The Investment Column: Reckitt Benckiser comes up smelling of roses again

Our view: Buy

Current price: 2,688p

Reckitt Benckiser, the Anglo-Dutch consumer goods giant, has a lot to answer for. Apart from anything, it brought Barry Scott to our television screens.

Shareholders won't mind one jot though, as the last five years have seen the shares almost treble thanks to innovative products, outstanding management and growth combined with defensive qualities.

So will it be a case of "bang, and the profit is gone"? Highly unlikely given yesterday's mouthwatering first-half numbers, along with confirmation that it expects full-year results to beat expectations. Underlying first-half net revenue rose by 10 per cent to £1.3bn, with like-for-like sales also up 10 per cent, while year-to-date operating profit is 39 per cent better at £510m. In a highly competitive market, Reckitt managed to raise gross margins by 1.9 per cent, to an industry-leading 57.6 per cent.

Reckitt's strength is its portfolio of consumer brands and the marketing drive that goes with them. Aside from Barry's Cillit Bang, it manufactures a huge range of products, including Airwick air fresheners, Finish dishwasher tablets and Vanish detergent. Boots Healthcare International, acquired for £1.9bn in October 2005, posted 9 per cent growth, and a number of underperforming brands have been phased out.

The shares, while not cheap, still trade on less than 20 times forecast 2008 earnings. Management has a challenge on its hands to continue beating forecasts, but so far has proved itself to be more than up for the task. It is hard to construct a sell-side case for Reckitt Benckiser, which on current form looks to be one of the best-managed diversified consumer goods groups in the world. So there is no point in attempting to - despite the lofty current valuation the stock remains a buy.

Renishaw

Our view: Buy

Current price: 684p

Dental technology, metrology (the science of measurement, apparently) and spectroscopy are all hi-tech, specialised industries, yet the UK engineering group Renishaw has become one of the world leaders in all of them. Its products can be found in applications as diverse as in Ducati motorbikes, in forensic science equipment and in dental lasers.

Yesterday's full-year results showed a 25 per cent jump in pre-tax profits to £49.2m, far better than analysts were expecting. Most had forecast that the weak dollar would have a much more detrimental impact on numbers, along with bad news on product delays and a Japanese court ruling against a key customer.

However, the overall impact was minimal, and not surprisingly the company remains bullish. There is little point in wasting time worrying about exchange rates, over which Renishaw has no control, and the company continues to concentrate on expanding its client base, cutting costs and outsourcing some production facilities.

And plans for next year sound promising. South-east Asia and China have been the fastest-growing and most profitable geographical areas for Renishaw, and the company has more expansion in the pipeline.

Despite the dire expectations the market had over Renishaw's US dollar exposure, the company looks to be in a very strong position in niche markets. Its cutting-edge technology is widely recognised as being a global leader in a handful of markets, with little in the way of competition. Despite yesterday's bounce and what might remain a slightly opaque short-term outlook, this is a quality business, and long-term investors could do far worse than tucking a few away.

Cains Beer

Our view: Risky buy

Current price: 18p

More often that not the decision to invest in smaller companies depends on faith in the product. In this case the product is not difficult to understand - beer was first brewed in the 7th century BC, so most investors should have a good grasp of it.

Although Cains Beer Company is not well-known outside its native Liverpool, it has been brewing there since 1850. Cains posted maiden results yesterday following June's reverse takeover of the struggling pub group Honeycombe Leisure, so the numbers themselves are slightly irrelevant for the time being. An operating loss of £488,000 was in line with management expectations at the time of the deal.

Five years ago Cains was on the verge of going the same way, as so many smaller local brewers have done - bankruptcy or gobbled up by a larger competitor. The group was then acquired by the Dusanj brothers, entrepreneurs with a solid track record of creating growth in the private sector. On top of its brewing, Cains now has an estate of 109 pubs.

The bottom line is that in a world of bland, uniform beers disguised as premium drinks, Cains Finest Lager really is a bit different - so much so that it has the endorsement of the Campaign for Real Ale. It is brewed using only the most expensive hops, and is the only UK lager matured for three months, creating a distinctive full flavour. Its other beers have also won numerous awards. Asda and Sainsbury's have begun selling bottled versions in the North-west, and Cains has ambitious plans to expand its markets.

This is early-stage investment and high-risk - but Cains' strength is its product, and for daring investors this looks well worth backing.