The Investment Column: Spot winners in pounds 15bn society bonanza

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The Independent Online
Anyone who thinks the economy is not set for a buoyant 1997, driven by strong consumer spending, has not reckoned with the pounds 15bn to be released from the Woolwich and Halifax building society flotations, details of which emerged this week.

Together with the proposed flotations of Norwich Union, Alliance & Leicester and Northern Rock, an estimated pounds 25bn of money that people had not previously counted on will be burning a hole in consumers' pockets.

This represents an unprecedented boost to the national economy, with very uncertain consequences. They are uncertain because nobody knows how much of those windfalls will be squirrelled away and how much blown in an orgy of "what the hell" consumerism. The balance will depend on how good people feel about their finances generally, but against a backdrop of rising house prices, low interest rates and falling unemployment it would be surprising if an awful lot of the cash were not splurged.

Another important factor is likely to be the size of the payouts from Woolwich and Halifax. With payouts averaging about pounds 1,300, many people will take the view that such an amount is hardly going to transform their pension fund but will buy a very nice holiday, or that multimedia PC they've been umming and aahing about for the past year or so. It might make a good down-payment for that low-finance Ford Mondeo they've seen in the garage window or replace that tired sofa.

For those lucky enough to be benefiting from this money-for-nothing handout, the key question is when, if at all, to cash in their chips and take part in the consumer blow-out. For everyone else, the more relevant question is how to benefit at one remove from all that spending.

For new Halifax shareholders, the best advice would be to hold onto the shares at least for the first few weeks or months following the transfer of shares. That is because, unusually for a company worth pounds 12bn on the stock market, the big investing institutions will be heavily underweight with all the shares in the hands of the general public. There will be an unseemly scramble to buy a suitable weighting in the stock, and unless everyone rushes for an early exit, the share price will be bid up sharply. Holding onto Abbey National shares paid handsome dividends after that first conversion.

For everyone else, attention should focus on which sectors and companies are likely to be the biggest beneficiaries of the largess. To answer that question we have drawn up a portfolio of likely building society bonanza winners.

Dixons said earlier this week that computers had been one of its best- selling items and there is no reason to suppose that trend is going to reverse this year. As owner of PC World, one of the leading computer superstores, Dixons should do well.

A pounds 1,300 payout will go a long way to replacing a household's washing machine and dishwasher, so expect sales of white goods to be strong at Comet, which is owned by B&Q to Woolworth's group Kingfisher. Furniture should sell well at MFI, where profits are on a strong recovery tack.

Our other hunch is that Halifax and Woolwich shares will be sold to pay for holidays and new cars. In these sectors we are going for quality, even if the shares already discount much of the good news. Airtours is the best of the bunch in a recovering holiday industry and Reg Vardy looks good value after strong profits growth this week.