Catch a Rising Star; Art of Picking a Potential Winnerthe Midas Column

The Mail on Sunday (London, England), March 22, 1998 | Go to article overview

Catch a Rising Star; Art of Picking a Potential Winnerthe Midas Column


Byline: NEIL THAPAR

IDENTIFYING a growth company before it achieves celebrity status is like spotting a potential film star in a crowd of debutants.

The reward comes when the market suddenly wakes up to its growth.

As investors rush to buy a stake, the shares benefit from a big revaluation, delivering a stunning performance for the firm's early fans.

But talent-spotting is not easy. A company may not have a sufficiently long financial record, or business may be undergoing a sea-change with new management.

Backing a company with a proven management is one way of finding winners. But do not rely on blind faith.

Examine the firm's strategy - even a commonsense line of enquiry can be revealing.

A company operating in a fast-growing or buoyant industry has a head start over a firm in a mature sector. However, a business with a distinctive niche, or offering a smarter product or service, may still outperform its sector.

Food manufacturer S. Daniels, led by former venture capital financier Cyril Freedman, is a good example.

When Freedman arrived as chief executive in 1995, Daniels was a loss-making powdered-milk supplier.

Thanks to his deal-making skills, Daniels has moved into faster-growing markets, with six acquisitions costing a total of [pounds sterling]35 million. Now it owns promising brands in fresh foods, including Johnson's, which supplies orange juice to sandwich shops, and New Covent Garden Soup Co, whose broths are sold in supermarkets.

On Tuesday, Daniels should thrill fans with profits tripled to [pounds sterling]2.3 million and earnings increased by 140% to 3p.

This year profits could surge another 40%, valuing the shares, at 50 1/2p, on just 11 times expected earnings.

Tipped by Midas at 48p in December 1996, their entry into the limelight looks overdue. Grab a front-row seat.

OUR FIRST ELEVEN MATCHES FOOTSIE

SOME readers have asked for an update on my annual portfolio picks in 1996 and 1997, as I recommended hanging on to all but one of the dozen shares.

A quick review seems in order now that they have had time to get into their stride. …

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