Our share tips off to a good start

Tom Stevenson reviews the new year portfolio and is relieved to find the pros haven't been outdone by a four-year-old
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The Independent Online
There is a reassuring quality to the new year tips race we launched at the beginning of the year. The highly paid fund managers we entrust with our pensions are leading the field; the random selection of our Business and City Editor's four-year-old daughter is, to the relief of the experts, bringing up the rear; and the recommendations of the Independent City desk are nicely ahead of the market.

As the charts show, the 10 fund managers who kindly put their necks on the block in the name of festive fun have proved their worth with an impressive 13 per cent capital gain in little more than three months. That is three times better than the return from the market as a whole, up a modest 3.7 per cent.

Star of the show has been British Biotech, which has attracted a flood of speculative money on the back of successful trials for marimastat, an anti-cancer compound.

Sema, the Anglo-French computing group, has been given a boost by demand for mobile phones. The company provides software to help the network suppliers work out customers' bills.

Management changes at Arjo gave the packaging company a boost, with the City believing a new chief executive could herald the sale of the group's struggling European manufacturing operations.

Trinity International, owner of the Liverpool Echo and the recent purchaser of Thomson Corporation, shrugged off higher newsprint prices to announce record profits.

Well done to Richard Lehman of Royal Insurance, Lloyds's Bernard Clark, Tom Crombie at Scottish Equitable and Philip Winston of BZWIM for those four tips.

The others have some catching up to do in the remaining nine months of the year, especially Tomkins and BTR, two well-managed but out-of-favour conglomerates that have remained in the doghouse so far.

Our own City Desk is quietly confident about its own performance, with a 6.6 per cent share price rise on average, almost twice as good as the market as a whole.

Leading the pack, Stakis has benefited from a dramatic upturn in the fortunes of the UK hotel industry and especially from the Government's proposals to relax the regulation of casinos.

The focus of packaging group Field on the profitable niche of health- care-related work and its refusal to take on low-margin business has highlighted its attractions. The Trocadero has appreciated as hoped for on the back of a string of deals to acquire rights to characters such as Noddy, the Flintstones and the Thunderbirds.

It's not all good news of course and we are also still waiting for the market to warm to Tomkins' attractions. The fall in Continental Foods' share price is also puzzling, given the 87 per cent rise in interim profits announced in February.

The biggest relief of all has been that neither the professionals nor the journalists have been outplayed by young Florence Warner, who eschewed fundamental research, choosing instead to throw a pen at the share price page of a newspaper to make her selections. But for one poor choice, however, her tips would have performed worryingly well, fuel for those who believe that stock markets are little more than a lottery. Including it, the value of her portfolio remained more or less static during the year, down just 0.8 per cent.

We were a little embarrassed by her selection of Mirror Group, which owns 43 per cent of Newspaper Publishing, publisher of the Independent, but she has reason to be pleased with the trajectory of her pen because the shares have risen 24 per cent so far this year.

For a random selection, she chose a fair array of good performers including Next, motor dealer Quicks and Guinness Peat, all of which have started the year well. Florence's dog has been Powerhouse, formerly Com-Tek Resources, which asked for its shares to be suspended on 1 April pending publication of its accounts for the year to last September. The suspension price was 50 per cent below the level of the tip.

In addition to the three actively chosen portfolios we also offered a selection of shares arrived at using the investment theory of a US investor, Michael O'Higgins. He chooses shares on the basis of size and yield, looking for large, safe, but out-of-favour companies that might be expected to bounce back into the limelight.

Translated to the UK market, his technique involves selecting the 10 highest-yielding stocks from the FT-SE 100 index and then whittling this group down to just five shares by picking those with the lowest prices.

Using the technique at the end of 1995 came up with the shares in the table. Sadly the theory, which has a good track record, appears to be having an off-year. The mean capital gain was just 3.5 per cent, in line with a dull FT All-Share index.

New year tips: Fund managers prove their worth

% change

Fund Managers City Desk Florence Warner Michael O'HIggins

Arjo Wiggins +24 Allied Domecq -4 Bensons Crisps -19 British Steel +20

British Biotech +38 Caradon +9 Mirror Group +24 Hanson -2

BTR -2 Continental Foods -6 Next +15 National Grid unchanged

Eidos +6 Field +16 Quicks +17 British Gas -8

GEC +7 Hillsdown +5 Christie -8 British Telecom +7

IMI +7 Laporte +4 Guinness Peat +17

Scholl +11 Stakis +34 Essex Furniture -8

Sema +25 Tomkins -8 Powerhouse -50

Tomkins -8 Pet City +2 GUS unchanged

Trinity Intl +21 Trocadero +13 Mercury Euro Pvtn +4

Average +13 Average +7 Average -1 Average +4

SInce the new year, the FTA All-Share Index has risen 3.7 per cent