Man Group may be a buy one day – but not just yet

Bob the Builder proves a huge Hit; Fast-growing Prestbury a buy if you can get it

When it burst into the FTSE 100 last year, Man Group proved that hedge funds were moving from the periphery of the investment landscape to the mainstream. The group is the world's biggest hedge fund manager and, amid the paranoia that accompanies bear markets in equities, has emerged as a powerful defender of the secretive, offshore industry often blamed for the demise of share prices.

But hedge funds aren't the only business of the group, which grew out of the historic ED&F Man commodities brokerage. While it no longer trades in sugar per se, it does act as a broker for commodities futures and other complicated derivatives. This brokerage business accounted for 18 per cent of profits last year and yesterday there was confirmation that Man is looking to bolster it with the £100m acquisition of Old Mutual's futures brokerage, GNI.

There are no financial details yet – the deal could still fall down as Man looks over the books and haggles over the final price tag – but Man's record is such that the City is confident it will not overpay.

The jury is still out, though, on Man's most recent acquisition for the core hedge fund business, the £570m purchase of its Swiss neighbour, RMF. Many European groups managing funds on behalf of institutional clients are having trouble attracting new business. Certainly, there is a new mood of caution over investment decisions and hedge funds are undeniably riskier than traditional products.

Since 1990, Man's flagship funds have outperformed the equity market by about 700 per cent, a fact which has been behind the group's astonishing growth in size and the tasty performance-related bonuses that have swollen earnings. There should be news this week on whether its latest fund launch has gone well; it probably has, thanks to the strong recent performance of its hedge funds and the dire market in equities. The question is whether it will have gone well enough to reinvigorate the share price.

It may not, since there could well be disappointment on RMF in the interim results next month. Man is still valued well below other asset managers, and its shares are worth holding for the long term. But there will be safer times to buy.

Bob the Builder proves a huge Hit

Hit Entertainment has, appropriately enough, a good story to tell. Since the company started in 1989, it has grown into a significant player in the world of children's characters.

The intellectual property company, which reported better-than-expected full-year figures yesterday, has developed characters in-house, most notably Bob the Builder, but it has also gone out and acquired others. Recent deals have seen it buy Barney the Dinosaur and Thomas the Tank Engine. Profit before tax, exceptionals and goodwill jumped 264 per cent to £27.3m.

The trick is to own characters that capture children's imagination, and then pump them for all they are worth – with multiple series, exclusive video releases, merchandise and, in the case of Bob the Builder, live stage shows. Thanks to his new popularity in the US, Bob contributed £60m in sales, having taken just £7m to develop. Hit's new internally developed property, Rubbadubbers (bathtime characters that run amok), has secured a television deal and a toy licence with Hasbro in the US, it was announced.

So far, Hit has focused on the youngest age group, getting them from the moment they are able to focus on a TV set, through to about the age of six. Yesterday, the company revealed a new departure. Unexpectedly, Hit will retain Guinness Book of Records, which is aimed at seven to 12-year-olds, and seek to apply its magic touch to this neglected property, which it acquired with Gullane this year.

Hit shares closed up 13 per cent at 235p, putting the stock on a forward price-earnings ratio of 12, which is inexpensive given the company's impressive growth prospects. Buy.

Fast-growing Prestbury a buy if you can get it

Shock news: a successful flotation yesterday. Despite the market malaise, the financial services group Prestbury raised £1m on AIM.

Prestbury is an intermediary in the sale of simple, low risk products such as mortgages and insurance, the stuff that doesn't require complicated financial advice. Ten blue chip insurers sell their products through Prestbury's internet-based network, with 600 independent financial advisers taking the service so far.

It is growing fast. Since IFAs are under pressure from regulators to charge for their time rather than take commissions, they are keen on a quick and easy service. The product providers are also keen, because most have moved out of selling direct to consumers. The Financial Services Authority takes on regulation of mortgages from 2004, which should accelerate the process, creating a further opportunity for Prestbury.

Francis Maude, the former Treasury minister, is chairman, and will help the group take advantage of the new regulatory landscape.

Prestbury's float price of 80p a share is 20 times the coming year's earnings, on its broker's forecasts. Management and institutions are hanging on tightly to their shares, so there is only a small free float and private punters will be lucky to get the stock for less than 83p. That would still be a fair price, and the shares look interesting.