US Tiger fund takes a bite of WPP

Market Report

ADVERTISING AGENCY WPP was one of the more active Footsie constituents as Tiger Management, the famed American hedge fund, emerged as a 3.91 per cent shareholder.

The US group, where Baroness Thatcher is a consultant, has taken an active interest in London shares this year. It determinedly built a 12.15 per cent stake in the Next fashion chain but when the one-time high- flyer failed to recover, it trimmed its holding to 10.99 per cent.

It could see WPP, headed by high earner Martin Sorrell, as a recovery play. The big advertising group fell to 202p in the October blood bath; in the summer it was 467p. Goldman Sachs believes the shares, up 10.75p to 323.75p, should go to 400p.

The Tiger pounce helped enliven a downbeat session with, in moderate trading, Footsie falling 7.2 points to 5,534.5. It was at one time down 73.3. For the first time the Stock Exchange's new Volume-Weighted Average Price calculation was used to determine closing order book prices.

In the past the final price has been based on the last order book trade. Under the new system a few prices were adjusted with, for example, Prudential Corporation being accorded an 847p close against an order book price of 849.5p and Vodafone 903p against 908p.

Despite late programme trades and some bed and breakfast exercises the usual festive lethargy was evident and this year there is the added excuse of the euro's arrival for institutions to adopt a no play policy.

The stock market is taking the new currency's debut so seriously that for the first time in living memory the market will be closed on New Year's Eve and open for only half a day on 30 December. Supporting shares had another depressing session with the mid cap index off 30.4 to 4,706.5 and the small cap 4.8 to 2,007.8.

Richard Jeffrey at Charterhouse Tilney points out that small cap shares have under performed by 40 per cent in the past two years. "Seldom has a fall from grace been so spectacular," he said. "The combination of economic slowdown and deteriorating profit margins makes it likely that investors will continue to shun small cap stocks in the early months of 1999."

Still the lot of under card shares could start to improve around the middle of next year, prompted by "escalating corporate activity as larger companies also seek to exploit the lowly ratings of their smaller brethren".

First Choice Holidays, a mid cap constituent, was one to buck the trend, gaining 1.5p to 101p. Year's results are due today. Helped by acquisitions, profits are expected to soar from pounds 15.4m to pounds 48m.

Railtrack, after being shunted into the sidings last week following regulatory strictures, rebounded, gaining 130p to 1,5311 with WestLB Panmure among those advocating buying the shares.

The advance was helped by suggestions that the group could play a significant role in the revamp of the London Underground.

But Pearson, the banking and media group, was weak, falling 33p to 1,062p on worries about a trading statement, due today. The market is braced for a cautious tone and profit downgradings are expected to follow. The market's expectations are currently around pounds 348m. Last year's figure was pounds 128.6m.

Shell's restructuring left the shares 3.5p lower at 350.5p but Southern Electric brightened 30p to 665p as Scottish Hydro-Electric's takeover obtained regulatory approval and with 79.1 per cent support went unconditional. General Electric Co's late bid to join the European defence merger talks left its shares 18p off at 521p. The market felt its last minute arrival would mean it would be forced to negotiate from a position of weakness. British Aerospace, little changed at 501.75p, is believed to be near to clinching a deal with Germany's DaimlerChrysler Aerospace.

Emap fell 74p to 1,050p. The publisher confirmed it may buy a US magazine group; the rumoured price is pounds 655m.

National Grid, splashing out pounds 1.9bn on a US electricity group and looking for more overseas deals, fell 10.5p to 488p.

A profits warning cut into PIC International, the remnants of the old Dalgety food group. The pig breeder's shares plunged 23.5p to 73p.

MFI fell 3p to 26p on worries it will slump into losses today and little Cadora, the Capolito Roma retailer, fell 0.25p to 1p following losses and signals more cash may be needed.

Greycoat hardened 6p to 162.5p after admitting to unfruitful merger talks with Wates City of London Properties. Wates, off 1p at 73p, has 2.1 per cent of Greycoat.

Servisair, the airline support group, rose 9p to 125p after it said it had received approaches but was not currently involved in any talks.

Newcastle Utd, said to be putting together a pounds 50m cash-raising exercise in New York, gained 9p to 105p.

LITTLE Oxford Biomedica rose 2.25p to 12p, reflecting a gene therapy licensing link with the giant Rhone-Poulenc Rorer. Dr Stephen Osborne at stockbroker Beeson Gregory calculates the value of the deal, including royalty payments, is at least 30p a share and could be as high as 87p. However, losses will continue; he forecasts pounds 3.7m this year and pounds 3.1m next. The shares, recently down to 8p, brushed 60p two years ago.

FARLAKE, the reshaped fund manager, should make further headway this year with stockbroker Teather & Greenwood shooting for profits of nearly pounds 1.2m against pounds 805,000. Next year's forecast from analyst Martin Cross is pounds 1.25m. The company has pounds 380m under management split between PEPs, pension plans and private client portfolios. The shares held at 325p, just below their year's high. In 1996 they were up to a 475p peak.

SEAQ VOLUME: 792.5m

SEAQ TRADES: 61,433

GILT INDEX: 114.95 +0.61