Discovery of `Black Gold' Makes Cairn Energy Top Stock of 2004 ; BUSINESS ANALYSIS Some of the Footsie's So-Called Defensive Stocks Struggled in an Unpredictable Year
Foley, Stephen, The Independent (London, England)
THE CITY'S professional fund managers are fond of predicting, at this time of year, that the stock market in the coming 12 months will be a "stock picker's market". They mean that all the likely trends for the coming year have been identified and largely priced into share valuations, so it will be those experts who can spot the value or growth prospects of an individual share who stand to make money. It is the fund managers' annual sales pitch, of course, but in 2004 it was also true.
The most startling conclusion from a look at the winners and losers of the year is the sheer diversity of those who came out at the top of the table. In the FTSE 100 of the UK's biggest companies, no two of the top 15 performers are from the same sector.
The top five span oil and gas, steel, media, mobile telephony and pubs. Just beyond those, property, food, mining, brewing, and support services are represented.
Those investors who spotted Cairn Energy at the start of the year are sitting on a gain of 173 per cent. The oil and gas exploration company has struck black gold off the west coast of India and - with the exception of one last drilling report last week - the size of the oil field has been revised up and up. Cairn shares went into the FTSE 100 in September and are up 700 per cent over the past five years.
Other companies to have joined the blue-chip index for the first time this year are: Enterprise Inns, whose shares are up 56 per cent and where the pounds 609m acquisition of Unique almost doubled the number of pubs it owns; Tate & Lyle, up 53 per cent thanks to the invention of sucralose, a zero-calorie sweetener; William Hill, whose betting shops were stuffed with lucrative fixed-odds gambling machines, leading to a 32 per cent share price gain; and Antofagasta, the Chilean mining group, sent 6 per cent higher thanks to the soaring copper price.
One of the major economic themes of the year has been the rising costs of commodities, which in many cases have hit levels not seen for 20 years. As Antofagasta's relatively modest share price gain shows, this has not translated into great gains for UK investors in these sectors, mainly because the sterling value of the dollar - in which commodities are priced - has fallen so steeply.
One exception has been Corus, the former British Steel, which dominates the "steel & other metals" sector and which has been brought back almost from the dead thanks to a doubling in the steel price. Lars Kreckel, a strategist at ABN Amro, says there has been, and will be, continuing high demand for the metal to feed China's industrial revolution.
"Most people were looking for a slowdown this year and it hasn't quite happened yet. There will be ups and downs, but China is not a phenomenon that appeared last year or will disappear next year. And trends in commodities are long-term and easy to underestimate. In steel in particular in previous cycles there has quickly been overcapacity but, after consolidation in the industry, this time steel companies have stayed pretty firm on supply and not gotten in each other's way," Mr Kreckel said.
Although the FTSE 100 has thrown up some diverse performances this year, that is not to say that that there haven't been themes. The property sector is one where a rising tide has floated all boats. The valuations put on retail …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Discovery of `Black Gold' Makes Cairn Energy Top Stock of 2004 ; BUSINESS ANALYSIS Some of the Footsie's So-Called Defensive Stocks Struggled in an Unpredictable Year. Contributors: Foley, Stephen - Author. Newspaper title: The Independent (London, England). Publication date: December 3, 2004. Page number: 40. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.