Investment Column: Hold on to recovering Premier Farnell

Begbies Traynor; International Greetings

Our view: Hold

Share price: 173.8p (+15.2p)

Some good news from Premier Farnell, the electronic components distributor which surprised the market on the upside after its-third quarter results, and has started to grow again after a tough time. The performance of the business is in many way dependent on the fortunes of others, but to its credit it has tried to be innovative in its methods of doing business – proving increasingly adept at exploiting e-commerce not only as a sales method but using it to build a community among its customer base.

The company also has an attractive geographic spread, and the latter is not to be underestimated. China, India, and even Eastern Europe are growing fast. With the recession showing a V shape (indicating a relatively speedy recovery) in the former two at least, this should help even if Europe continues to be flat.

And yet the upturn in Premier's fortunes appears not to have been reflected in the share price to date. Over the last month it has underperformed the market and sits on 13.9 times 2010 earnings, which doesn't offer massive value but is not too bad in a recovering market. However, there is also a 6 per cent yield, which is not to be sniffed at.

The dividend has barely moved over the past five years, but that could change if the company can capitalise on the momentum it is showing, and the payout is certainly under no threat, which adds sparkle to the shares.

Premier is not the most exciting company in the world, but it is a solid bet, and those who followed our advice to buy at just over 135p in June have been rewarded.

Given the recovery the company is starting to show and its solid management, we see no reason to desert it now and would suggest sticking with it. Investors should be rewarded for holding the shares.

Begbies Traynor

Our view: Buy

Share price: 100p (+4.75p)

The recession has been painful for UK plc, but Begbies Traynor, the professional services firm, has been making hay during the downturn by mopping up plenty of insolvency and restructuring work. Yesterday, the group said its results for the six months to 31 October will be "significantly" ahead of last year's, driven by "good progress" at its insolvency division. Begbies Traynor said it also benefited from the integration of its small corporate finance business and core insolvency and recovery division, which together account for 85 per cent of turnover. A steady stream of corporate insolvencies looks set to continue in 2010, which bodes well for Begbies Traynor, as does the argument that more companies historically run out of cash and fail as recessions come to an end. Certainly City analysts forecast that the company's pre-tax profits will jump by about a quarter to £12.3m this financial year.

However, its tax division's performance in the first half was down on last year and it continues to see challenging times ahead. The other concern is that the rate of corporate insolvencies in sectors such as hotels and retail has showed some signs of slowing recently, which could dampen the company's growth. But Begbies Traynor's shares currently look fair value at a 2010 price to earnings ratio of 10.2, and the valuation looks better over time – with the figure at 9.4 times 2011's forecast earnings. Based on a cautious outlook for UK growth over the next two years, we think that Begbies Traynor will continue to prosper from the misery of others. Buy.

International Greetings

Our view: Hold

Share price: 79.5p (+3p)

The internet has challenged sectors large and small. The greeting cards business seems like an obvious victim, with more and more people opting for the digital option. So why should you invest in International Greetings? Well, to begin with, the name is deceptive. Besides cards, the company manufactures gift wrapping, bags, stationery and gifts, and is a market leader in Christmas crackers. Moreover, it is exploiting the value end of the market, giving customers an alternative to the expensive cards offered by large international manufacturers. If you're still concerned, it's also worth noting that the UK remains especially fond of the paper option, particularly when compared to markets such as the US. Furthermore, management is mindful of the potential challenges posed by the web. It is open to the idea of making a foray into the online world.

The fact that the business returned to profit with its interim results (and is expected to grow more profitable in coming years) increases our confidence. It's just that the shares are not cheap. They trade on a multiple of 25 times Arden's forecasts for 2010. As such, we'd view any pullback as a buying opportunity, but recommend that investors hold for now.