Winners & Losers: No cure for summertime blues

Our staff tips

THE INDEPENDENT'S share tips for 1998 bear the scars that afflicted the whole market. Though the FTSE 100 eventually rallied after its summertime blues to show a 14.5 per cent gain, the recovery was based on the rampant performance of one or two star sectors which skewed the whole index.

Most of our tips were from outside the blue chips, where stocks remained unloved. There were some notable exceptions, however. WS Atkins, the engineering and consulting group, finished the year strongly after calling off merger talks with P&O's Bovis Homes subsidiary. Chorion, the former Trocadero group, also tootled along merrily after picking up the rights to the Noddy and Big Ears books. And Eurotunnel, that perennial under-achiever, turned in a solid performance on the back of improving passenger figures and its first "profit" following a debt restructuring.

At the bottom of the league, Tamaris, the nursing home company, looked sickly. Northern Leisure, the nightclubs operator, called off takeover talks in the spring and the downturn in consumer spending hit it hard.

But the logic of some of the tips remains intact. Readers who bought BSkyB should hang on as the stock still looks under-valued. And BTR was tipped on the basis that if things continued to slide it would fall to a takeover. It did, but the merger with Siebe only emerged after the stock had fallen further than expected.

This year is likely to be difficult. Growth stocks will be few and far between as fear persists about weak consumer spending, price deflation and weak economic growth. For that reason the best course of action when considering FTSE 100 stocks, is to look for recovery potential.

For that reason we like the look of Bass (881.5p). Shares in Britain's biggest brewer are well below their peak of 1175p in the spring. It has been hit by fears over consumer spending but its purchase of Intercontinental Hotels offers more balance and its portfolio of drink and pub brands such as All Bar One, is among the strongest.

In retailing, the supermarkets look undervalued and Asda (161.5p) is trading at a discount to the sector. The shares are around 30 per cent lower than their 1998 peak.

Barclays Bank (1296p) may be worth a punt after its recent woes. Despite Martin Taylor's surprise exit from the chief executive's hot seat a couple of months ago, the basic high-street banking business remains in good shape. The shares have rebounded from their 838p level in October but are still well down on their 1946p peak and trading at a considerable discount to rivals.

Outside Footsie, another recovery stock is Churchill China (87.5p), the specialist manufacturer of tableware. The strength of sterling has depressed export prices, and the Asian crisis wiped out sales in Korea and the Pacific Rim, while frustrated exports have depressed prices on the home market. But the company is ungeared and its technical problems have been virtually solved.

Seton Scholl Healthcare (837.5p)looks like a safe bet. The group, formed by merger of Scholl, the maker of the famous medical sandals, and Seton, the over-the-counter drug specialist, is one of the leading healthcare players in the UK and continental Europe. Those two markets are expected to buck the gloomy economic outlook and grow by around 8-10 per cent for the next few years.

Hanson (477.5p)is a solid rock in the crumbling building materials sector. Unlike its unfancied peers, the rump of Lord Hanson's empire is less vulnerable to the UK economic slump. After an aggressive spending spree on bolt-on buys, over half of Hanson's profits come from the US, which is on the verge of a boom thanks to a $216bn government roadbuilding programme.

Support services could do well this year as contracting-out is more popular in downturns. Skills Group (181.5p), is shifting from low-margin distribution to more lucrative computer services, but has yet to reap the benefits in share price terms. The group has net cash of pounds 33m to fund bolt-on acquisitions and with a forward multiple of just 12, a rerating looks overdue.

DCC (520p), the Irish industrial holding company, has an odd mix of businesses in healthcare, food, energy and computer distribution. But it has proved a successful combination and its "localisation" business, which adapts computer software for European and Asian markets, is booming. Analysts are impressed with the company's progressive management, and good acquisition record.

For a play on the explosive growth potential of the Internet, investors with strong stomachs should have a look at Zergo. Two weeks ago the firm became the world's second-largest supplier of security software, which allows people to trade safely on the Internet, when it merged with its Irish rival, Baltimore, in a pounds 35m deal. Not for widows and orphans, but worth a punt.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Mia Freedman, editorial director of the Mamamia website, reads out a tweet she was sent.
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
books...begging to differ, John Walsh can't even begin to number the ways
Jose Mourinho on Sky Sports
footballEXCLUSIVE COLUMN Paul Scholes: It was not a leg-breaking tackle, as the Chelsea manager had claimed
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Anna Woodward: German Speaking Accountant

£45,000: Anna Woodward: My client is aleading global manufacturer and service ...

Danielle Degan: Accounts Payable Executive

£13 - £15 Hourly Rate: Danielle Degan: Are you looking for a Purchase Ledger r...

Jemma Gent: International Management Accountant

£150 - £200 Day Rate: Jemma Gent: Are you as an experienced accountant with ex...

George Parlour: Assistant Accountant

£13 - £15 Hourly Rate: George Parlour: Do you want to give something back? Th...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower