Vintage year shows a 46 per cent gain from the professionals' picks

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The Independent Online

Our panel of professional fund managers excelled themselves - and the stock market - in 2005, registering a 46 per cent overall gain.

In any other year, John Hatherly's tip of Sportingbet, the online gambling pioneer, would have won him the traditional bottle of champagne. The company's acquisition of Paradise Poker turned out to be astute, since the fad for internet poker only continued to grow last year.

But it is Colin McLean who comes out top, after shares in CES Software - now renamed Fun Technologies - more than doubled. The company develops online games for sites such as AOL and MSN's and, in November, the US entertainment giant Liberty Media made an offer for a controlling stake in the company.

This year's panel and their tips are:


The engineering group Invensys provides controls systems for a variety of industries including construction and rail. New management, the disposal of non-core assets, and debt restructuring are all helping to turn the company around. The shares are now valued at just a fraction of their peak level. Some value has been destroyed, but 2006 should see further restructuring and resolution of pensions and some debt problems. There are still risks, but the potential for recovery is also substantial.


Antibodies are an area of growing medical interest. Cambridge Antibody Technology, a market leader in this area, has a collaboration with AstraZeneca on a series of respiratory antibodies. This work offers significant potential value, which may become apparent as data is published in 2006. CAT's market value is around £365m, but it has cash of £160m and the net present value of forecast royalties from its major drug Humira (for rheumatoid arthritis) is around £190m. Therefore, value ascribed to its drug pipeline is close to zero.


My tip Titanium Resources mines rutile, one of two sources of titanium dioxide, used in white paint pigment and a widely used industrial commodity. It is reopening a mine in Sierra Leone which had been the largest producer of rutile before being closed because of the war.

The shares came to the market in August and, looking at the mining production schedule, it is difficult to see why you shouldn't double your money on a two- to three-year view.


In the summer of 2004, NeuTec Pharma's treatment for life-threatening hospital fungal infections passed its trials with flying colours, and regulators are currently deciding on its launch.

The shares have come off a long way but we are getting closer to the point when approval will hopefully be given. They are also testing the product as a potential cure for cancer, with trials results coming out in the spring, so there is much of excitement going on.


What might seem a surprising selection, considering the state of the retail sector right now, is Kingfisher. But as a value investor the business appeals - not only because the shares look cheap, but also because the business has fundamental strength.

With housing transactions improving, there could be a knock-on benefit for DIY retailers. If consumer sentiment improves next year, it should have a dramatic impact on profits. It's also worth pointing out that the company is not solely reliant on the UK economy. It is trying to build a global franchise and has, for example, 1 per cent of the Chinese DIY market.


For the second year running, I am picking Protherics. The drug development company has invested in production improvements and in its research and development pipeline, but it is likely to become an extremely profitable business even on conservative assumptions. Last month, it licensed its sepsis treatment to AstraZeneca.


Tipping British Airways clearly has its risks given the airline's high operational and financial gearing in an industry with a reputation for horrendous value destruction, difficult labour relations and geopolitical threats.

However, BA has a unique position at Heath-row, where capacity constraints and global economic growth should sustain a yield environment that has the potential to continue to surprise.