Pick a winner with resilience and quality

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The Independent Online

On a positive year for the markets, how did our experts do? There were no stunning disasters, although it's worth noting that only two of our experts' tips outperformed the market.

They were Charles Luke, from Aberdeen Asset Management, with Whitbread, whose shares stormed up 54 per cent in 2009; and Bruce Packard at Evolution Securities, who plumped for HSBC, which gained 23 per cent. Charles Pick from Fincap also deserves an honourable mention for Hilton Foods, which gained a more than respectable 32 per cent.

It was the most optimistic of last year's forecasters, Mr Pick again, who got closest to this year's FTSE 100 close of 5,413 with his prediction of 5,100. This year's panel and their tips are:

Catherine Stanley, F&C Investments

My stock for 2010 would be RPC. The plastic packaging company finds itself in a very attractive position with much of its competition financially overleveraged and unable to invest in an industry where innovation is essential to customers. Returns on capital and operating margins are increasing as the management reaps the rewards of a prescient cost-cutting programme started in the summer of 2008. Any improvement in revenue should lead to an acceleration of returns.

FTSE 100 prediction: 5600 via 5900

Simon Murphy, Old Mutual UK

A key opportunity for 2010 lies with companies that will deliver growth irrespective of the strength of any economic recovery, and we believe one such company is Homeserve.

Homeserve is a provider of home emergency services – providing insurance for problems related to services such as plumbing and drains, and water and gas supply. The company services nearly 10 million policies and operates primarily in the UK, but has growing operations in France, the US, Spain and Belgium. The business is extremely resilient to economic cycles, and while the UK operations are relatively mature there are still growth opportunities in terms of new customers and the number of policies each customer buys. However, the greatest potential for the company is in replicating the successful UK model in other countries. The French and US businesses will soon make meaningful contributions to the group's profitability. Trading on a price-earnings multiple of 14, we believe the shares represent an attractive investment given the exciting growth potential, particularly overseas, which is not reliant on a strong economic recovery.

FTSE 100 prediction: 5850

David Buik, BGC Partners

The recovery of world stock markets in 2009 has been breathtaking. Many, including me, are comfortable about their well-being for the first four months of 2010, as alternative asset classes are unattractive. However, dark clouds will be massing in the form of public sector debt and the withdrawal by the Bank of England of quantitative easing. It will be difficult to sustain growth and markets will become nervous, with investors losing heart. A conservative selection: HSBC may well be a stock pick for 2010. However, their global access to every continent with Michael Geoghegan, the CEO, relocating himself in Hong Kong, tells us where the growth will be.

FTSE 100 prediction: 5200

Charles Luke, Murray Income Trust

Centrica, trading as British Gas, is a supplier of energy to UK households. After the acquisitions in 2009 of Venture Production and a stake in British Energy, the company's strategic balance has improved considerably with a far greater upstream exposure to its own energy supply – something that has yet to be rewarded by the market. British Gas's network of service engineers provides it with a competitive advantage against its peers, helping it to improve profitability and reduce churn. In addition, the company has a number of interesting avenues for growth, including its operations in the US, gas storage and further investment in renewables that will also help to drive earnings. The shares have a very healthy yield close to 5 per cent and are attractively valued on around 12 times 2010 earnings.

FTSE 100 prediction: 5100

Henk Potts, Barclays

Shares in WPP have outperformed the market, but we believe there is more to go for and are therefore reiterating our outperform recommendation. Within the quadrennial cycle, 2009 was expected to be a lower growth year for advertising and the recession reduced rates further. However 2010 should be better. We expect WPP to outperform its advertising peers, due to diverse geographic exposure and leading positions in a number of disciplines, plus synergies from the integration of TNS. We have based our fair value of 680p on a target 2010 of 14 times earnings, which is a small discount to WPP's historical average.

FTSE 100 prediction: 5700

Stephen Adams, Aegon Asset Management

Euromoney, because the earnings forecasts are too low. Conferences have been sparsely attended because of the recession and advertising rates have been low. That should change as corporate spending picks up and the stock should see upgrades this year. Euromoney, which focuses on trade magazines, is perceived as a quality business that has suffered from the external environment.

FTSE 100 prediction: 5675

Sanjay Vidyarthi, Noble

Galiform, through its subsidiary Howdens Joinery, is a supplier of kitchens to trade customers across the UK, serving 234,000 customers from over 450 depots. In our view 2009 marked a watershed as the market stopped focusing on legacy issues and instead turned to the longer-term growth prospects of a business where 50 per cent of depots have not yet reached maturity. We recently increased our full-year 2009 earnings per share estimates by 28 per cent and full year 2010 by 38 per cent, which meant that, even after the recent share price rise, the rating is not expensive.

FTSE 100 prediction: 5950

Simon Denham, Capital Spreads

While public spending is likely to be cut across the globe, the major infrastructure and maintenance projects of both the state and private sectors will probably not only be held steady but possibly gain momentum. With the fear over a double dip recession, there might be renewed focus on big "headline projects" while, at the same time, the maintenance requirement for an increasingly ageing infrastructure may well accelerate. Balfour Beatty looks to be in good spot to take advantage of this and their share price does not look stretched.

FTSE 100 prediction 5150.

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