The Investment Column: Steer well clear of F&C Asset Management

F&C Asset Management

Our view: Sell

Share price: 103p (-1p)

TIMES ARE pretty tough for F&C Asset Management, the oldest investment firm in the UK. If having to tell the market yesterday that pre-tax profits in the last six months had dropped by 13 per cent was not bad enough, chief executive Alain Grisay then had to fend off questions from a bunch of pesky journalists who put it to him that there was little interest in the 52.5 per cent of the group that Friends Provident is trying to sell. "There have been a number of expressions of interest," insists Mr Grisay, who said that he expects a sale in the third or fourth quarter.

His job can hardly have been helped by another major investor, Dawnay Day, selling 19 per cent of the group last month, although in fairness Dawnay Day was a forced seller after facing collateral calls.

The numbers themselves, while not necessarily marvellous, were not too bad. Yes, profits dived and asset under management fell from £103.6bn at the end of last year to £96.5bn on 30 June, but earnings per share were flat compared with last year, which will at least give some cheer to investors. The fact that F&C has a higher proportion of insurance clients, which tend to be longer-term investors, compared with many of its peers does mean that funds are likely to stay at least stable.

What is providing considerably less cheer is the state of the wider market. Mr Grisay says that asset managers are a leveraged play on the stock market and when an upturn comes along, buyers should pile in. Indeed. Except that there is no sign of an imminent upturn, meaning that there is nothing to apply to halt the fall of the stock, which has already lost more than 45 per cent of its value in the last 12 months.

If you want an asset manager, the analysts would recommend F&C. According to those at Altium, the group will trade at 10.3 times its price-earnings ratio next year, compared with Aberdeen and Henderson, which are both closer to 12.5 times. However, you really do not want an asset manager. The sale by Friends Provident is also an irritation. Sell.

Eurasian Natural Resources Corp

Our view: Buy

Share price: 1,017p (+67p)

The perception over the last year is that investors in mining stocks have had a jolly old time: until recently, as the price of commodities has risen, so in theory have the portfolios of buyers.

That is not quite true of backers of the FTSE 100-listed Kazakh miner ENRC, which now trades down from year highs of 1,535p and had lost nearly 21 per cent of its value in the last three months before yesterday. The spike in the share price was largely due to speculation that the group would merge with the other London-listed Kazakh miner, and holder of 22 per cent of ENRC stock, Kazakhmys. The rumours have not yet gone away and an actual bid would spark a revival in the stock.

It is not just the lack of a substantive bid from Kazakhmys that has led to a slip in the stock. Metal prices have fallen considerably in recent weeks, based largely on fears of a fall in global demand. The group was up 7 per cent yesterday, however, on news that production volumes in the second quarter were up, with a 2.5 per cent rise for total ferroalloys, including a 3.8 per cent increase in high-carbon ferrochrome production.

The analysts reckon that the sell-off in ENRC shares is overdone. Those at Credit Suisse, which have the group on a target price of 1,600p, reckon the stock will outperform the market. "On our 'worst case' scenario ...assuming ferrochrome averages $1.80 per pound in 2009 compared with our current forecast of $2 per pound, ENRC could still achieve trough earnings of $2.10 per share for 2009, which implies a [price-earnings ratio] of just 9.4 times." Buy.

Nichols

Our view: Hold

Share price: 237p (-4p)

Vimto, the cordial drink that is decidedly easier to get hold of in the north of the country – and oddly in the Middle East – than it is in London is 100 years old this year.

Its maker, Nichols, said that the immediate future will continue in much the same vein as the last six months. Yesterday, it announced that first-half pre-tax profits were up 15.5 per cent to £3.2m. John Nichols, the group's non-executive chairman, reckons that the credit crunch is having little impact on the group, which outsources its production of its drinks Vimto, Sunkiss and Panda. The other part of the business, its dispensary unit, is now becoming "an acceptable part of the portfolio", after several difficulties in recent years.

If investors are thinking that all this fairly mundane stuff means that Nichols is a good counter-cycle punt, sadly they are wrong. The group is growing, especially in the Middle East where Vimto is an increasingly popular drink during Ramadan, but even its own broker sees little room for growth. Watchers at Brewin Dolphin downgraded the stock to hold from buy yesterday, saying that it will only get to 260p in the next 12 months: but now would be a waste of time. Hold.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
i100
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Sport
Fernando Torres has not scored in 266 minutes of pre-season for Chelsea
football
Arts and Entertainment
(L-R) Amanda Peet as Tina Morris, Melanie Lynskey as Michelle Pierson, Abby Ryder Fortson as Sophie Pierson, Mark Duplass as Brett Pierson and Steve Zissis as Alex Pappas in Togetherness
TV First US networks like HBO shook up drama - now it's comedy's turn
Travel
Pool with a view: the mMarina Bay Sands in Singapore
travel From Haiti and Alaska to Namibia and Iceland
News
The will of Helen Beatrix Heelis, better known as Beatrix Potter, was among those to be archived
people
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect