The Investmemnt Column: Give Enterprise Inns a miss while the 'perfect storm' lasts

Our view: Sell

Share price: 487.5p (-7p)

At first glance the pub group Enterprise Inns has been a disaster for investors in the past 12 months. The share price has plummeted from a year high of 774.5p to its current level, and a selective appraisal of yesterday's trading statement will make nervous reading for even the hardiest investor.

The chief executive, Ted Tuppen, says he dislikes the overused phrase "a perfect storm," but concedes that a slowdown in consumer confidence, which he does not see improving soon, the introduction of the smoking ban and the unstoppable increase in input costs makes the expression more appropriate than ever. All this has combined to make the first six months of this year the worst on record for the pub sector, he says.

Sadly, there are other reasons to be glum. In the update for the first half-year announced yesterday, the group revealed an 11 per cent fall in profits and conceded that its lease support – money given to struggling licensees – has risen.

But before you call your broker, there are reasons why Enterprise may be worth holding on to. The group has been given permission to restructure itself as a real-estate investment trust, which will cut its tax bill from 28 per cent to 6 per cent. And being at the quality end of the pub industry, it has probably suffering less than others. Landsbanki says that the group's earnings are down 1.5 per cent, compared with a fall of 2 per cent at rivals Punch Taverns. Good weather in May has also helped.

However, like all its peers, the group is toiling in this market, and buyers should be wary. On a sector basis, the group looks good, but investors that do not like pubs, and there are many, should give it a miss. Sell.

Serco

Our view: Buy

Share price: 450.25p (-0.5p)

While it may not be on the tip of everybody's tongue, Serco is one of the biggest outsourcing groups in the country. It runs a plethora of services, from the Docklands Light Railway in London to looking after the UK's nuclear warheads.

From the point of view of investors, so long as the group can carry on bringing in the business (it says it is bidding on £27bn worth of new projects), the share price should continue to perform well.

The group issued a trading statement yesterday in which it said that the first quarter had been strong, signing contracts worth £1bn. It expects to return double-digit revenue growth "for the foreseeable future".

For buyers wanting a safe stock, Serco would fit the bill. And judged against its competitors, the story looks even more compelling. The UK's biggest outsourcing company is Capita, which issued its market update last week, when analysts said that it was difficult to see where an increase in the stock would come from. The opposite is probably true of Serco, which trades at a discount to Capita and should benefit from at least two new big contracts.

The company has a £500m contract to run the Dubai Metro, and has added an extension to that deal; to build another 300km of track. Analysts also think that there is a good chance that the group will win, as part of a consortium, the nuclear decommissioning contract at Sellafield, to be announced in the third quarter. "Sentiment ahead of the Sellafield bid will move the shares upwards," say watchers at Landsbanki.

It is difficult to find a reason not to buy Serco: it is a strongly defensive stock and looks good value in its own sector. Buy.

Invu

Our view: Hold for now

Share price: 32p (-0.5p)

Invu's chairman Daniel Goldman is keen on ticking boxes. In fairness, there have been a lot of boxes that needed ticking in the past 18 months for Invu, a data management group.

Mr Goldman says that after teething trouble, its series six programme, which was launched last year, is now on track and working normally. Meanwhile, the company has streamlined its share listing to have the stock listed solely in London and has launched a clever search engine that can be used in conjunction with Google.

All good news, especially as Mr Goldman says, the listing reorganisation has come in under budget. Investors may also be comforted by the group's full-year results yesterday: revenues were up almost £2.5m to £8.7m; profits were down, but this was the group's first year of taxation. Aside from the risk associated with every growth company, Mr Goldman sees no obvious dangers.

All good so far. However, independent watchers at Panmure Gordon caution that the group's first deal for its Ergo search engine, with the Japanese group Wacom, which makes graphic tablets for computers, is the only one so far (although more are expected soon), and points out that the "errant Ergo" was not mentioned in yesterday's trading update. Mr Goldman says the note from Panmure Gordon is "tongue-in-cheek".

Invu has sorted out many of its troubles in recent months and recruited a number of highly regarded senior managers. However, with the shares already at an all-time high, perhaps buyers should wait for news of further Ergo deals. Hold for now.