Investment Column: 'Naturally cautious' Pearson in the pink

Pearson

Our view: Buy

Share price: 625p (+27p)

"We live in Financial Times", proclaims the FT's advertising billboards. Indeed we do, and not very pleasantly at that.

Nonetheless, Pearson, the FTSE 100 group that owns the paper and other publishing businesses, is more than keeping its head above water. The company, which counts the FT, Penguin books, an education arm and 50 per cent of The Economist Group in its portfolio, issued a trading statement yesterday saying: "All of our businesses achieved or exceeded our guidance for 2008". The shares rose 4.5 per cent, following the 12 per cent hike of the past quarter.

Past performance is not necessarily a guide to the future, as the investment caveats say, and punters should note that the chief executive, Dame Marjorie Scardino, starts the statement by saying the company is "naturally cautious about the economic environment, but we take confidence from our performance in 2008 ... Some of our markets will be tough this year and we are managing the company accordingly".

Despite that, Pearson's shares are performing well for investors. The stock has lost just 7 per cent of its value in the past 12 months, compared to the FTSE 100's average fall of 31.3 per cent in 2008. Even the flagship paper's annual readership decline of 2.2 per cent is a better performance than any other UK national newspaper.

"Pearson is one of our key 'buy' ideas and top pick within media, with an upside potential of some 30 per cent," say analysts at Exane BNP Paribas, adding: "We continue to see valuation of around 8.5 times enterprise value to 2009 Ebit attractive, given the solid business mix and top of the range dividend yield of 6 per cent."

Economic Armageddon would spell serious problems for Pearson, but then so it would for lots of other hitherto solid stocks. For the time being at least, Pearson looks like a safe punt. Buy.

Healthcare Locums

Our view: Buy

Share price: 128.5p (+0.5p)

Healthcare Locums' share price has grown by 55 per cent in the past 12 months. Yes, that's right. The stock is up by levels that would look impressive when the economy is in rude health, but in these woeful times the company's performance is stunning.

The group finds doctors and other medical staff to fill some of the 4 million worldwide healthcare vacancies, sourcing people from 65 countries. If investors are looking for something defensive, they cannot get much further away from the epicentre of the recession than Healthcare Locums. The group announced yesterday, as part of its pre-close trading statement, that full-year results, to be published in March, will be in line with management and market expectations.

Kate Bleasdale, the group's founder and executive vice-chairman, says its biggest problem is ensuring its 23 agents around the globe continue to find enough staff to meet demand. With health systems being built from scratch in places like the United Arab Emirates, which counts as one of the group's biggest markets, this is a real problem, she insists.

Ms Bleasdale says "general consensus" among analysts is for another stellar year in 2009. Watchers at Singer Capital Markets reckon the stock is still cheap: "Consensus pre-tax profit is £18.2m ... [and] the shares are trading on an estimated 2009 price-earnings ratio of 6 times versus a staffing sector average of 7.3 times."

The need for healthcare workers is never going to diminish, and on this rating investors should buy Healthcare Locums. It is increasingly rare to find a group that can be considered safe, given the economic backdrop, and that is also likely to provide plenty of growth. Buy.

OneClickHR

Our view: Buy

Share price: 4.75p (+0.375p)

The busiest division of most companies at present is the human resources office, and sadly its main activity recently has been deciding which staff are sent the dreaded P45 form.

Every cloud has a silver lining, of course, and OneClickHR, the producer of HR software programmes that allow for the nasty process to be carried out with the maximum efficiency, is banking on its premier offering, HR.net, proving popular. Already the company has household names such as EMI, Hilton Foods and Rentokil signed up. Chief executive Frank Beechinor reckons more companies will see the benefits of HR.net, which he says allows HR teams to be trimmed. Throw into the mix that it allows executives to monitor individual staff performances, and that it is cheaper than rival software, and clients are on to a winner, says Mr Beechinor.

With development costs largely already sunk, and recurring revenues growing, the future looks good. Buy.