Shares: A quartet that offers extra lift: Special factors can create excellent opportunities for the vigilant, even in a dull market

EVEN in dull stock markets there is always something going on; and the advantage of buying when shares are generally weak is that your purchases should receive an extra lift when the inevitable recovery takes place. Below, I look at four shares where special factors suggest that prices should be much higher in 12 months.

Proof that a well chosen share can beat the stock market comes from Hawtal Whiting, the car-body design specialist, at 250p. It featured in this column in early July when the price was 128p. The story was of recovery and refinancing for what had been an over-borrowed lossmaker. At the time, I was looking for profits to recover from pounds 763,000 to pounds 1.5m for a group that lost pounds 2.2m in 1992. The shares have rocketed on the back of half-year profits of pounds 1.6m. The full-year figure is likely to exceed pounds 4m for a group moving fast from bust to boom.

Developments within the car industry are partly responsible for the turnaround. There are more types of cars, many more manufacturers active on a global scale, and new models are coming thick and fast. Hawtal Whiting is working on the cars that are going to be on the roads in four or five years, and its services have never been more in demand.

But there have also been great changes within the company. For much of the 1980s, General Motors was the group's only customer. In the late 1980s, the business was reshaped to attract a much wider customer base, which made profits vulnerable when recession struck.

But now Hawtal is reaping the rewards. As the car industry remains buoyant in the US and much of the Far East, while recovery begins in Europe and flickers in Japan, there should be years of growth ahead. The shares still look worth buying.

Another company that seems to have gone almost overnight from bust to boom is Real Time Control, at 155p, a supplier of electronic point of sale (Epos) systems for shops. In 1992/93, the group made profits of just pounds 492,000, of which pounds 309,000 was interest on cash balances of more than pounds 4m. Trading was hit by the relentless decline in hardware prices, problems with a US subsidiary, and a feeling that most shops had Epos systems.

But under the surface, changes were taking place that were to transform the performance. Most importantly, the group decided to concentrate its efforts on software, where it could add value. It ceased trading in the US and looked for multi-site customers in Britain. Success came with big contracts to fit out Victoria Wine shops, which has 1,520 branches, and Selfridge's department store. Profits for 1993/94 almost trebled to pounds 1.39m for earnings per share of 13.3p and an historic p/e of 12.3.

RTC is dependent on a few large contracts, which makes any one year's results hard to predict. Nevertheless, the current year has begun well with hopes of a further increase in profits. The group has about pounds 5.5m in cash worth about 80p a share, so taking that and interest receivable out of the results, we are left with a business valued at less than pounds 6m making operating profits of pounds 1.15m. That looks cheap.

An interesting investment in management skills has taken place at B Elliott, a machine tool business turned specialist engineer, at 85p. Machine tools is a dead-end business, so the group borrowed heavily in the late 1980s to diversify, without much success. In an effort to salvage the position, Michael Frye, a member of the family that originally controlled Elliott, was brought in as chief executive. He continued to diversify but was let down on a financing package at the onset of recession and ended up presiding over a capital reconstruction.

Unusually, Mr Frye's own head was not demanded as part of the price of reconstruction. He stayed in charge partly because of a feeling that the near collapse of the group was not his fault and because of his record in the 1980s, when he made a fortune for himself and fellow shareholders building up and selling the quoted Rotaflex lighting business. Banks and venture capital groups were also impressed by the management systems he has developed, which create a remarkable framework for improving corporate performance.

After a long struggle, the rewards are starting to flow. The group is almost entirely out of machine tools with the lions's share of sales and profits coming from specialist and electrical engineering. Last year saw a near pounds 6m turnaround from losses to profits of pounds 2.8m. Mr Frye says he is pleased with current-year trading, which suggests analyst's forecasts of pounds 3.9m could be beaten. Next year pounds 5m is projected to drop the p/e to just over 10, which looks undemanding.

Another company being reinvigorated by a new management team is Bridport Gundry, at 93p. Established in 1665, the group makes nets and was caught up in the rapid decline of the fishing industry. Under David Sebire, the recently appointed chairman, and Geoffrey Woods, a chief executive with a big company background, the company is being given a new direction. Previous managements had tried unsuccessfully to diversify but at least left the new team with an improved balance sheet with debts cut from pounds 10m to pounds 3m.

The new team has sold all the fishing-related interests and is applying modern management techniques to improve the performance of the 11 operating companies in the group. Many of the businesses focus on alternative uses for nets - such as controlling air cargoes or for helicopters carrying loads. This is already showing results, with losses for the six months to 31 January down from pounds 439,000 to pounds 220,000 despite some hefty one-off charges. Full-year profits should reach pounds 700,000 on the same business, which implies profits topping pounds 1.1m in 1994/95 even on the unlikely assumption of no underlying trading improvement.

The group has a blue-chip list of institutional shareholders, who should provide the financial firepower for acquisitions to enhance growth.

Investors now should be coming on board at the outset of what could be an exciting 1990s growth story.

(Photograph omitted)