"MONEY won is twice as sweet as money earned."
Paul Newman's 'Fast' Eddie Felson might have been talking about his winnings from playing pool when he spoke the famous line in The Hustler, but any successful stock market investor will testify to the truth of those words.
There are plenty of winnings floating around the economy this festive season after another vintage year for the Iseq, which recently crashed through the 9,000 barrier for the first time in its history.
But where is the best place to invest the Christmas bonus to make sure you're sitting pretty this time in 2007? Tribune Business sought out the views of a crack team of Irish market watchers to fill in a betting slip with their top five stock picks.
The runners and riders they have selected are surprisingly diverse. The portfolio encompasses stalwarts such as aggregates giant CRH and international financial services kingpin HSBC, as well as more risky ventures such as London-listed Cambridge Silicon Radio.
Joe Gill, Goodbody Stockbrokers Gill's five picks are a bet on the continued strength of the domestic economy. "We think there's really strong momentum going into 2007, " he said. With inflation steady and interest rate hikes likely to top out at around 3.75%, according to Gill, "it's a very benign scenario for corporate profit growth".
His first pick is Grafton. The building materials and DIY retail "rm has been on the up and up over the last year and the portents for the 2007 are good. The company is likely to benefit from an improvement in residential construction in the UK. At home, its Woodies and Atlantic Homecare chains are set to benefit from a bumper year for DIY, according to Gill. "The SSIA flow of money will be a very healthy stimulant to DIY and home improvements, " he said.
CPL is another classic boom play. The recruitment company is benefiting from a buoyant labour market where 83,000 new jobs were created in the past year alone and all economic indicators point to another strong year in 2007. Gill reckons CPL "will get a run in the New Year".
Also due for a bounce, he said, is Ryanair. The airline's shares have not performed well over the last 12 months, lagging both the overall Iseq performance and other European airline stocks.
Gill believes the market will eventually redress the imbalance. "If oil is any way weak in 2007 there's a chance you'll get upgrades as well, " he said.
Rounding out Gill's fab five is Newcourt, the recruitment and security personnel outsourcing specialist. "It's just a straight play on the Irish economy, " he said.
Pramit Ghose, Bloxham Stockbrokers Look to this year's ugly ducklings to find next year's swans, says Pramit Ghose. His investment picks have, for a variety of reasons, been overlooked or fallen out of favour over the past year but he believes they're ready to bounce back in 2007.
Home builder Abbey is an obvious choice, he said. "It's got about 20% of its valuation in cash sitting on the balance sheet. It's very conservative and very well managed." The outlook for Irish residential construction is good. In the UK , meanwhile, Ghose feels that where its fellow quoted Irish construction stock McInerney has performed strongly, Abbey is set to follow.
United Drug has historically been one of the most consistent performers on the Iseq but has treaded water for the past year. Ghose believes that is about to change. "It's a very fine company with very fine growth prospects but it has done nothing on the market this year." At just "ve times historic earnings, Ghose said the stock is "very cheap" compared to its historical valuation, presenting a good opportunity to buy.
Ghose also believes drug maker Glaxo Smithkline is about to come in from the cold. "It is a pretty hated stock in the UK . It has not performed at all, " he said. It too is trading at a low valuation relative to historic prices. Ghose feels the current price does not reflect the strength of GSK's development pipeline which could see it generate a lot more positive feeling in the year ahead.
Global banking giant HSBC is another laggard, underperforming relative to its peers in CMYK the financial services. But the current share price weakness is unlikely to last, according to Ghose.
"We would regard the growth prospects as very good, " he said.
For the risk-taker, he recommends taking a close look at Cambridge Silicon Radio (CSR). The manufacturer of Bluetooth chips, used in devices such as mobile phone headsets, was trading at £15 in London during the summer but plummeted following a pro"t warning to £6.30.
"We just think it has been oversold, " Ghose said.
Stuart Draper, Dolmen Stockbrokers Dolmen is a big fan of the blue-chip stocks and Draper believes there is still plenty of value to be had from investing the old reliables over the next 12 months.
Those who were disappointed with AIB's end of year trading statement, which precipitated a 3% drop in the share price, should have a bit more faith, he said. "It should be remembered that AIB previously upgraded earnings guidance twice in 2006 and last year its year end trading statement gave an in-line update only for this guidance to be beaten three months later when the full year results were announced."
CRH will release its end of year trading statement on 3 January and Draper is expecting the company to start the year as it means to go on - strong growth to continue across its European business, recent acquisitions to begin delivering and a solid 10% return on your investment in Ireland's cement king.
Independent News and Media is confident that a pick-up in UK advertising will fill its sails. A strengthening rand is a big plus for its South African division and recent deals in Australia and India will bear fruit in 2007. Combine that with a healthy dividend yield of 4.4% and INM is a definite buy, said Draper.
For those interested in a good old-fashioned property play, next year "will be an important year for Greencore in starting to unlock the hidden value contained in its substantial land bank". The upside is not yet priced into the Greencore shares, according to Draper. A favourable result in a legal case about payments due to the company from the EU as compensation for exiting its sugar business could provide further upside.
High oil prices haven't gone away and Draper believes BP will reap the benefits of a string of new production sites in 2007. At current prices, in line with its peers, the company is undervalued, he said. "Given the extent of BP's operations and the spread of its geographic risk it is reasonable that it should be rated at a 10% premium to the energy sector average of ten times 2007 earnings."
Liam Boggan, Merrion Capital Boggan takes his investing tips from Merrion's ten stock model fund, a portfolio of ten Irish stocks that the broker shuf"es on a regular basis.
"CRH continues to be one of the key stocks that we recommend and we have recently published a research piece highlighting our positive views on the stock. The CRH valuation is low and the stock is trading at a discount to its international peers which we feel is undeserved, " he said.
Like Joe Gill, Boggan is also bullish on Ryanair. "The outlook for Ryanair is supported by the prospect of strong margin expansion in its next financial year. This reflects the likelihood of the continuation of a relatively benign pricing environment, " he said.
Merrion also likes the look of C&C, based on its roll-out of Magners cider in the UK. "C&C are also looking to further expand the geographic distribution into a new market this year as well as to begin servicing the UK off-trade in earnest as they grow their capacity, " Boggan said.
He also echoed Stuart Draper's view that AIB is a good bet for 2007 despite its recent hiccup.
"We continue to find the valuation attractive. Our Euro24.50 target price represents upside of 14% from current levels, before dividends, " he said.
Its domestic rival, Anglo Irish Bank, is also worth a look, said Boggan, as it plans to grow its business in both the US and the UK, markets where it has already enjoyed considerable success. "We see organic opportunities for expansion in the UK and US while maintaining its strong position in the Irish market, " he said.
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