Investment Column: Aberdeen still has a place in our portfolio

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Aberdeen

Our view: hold

Share price: 228.9p (+1.2p)

Aberdeen Asset Management's phoenix-like rise from the ashes of the split capital investment trust scandal continues at breakneck pace.

Yesterday saw the fund manager release yet another positive trading statement, suggesting that all is rosy in its garden. The group put on net new business of £700m in its third quarter (covering the three months to the end of June), compared with a £600m outflow of business in the previous quarter.

It's worth noting that the sales generated by the company were skewed towards products with better margins, such as pooled funds, and asset classes with better margins, such as equities. The net effect is an extra £15m of fee income for the current financial year.

Overall assets under management are also looking healthy, coming in at £185.8bn, a rise of 2.5 per cent over the quarter and better than some had expected, while the company has sensibly paid down some debt.

We highlighted Aberdeen as a buy in March last year with the share price at a lowly 126.7p. Since then they have nearly doubled. This might be seen as an opportunity to bank profits, and we wouldn't blame anyone for doing so.

What's more, there is also the volatile investment climate to think of, something that was highlighted by Aberdeen in its trading statement. The ride, then, could well prove to be bumpy for those who stay on.

That said, the stock is hardly expensive. Aberdeen trades on 13 times forward earnings, falling to 11.9 times on the estimates for 2012, leaving it more or less in line with the wider sector. At the same time, it boasts a healthy forecast yield of 3.5 per cent.

Moreover, it is worth noting that the company has cash on its balance sheet and is also generating strong earnings. So it should have the capacity to return more to shareholders soon. Remember that while Aberdeen has been acquisitive in the past, it has tended to buy unfashionable or distressed rivals on the cheap, so a massive acquisition-related bill is not a worry. We'd stick with it.



Persimmon

Our view: hold

Share price: 462p (-4.7p)

Yesterday's figures on mortgage lending by Britain's major banks suggest housing market pessimists remain in the ascendancy.

Lending fell 11 per cent to £7.6bn in June, while the number of house purchases at 31,747 was 6 per cent down on the year. Prices are falling and all- time low interest rates are, yet again, the only ray of light. Steer clear of homebuilders then? Well, Persimmon is showing some signs of life. Its trading statement earlier this month was fairly upbeat.

The company described the market as "stable" in the first half of the year. The number of completions was down a shade on the first half of 2010 (4,439 against 4,657) and the average selling price was lower (£162,000 against £168,936). But the latter is largely because activity was concentrated at the cheaper end of the market. The company's pipeline suggests that the full-year average selling price will be better because it should sell more bigger houses in the current half.

Overall, Persimmon expects to complete the same number of sales as last year while facilities to support first- time buyers appear to be generating some interest.

In conclusion, then, the market is bad, but Persimmon is outperforming. We held at 437.5p in January. The shares haven't done much since but trade at 82 per cent of their forecast net asset value. Hold for now, but if the shares show signs of weakness take the opportunity to wade in.



Staffline

Our view: buy

Share price: 242p (unchanged)

Staffline, which supplies clients with thousands of blue-collar workers every day, put out a reassuring trading update in early July, reiterating earnings hopes as investors awaited the payment of the full-year dividend for 2010, which, if you missed it, was up 123 per cent on last year, a clear sign of management's confidence.

The update, and the subsequent payment, was followed by news yesterday of a deal to buy certain assets from Arnashade Recruitment following its administration earlier this month. The fact that Staffline, which trades on around 11 times forward earnings, can move so swiftly only confirms its strengths. Yes, the stock is valued at premium to peers. But that is well deserved, in our view.

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