Twelve Tips Good and True

Article excerpt

As Usual at the start of the New Year, business writers of the Independent on Sunday and the Independent stick their necks out and tip a share to follow.

Of course, the usual health warning applies. The tips are an ad hoc selection and in no sense constitute a balanced portfolio.

Paul Farrelly If it ain't broke, don't fix it. The approach, that is. So after Trafalgar House last year, I am again looking for hulks still not sufficiently bombed out to attract top dollar. I toyed with Sherwood Group, the lace maker, which had a terrible 1996 but is fundamentally sound. There is institutional unrest, which may lead to new management or a bid. Chairman David Parker, however, has a 30 per cent stake and may be hard to persuade. So I am going instead for DIY group Wickes. The shares are due to be relisted on Tuesday after its pounds 53m rescue rights issue. At 15p, that has been priced low to ensure a take-up and analysts expect the stock to open at 20-25p. That compares badly with the 69p suspension price following discovery of a huge accounting fraud last June, but will provide a benchmark for a bid. RMC and Kingfisher have already been sniffing and the housing market recovery offers an attractive backdrop for a deal. Richard Phillips There has been plenty of interest in Flextech (681p), the cable and satellite TV programme supplier, following the growing hype over digital and pay-per-view television. The company does have real merit; a recent digital deal with the BBC gives it access to the BBC's strong back catalogue, and Flextech also has established interests in The Children's Channel, UK Gold, Bravo and Playboy TV. The shares are not cheap, especially as it has yet to make any profits, but there are hopes Flextech's total profits could explode to more than pounds 200m by 1999. An interesting speculative punt. Richard Halstead Value is going to be hard to find this year in the tail of a bull market, and particularly rare in oil exploration shares. They had a bumper 1996 on the back of high oil prices and takeover activity. But Premier Oil (36.5p) may prove there's more life in the sector yet. Its recent purchase of Discovery Petroleum gives it exploration and production in Western Australia and Indonesia to add to its holdings in Pakistan and the North Sea. Last year Premier paid its first dividend and it has outlined an aggressive growth strategy. Yet the shares have not taken off, partly because of Amerada Hess's blocking 25 per cent stake. A standstill agreement on that holding expires in February, allowing it either to launch a full bid or sell out to a predator. Roger Trapp In an election year after a heady market, any investment has to be risky. So for my punt, I'm going for strong management. On this criterion, you could do worse than Siebe - a world-class British engineering company. Siebe may not give you huge returns - though the past year has seen the stock rise steadily from 751p to a high of 1,082p now - but it is unlikely to let you down. With a string of strong acquisitions under its belt and Allen Yurko installed as the successor to Barrie Stephens at the top, Siebe looks set to benefit from clear thinking and formidable products. Tom Stevenson It's been quite a year for First Choice, Britain's third largest tour operator after Thomson and Airtours. A new chief executive in Peter Long and a pretty dismal set of full-year figures ended the Francis Baron era. Profits of pounds 10m in 1996 were a lot better than the pounds 1m after the disastrous summer of 1995 when the whole industry was plagued by overcapacity and slashed prices. But they still represent a pathetic return on sales of more than pounds 1bn. The challenge is to translate that 1 per cent return into something closer to the industry best of 5 per cent or so. It might take a couple of years, but the prospect makes the shares (73.5p) attractive. Bookings are well up on last year and the City at last believes there is a firm hand on the tiller. …