Investment Column: Sunny outlook to keep AG Barr sparkling

AG Barr

Our view: Hold for now

Share price: 1,263p (-61p)

Looking through AG Barr's trading update yesterday you could be forgiven for thinking the recession is little more than a myth. The maker of Irn Bru and other soft drinks said that trading between February and the end of May had been strong, with total revenues up 22.5 per cent and like-for-like sales increasing by 7.9 per cent. Its chief executive, Roger White, says that, with the group's products costing less than £1, it is as immune from the recession as any other business.

Indeed, it is not economics and high finance that worries Mr White. Rather he frets much more about the weather, fearing that another summer like the last two (for those with short memories, the rain seemed ceaseless) would be more damaging than any prolonged downturn. Investors will be relieved, then, that the Met Office appears to be predicting a warm summer. What buyers will be hoping for most as a result is an improvement in the performance of the share price, which has grown only marginally in the last three months, despite equities investors generally having a super time with other stocks.

It is maybe because the shares are regarded as already being fairly valued that their growth has slowed. The group has been a top operational performer in the past year, but even the house broker, Investec, does not see the stock rising beyond 1,400p in the next year.

We like AG Barr, and while we see the group as defensive in nature, which we still think is the most important characteristic of any stock, there are clearly those that have greater potential for growth. For the true bears, and those looking to add some stability to an already racy looking portfolio, we would heartily recommend AG Barr. Otherwise, we reckon the shares are likely to pause around this level. Hold for now.

JD Sports Fashion

Our view: Buy

Share price: 470p (-1p)

JD Sports Fashion is not a sportswear chain. The company is keen that we are all aware of that, lest it is confused with the likes of JJB or Sports Direct, which suffered after selling fewer football shirts than expected following England's failure to qualify for last year's European championships.

We reckon investors have already worked out that JD is a fashion chain, and does not share the same problems, judging by the stock's 66 per cent increase in the last quarter.

Its finance director, Brian Small, says that one of the reasons for the growth is that the stock was severely undervalued before the surge three months ago. True, but investors beware: when asked if he thinks the shares are still cheap, or otherwise, Mr Small now says it is not for him to comment.

The group issued a heartening management statement yesterday, saying that underlying sales in the 17 weeks to the end of May were up 1.7 per cent, with sales at fashion fascia stores up a very creditable 4.6 per cent.

This no doubt encouraged the watchers at Seymour Pierce to reaffirm their "buy" rating, adding that despite the notable gains of the last few months, the "stock remains lowly rated at 6.4 times based on our 2009/10 forecast, falling to 5.7 times in the following year and putting it at significant discount both to Sports Direct and the general retail sector". Buy.

Latchways

Our view: Buy

Share price: 545p (+32.5p)

For investors, yesterday's full-year numbers from Latchways, the designer and maker of fall protection safety systems (harnesses to stop people falling off big buildings, to you and me), were something of a mixed bag.

Of course, there were deserved cheers for the 10 per cent increase in the dividend. We have to say that there is some logic in its finance director Rex Orton's argument that it is better to give some of the £4.8m of net cash on the balance sheet back to investors "rather than have it in the bank doing nothing". We are also encouraged by the company's plans to target defensive industries such as the power utilities.

However, despite being well flagged a month ago, we were a little disappointed by the 3 per cent fall in operating profit, which itself was enhanced by beneficial currency movements. Latchways has long said it is a defensive bet because many of its products and sales are regulation-driven, but Mr Orton concedes that sales in the UK and US have slowed since the onset of the downturn.

That said, Latchways does clearly have defensive qualities, which should be accentuated by targeting clients with more defensive characteristics. Even though analysts at the house broker, Brewin Dolphin, cut their target price for the shares yesterday, we think there is probably still some juice left in them. Buy.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Guru Careers: Research Associate / Asset Management Research Analyst

£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...

Ashdown Group: Finance Accountant - Financial Services - Central London

£30000 - £35000 per annum + benefits : Ashdown Group: Finance Accountant - Fin...

Ashdown Group: Chief Technology Officer (CTO) - Glasgow

£90000 - £98000 per annum + benefits : Ashdown Group: A truly exciting opportu...

Day In a Page

Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

Solved after 200 years

The mysterious deaths of 3,000 soldiers from Napoleon's army
Every regional power has betrayed the Kurds so Turkish bombing is no surprise

Robert Fisk on the Turkey conflict

Every regional power has betrayed the Kurds so Turkish bombing is no surprise
Investigation into wreck of unidentified submarine found off the coast of Sweden

Sunken sub

Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
Instagram and Facebook have 'totally changed' the way people buy clothes

Age of the selfie

Instagram and Facebook have 'totally changed' the way people buy clothes
Not so square: How BBC's Bloomsbury saga is sexing up the period drama

Not so square

How Virginia Woolf saga is sexing up the BBC period drama
Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

Still carrying the torch

The seven teenagers given our Olympic hopes
The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

The West likes to think that 'civilisation' will defeat Isis...

...but history suggests otherwise
The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

The bald truth

How thinning hair made me a Wayne Rooney sympathiser
Froome wins second Tour de France after triumphant ride into Paris with Team Sky

Tour de France 2015

Froome rides into Paris to win historic second Tour
Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

A new beginning for supersonic flight?

Concorde's successors are in the works 15 years on from the Paris crash
I would never quit Labour, says Liz Kendall

I would never quit party, says Liz Kendall

Latest on the Labour leadership contest
Froome seals second Tour de France victory

Never mind Pinot, it’s bubbly for Froome

Second Tour de France victory all but sealed
Oh really? How the 'lowest form of wit' makes people brighter and more creative

The uses of sarcasm

'Lowest form of wit' actually makes people brighter and more creative
A magazine editor with no vanity, and lots of flair

No vanity, but lots of flair

A tribute to the magazine editor Ingrid Sischy
Foraging: How the British rediscovered their taste for chasing after wild food

In praise of foraging

How the British rediscovered their taste for wild food