The Investment Column: National Grid looks set to shine in hard times

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National Grid

Our view: Buy

Share price: 664.5p (-10p)

For National Grid, dull is good. In fact, the group is so steady some investors might not have spotted that it is bobbing along quite nicely in the face of the financial downturn, and that they should buy.

The UK's power network operator yesterday put out a fairly mundane trading statement, saying everything was tickety-boo and that it is expecting to hit targets in the rest of the financial year.

In an economic upswing, when every company is making money hand over fist, National Grid is probably not worth backing. However as finance director Steve Lucas says, with regulatory restrictions on its exposure to fluctuating energy prices, the company is immune to the worst of the credit crunch. Underweight investors might well be kicking themselves for missing the boat: the stock is down less than 2 per cent in the last 12 months, whereas other groups have lost more than 90 per cent of their value, in the worst cases.

However, new buyers shouldn't be unduly worried. While every board in the country will say that its shares are undervalued, National Grid is putting its money where its mouth is and has bought back shares on six separate occasions since taking back 1.5m shares on 21 July.

This brings the total spent on buybacks in the three months between the start of April and July to £339m, with another £260m expected to be spent in the remaining nine months of the financial year.

Yes, the company was committed to returning cash to shareholders after the sales of several divisions last year, but no board of any company is likely to sanction such a programme if it believes that the stock is not likely to rise.

National Grid is not going to win an award for being exciting, but in the present market, the company is as good a bet as any. Buy.

Keller

Our view: Buy

Share price: 695p (+47p)

Yesterday was a largely unremarkable day for the markets, with the FTSE closing slightly off the day's starting point. That makes engineering group Keller's performance, with its shares up 7.25 per cent, all the more impressive.

The company, which has a history of operating in the UK and US housing markets, has worked hard to gain exposure and market share in booming areas of the world such as eastern Europe and the Middle East. Existing investors will not care a jot if that decision was good luck or good judgement, but will be grateful after the company said that first-half profits were up 19 per cent to £54m. On its own this is good, but even better against the backdrop of a dreadful domestic market.

Those not yet signed up will be relieved to learn that the experts think the next 12 months will be stellar. Analysts at Oriel say the group trades at 6.7 times estimated 2008 earnings, which "perhaps remembers Keller's historical 70 per cent US exposure, rather then the sub 40 per cent now." True, they say, the company's US Ebitda is down 25 per cent, but it has risen by more than 50 per cent in the emerging markets.

The move away from Keller's traditional markets will continue, with "capex being thrown at Middle East and Eastern Europe," say the Oriel analysts. Investors would be advised not to get too carried away and think that the share price will reach the heady heights predicted by analysts at house broker Dresdner Kleinwort. They say the stock will reach 1385p in the next 12 months, which looks a little ambitious. They are right that the shares are on an upward trajectory, however. Investors take heed: the sooner you buy, the more you will make. Buy.

Cains Beer Company

Our view: Sell

Share price: 2.75p (-3.625p)

2008 was supposed to be a good 12 months for the 168-year- old Cains Beer, the Liverpool- based brewer and pub group.

After being named as partner beer to the city's year as the European capital of culture, and having to better 2007 numbers that were ruined by the hopelessly wet summer, investors could be forgiven for expecting a solid set of results at the very worst.

Or at least that is the theory. The stock in fact fell a whopping 56.9 per cent yesterday, with news that losses for the six months to 28 April were £4.6m, compared to £690,000 in the same period a year ago, and that given the well-recorded problems with consumer confidence, things are not going to get dramatically better in the short term.

However, if investors do fancy a speculative punt, Cains may not be a bad bet, especially with the shares at a bargain basement price. The group said investment in the group's retail division is helping sales, new contracts have been signed with Asda, and the company has launched a new premium strength drink to compete with Stella Artois.

Many investors will be more more cautious, however, particularly with the group warning that full-year losses will be woeful. Sell.

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