The Investment Column: Savills not too posh to be pushed into maelstrom

Our view: Sell

Share price: 244p (+23.25p)

To put it mildly, estate agents are not everyone's cup of tea. Still, for investors the sector has done well, until recently piggy backing on the incessant increase in house prices.

Naturally, life has become more difficult over the past six months, as house prices have fallen back. Indeed, if the chart of Savills' share price is anything to go by over the last two months – the stock has fallen from 366.75p on 26 March to its current level – estate agents should be shunned by investors.

Savills would argue that it is different, specialising in top-end expensive residential, commercial and international properties. However, like luxury cars, while the pricey end of the market is holding up better than others, much of the spending, especially in London, is off the back of City bankers and traders spending their huge bonuses. These will be dramatically cut back, or will disappear altogether, in the immediate future.

Yesterday the group announced it has sold its 50 per cent stake in the wind farm project Infinergy to its joint venture partner for £23m. It is not clear why the group opted to sell now – the company declined to comment yesterday – but analysts at Brewin Dolphin suggested that the cash will bolster the cash position and that investors should buy because the group has been oversold in the rush away from the sector. This may be true, and if buyers want to be exposed to the property market, far better they buy Savills than something like Barratt Homes; although analysts now say that the value of some homebuilders has fallen so far that a speculative buy is worthwhile.

Observers at Numis are upbeat on Savills, remaining fans of the "diversified business model". Still, with signs that the general UK property market is in trouble, and will remain in trouble for the foreseeable future, it is difficult to imagine that Savills won't get dragged into the maelstrom irrespective of the business model. Sell.



Cobham

Our view: Hold

Share price: 202.75p (+2.5p)

Ethical investors must be having rather a hard time of it at the moment. While they tend to eschew groups exposed to defence spending, there are not too many more stocks that are worth a punt. Cobham, the aerospace and defence systems group, provides such a quandary; it is in unquestionably good shape, but does provide a raft of military equipment.

Yesterday it announced that it has signed new helicopters deals with AgustaWestland and the Ministry of Defence worth £55m. This is the tip of the iceberg. The group had an order book at the end of the financial year 2007 of £1.8bn, up from £1.4bn in 2006, and revenues of £1.1bn; an increase of 4.5 per cent in 12 months.

US defence spending is going through the roof as it continues to fight in Iraq and Afghanistan. According to experts at Société Générale, Cobham generates 60 per cent of sales in the US, with 45 per cent coming from US government and military programmes, giving the group "a significant degree of protection in the event of any economic downturn".

The problem for those prepared to look at Cobham, and the solution for those uneasy about it, is that the stock is expensive. Credit Suisse say it trades at 13.8 times earnings, representing a "slight premium" to the UK aerospace and defence sector.

Investors wanting a safe and steady stock should take a close look, but they should be warned that there is little potential for growth. The Société Générale watchers reckon the stock will only rise to 210p over the next 12 months, making a punt now a waste of time. Hold.



Charles Stanley

Our view: Cautious hold

Share price: 230p(unchanged)

With the well-reported ill winds blowing through the financial markets, investors are more than justified in avoiding anything remotely linked to financial markets.

It is because of this that the stockbroker Charles Stanley's shares took a battering at the start of the year, falling from 378p last year to 190p by March.

However, punters that bought at that level are now quids in, and despite a headline fall of more than £5m in pre-tax profits announced yesterday, the chairman, Sir David Howard, reckons the firm is in fine shape.

Sir David says that much of the fall in profits is due to acquisitions, which are now "firing on all cylinders". Other numbers, like a more than £7m increase in revenue, are laudable.

Analysts at Numis say that Charles Stanley trades at 8.6 times next year's estimated earnings, and argue that the firm's discount to the private client wealth management sector "is appropriate". Charles Stanley's brokers at Landsbanki are predictably more bullish, and say that the firm is "exploiting the challenging trading environment to recruit teams from less stable competitors and improve its product offering."

That is commendable, but even Sir David says that while macroeconomic fundamentals are in fact pretty robust, the main risk to the business remains the credit crunch, and that it is very tricky to work out what will happen from one day to the next. Investors should heed this warning. Cautious hold.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us