What the experts say will yield the biggest gains

The Professionals
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The Independent Online

Our panel of professional fund managers put in a stellar performance, having picked one of the most successful members of the FTSE 100 over 2004 (mmO2), plus two stocks which entered the blue chip index during the year (Corus and Tate & Lyle).

Our panel of professional fund managers put in a stellar performance, having picked one of the most successful members of the FTSE 100 over 2004 (mmO2), plus two stocks which entered the blue chip index during the year (Corus and Tate & Lyle).

But top honours go to Andy Crossley of Invesco, who took a punt on a much smaller company, the Peruvian copper explorer Monterrico Metals. It has made progress developing its main copper project, and the selling price of the metal hit levels not seen since the Eighties. The other beneficiary of soaring commodities prices was Corus, tipped by Colin McLean of SVM Asset Management.

Ralph Brook-Fox, who won with mmO2 in 2003, tipped it again and added to his 74 per cent gain the previous year with 59 per cent in 2004. The mobile operator has increased its subscriber numbers and cut its debts.

The wooden spoon goes this time to David Lis of Morley, whose favoured company, Center Parcs, was plagued last year by poor trading and the rising costs of fuel.

Our team's selections for the new year are:

Stuart Fowler, Axa Investment Managers:

¿ Centaur

This business magazines publisher, best known for Marketing Week and The Lawyer, has kept a particular focus on weekly publications because that is where you get most recruitment advertising. The corporate sector continues to look more confident, with profits improving and more takeover activity and - where Centaur is well-placed to benefit - additional recruitment. The publisher ought to have a conspicuous success this year with Finance Week, aimed at corporate accountants, which it launched in November.

Ralph Brook-Fox, Britannic Asset Management:

¿ mmO2

We select mmO2 for the third year running, and the reasons remain largely unchanged. The brand clearly has substantial momentum, with continual upgrades to UK expectations despite the improved performance of 3. The market also continues to underestimate the German potential; many analysts have growth tailing off in a year or two. Our view is that the German business is capable of delivering strong revenue growth for many years, given its small size in a very profitable market, even if the overall market slows. Finally, industry consolidation has an outside chance of adding some additional spice, although the valuation remains cheap, even without this.

John Hatherly, M&G:

¿ Sportingbet

AIM-listed Sportingbet is a leading online betting operator, offering sports betting, online casino and online poker businesses. Rapid growth from existing activities should be enhanced by the recent addition of Paradise Poker, which offers significant cross-selling opportunities from its extensive customer database. A prospective PE ratio of about 16 does scant justice to a genuine growth stock.

David Lis, Morley:

¿ Protherics

Protherics is a rare beast in that it was a profitable biotech business in 2003/04. Investment in production improvements and the research and development pipeline will temporarily take the company back into loss, but in two years Protherics is likely to be an extremely profitable business even on conservative assumptions. An R&D pipeline that includes promising products in sepsis, high blood pressure and solid cell cancers - markets that total more than $20bn - should lead to licensing deals with Big Pharma, most of whom are reliant on smaller biotech companies to deliver the technologies to drive future profits.

David Cumming, Standard Life Investments:

¿ Vodafone

Despite a stream of upgrades throughout 2004, driven by higher subscriber additions, lower capital expenditure and buybacks, the stock was held back by worries over acquisition strategy, problems in Japan, and general negative sentiment towards large capitalisation stocks. The outlook should still be one of strong growth driven by ongoing subscriber growth of about 10 per cent, a turnaround in Japan under the new management team, plus an improving product in 3G, leading to higher revenue per user. The valuation is now low.

Ruth Keattch, Deutsche Asset Management:

¿ Regent Inns

The operator of Walkabout sports bars and Jongleurs comedy clubs reached a precarious situation last year after making strategic errors and persisting with an aggressive expansion programme in deteriorating market conditions. Shareholder action prompted the removal of the executive team and the installation of the board members Bob Ivell, John Leslie and Alan Jackson. The team has strong credentials in the licensed trade and has quickly stabilised Regent's trading and finances. It is now seen as a strong recovery candidate and possible leader in high-street consolidation.

Andy Crossley, Invesco:

¿ Plusnet

PlusNet is one of the UK's leading internet service providers with more than 200,000 subscribers, 90,000 of those on broadband. The broadband market in the UK is far from mature: just 4 million people have broadband access out of 26 million households. Uptake is accelerating and PlusNet has been forecast to grow by 40 per cent in 2005. On top of this, they also plan to buy smaller, privately held ISPs, many of which are likely to struggle as a result of changes to the way BT charges for wholesale broadband access. This is likely to be highly earnings enhancing because PlusNet's operating platform allows transfer of acquired customers without much of the associated cost.

Colin McLean, SVM Asset Management:

¿ CES Software

CES Software provides technology for the growing areas of skill gaming and exchange betting. Although a relatively small business at present, its management team has a successful record in building a similar technology business. CES should grow organically and by acquisition. It works with major customers, including AOL and Golden Palace Games. It is developing a portfolio of interests in this growing area which have the potential for strong profitability and cash flow after critical mass is reached. As these markets become regulated, there is the potential for new partnerships with household names. CES should move into profit in 2006, and this year revenues will build up via new partnerships and acquisitions.

The portfolio for 2005

  • Centaur
  • CES Software
  • mmO2
  • PlusNet
  • Protherics
  • Regent Inns
  • Sportingbet
  • Vodafone