Press & Magazine Tips for 2007

DAILY TELEGRAPH TIPS FOR 2007

Did they spot a winner? Here are our predictions for shares that should see off the opposition and romp home in 2007, with a brief reminder of what happened to some of last year's field

ITV
Damian Reece, City Editor

A year ago I predicted strong demand for broadband, a technology that has since made the headlines. My pick was PlusNet at 281.5p which soared 45pc. Carphone Warehouse's broadband launch turned sentiment against PlusNet but we advised readers yet to lock in profits to sell in April at 296.5p.

This year I've been tempted by several shares but one story stands out. Of the possibles, publisher Bloomsbury (243p), devastated by a recent profits warning, still has the final Harry Potter book to come. Cable & Wireless (157p) and Compass (285.25p) are interesting FTSE 100 recovery plays while United Utilities (777.5p) is a solid, high-yielding blue chip.

However, I'm going to plump for ITV (106.75p). Well below the 135p BSkyB bought at, I'm confident Michael Grade, the new executive chairman, can start sorting out ITV's programming issues and reconnect with advertisers. A showman undoubtedly, Grade has a solid chief operating officer to look after the nuts and bolts. Buy.


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Omega
Richard Fletcher

My first new year selection for the Business section is Aim-listed Omega Insurance, previously called Omega Underwriting, which has risen steadily since the company listed in April 2005.

Omega was originally set up as a managing agent for Lloyd's syndicate 958 in the 1980s. It has since delivered an unbroken record of underwriting profit on the syndicate, one of only three syndicates at Lloyd's to have done so.

Over the past 18 months Omega, which is run by insurance veteran Richard Tolliday, has evolved into a global business with operations in both the US and UK. In September, it followed a number of other Lloyd's of London insurers and moved its domicile to Bermuda, which should mean a substantial reduction in its tax rate.

Numis believes the move should increase earnings per share by 22pc in 2007 and 33pc in 2008, yet the share price has increased just 9pc since it was announced. At 156p buy the shares.


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Carnival
Alistair Osborne

President Bush called my bluff last year when I tipped online casino and poker group 888 at 194p, believing he would not be daft enough to ban internet gambling.

He was. The shares, which hit 245p, folded to today's 135p.

Flush from that success, I've decided to get my own back on America by going nap on Carnival Corporation, the world's biggest cruise operator with around half the market.

It was the FTSE 100's worst performer last year, with the shares down almost a quarter. That's a bit harsh given it's just posted record profits. This is despite being buffeted by hurricanes, soaring fuel prices and fewer Caribbean cruisers.

Carnival's the best way to pick the pocket of America's ageing baby boomers, with their bermuda shorts weighed down with grey dollars.

At £25.99 the shares trade at near their lowest ever earnings multiple. Dip your toes in the water.


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BT
Tom Stevenson

BT might seem like a pretty boring tip of the year but it ticks all the right boxes ahead of what I expect to be a much more difficult year for investors.

First, it is on a roll. While it might seem odd to buy a share that has already risen sharply this year, when the market changes its mind on a stock the recovery tends to go further and for longer than you might expect.

Second, under impressive chief executive Ben Verwaayen, BT has rung all the right changes. Four years ago, half of the revenues came from voice calls and line rentals and just 13pc from so-called new-wave sources of IT networks, broadband and mobile.

Now these more future-proofed income streams are a third of sales.

Finally, at 312p BT's shares yield a generous 4.5pc, the dividend is well-covered and the company has promised to continue paying two-thirds of profit to shareholders.

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Pipex
Dominic White

Anyone who has signed to broadband or tried to switch supplier knows that it can be a frustrating process.

But once you've got a high-speed web connection, just like electricity and gas, you find you can't do without it. This type of consumer apathy towards switching suppliers has helped utility companies to continue coining it in for years. So while net growth in broadband subscriptions is slowing, the value of companies with customers already signed up is on the rise. Carphone Warehouse recently paid £250 for each of AOL UK's 1.1m subscribers.

Pipex, which has 600,000 broadband subscribers, is trading at 13p or over 30 times forecast 2006 earnings, falling to nearer 20 for 2007. Investec's sum-of-the-parts valuation of 16.7p a share assumes a value of £250 per broadband subscriber. Raising that to £300 per subscriber would lift the valuation to 18.3p, offering serious upside to the share price. Plus Pipex uses David "the Hoff" Hasselhoff in its advertising. What more could you want?


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Aberdeen
Sophie Brodie

Last year, I tipped fund manager Schroders as a short-term buy, advising cautious investors to cash out of it if the stock rose much above £10 a share. The bet was based on a bearish assumption that the market couldn't rise forever. In the event, the tip was right but the rationale wrong. Aside from a sharp fall in the second quarter, the market has steamed ahead. Schroders, on the other hand, didn't have such a rosy time. After hitting a high above £12 in April, the shares plunged to below £9 due to heavy outflows from the manager's core balanced mandate business, including a couple of large, long-term clients. However, the shares have recovered enough to close on Friday at £10.90.

As for 2007, it's tempting to back current sector favourite Aberdeen Asset Management, which rose 40pc this year buoyed by healthy profit rises and acquisition rumours. Compared to the rest of the sector, the shares at 186p are still good value.


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ReNeuron
Katherine Griffiths

The science needed to get adults to grow new stem cells is still years away. But when it happens, it will be a major medical breakthrough, as the brain and other organs will be able to repair themselves after damage. Britain's ReNeuron is at the forefront of the experiments which should mean we one day get there.

The Guildford-based company has had a rocky history with the stock market. It was floated, taken private and then re-floated. The shares trade at 37½p.

Next year will be key for ReNeuron. It has applied for a licence in the US to begin the first trial in humans using stem cells to repair brain damage after strokes.

ReNeuron is worth a fraction of US companies working in the same area. Some analysts believe it is still too early to invest in this sector. Certainly, those putting money into it should do so on a three or four-year view. For those with an appetite for risk, this is a maiden New Year selection for the Business section.


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Greene King
Harry Wallop

Hampson, the small Birmingham-based aerospace company, failed to take off quite as much as I hoped in 2006. Tipped at 141p the shares currently trade at 148p. The weak dollar and a delay in a key contract explain why the shares, which climbed to 187p early in the year, ran out of steam. Stay on board, however, the shares are good value.

I'm off to the pub for this year's tip. All the pub companies have had a great run in 2006. Greene King is no exception, seeing its shares rise nearly 50pc during the year, making the shares at £11.37 far from cheap. But there should be more to come from the pub operator and brewer of Old Speckled Hen. Having swallowed Belhaven's Scottish pub network, and Hardy & Hanson's midlands estate, the company is looking leaner and more efficient than ever. The next step would be a merger or takeover of Wolverhampton & Dudley.

If that fails to whet your appetite, how about a conversion into a real estate investment trust? Either way, the shares have further to travel.

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VT Group
Russell Hotten

Shares in VT Group have yo-yoed since starting 2006 at 415p, which is odd given that the news stream was mostly positive. The support services and shipbuilding company might not match its 33pc jump in pre-tax profits and 10pc dividend rise, but that won't put a brake on the shares, currently 466¾p, in 2007. This year may be the one where we all finally stop referring to VT as "the warship builder", and give more credit to its successful services operation, which accounts for 80pc of turnover.

advertisementThe shipbuilding interests are being put into a joint venture with BAE, leaving money and management time to focus on areas with greater margins. But the bulk of VT's activity this year will come from the other, larger arm. With its strong cash position, and just £15.3m of debt, VT has plenty of firepower to make bolt-on acquisitions for its defence services, education, and skills support operations, particularly in the US. These are the sectors where VT's future lies, and 2007 should be another very good year.


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Lonmin
James Quinn

With the demand for precious metals increasing as the global economy continues to boom, shares in platinum producer Lonmin at £29.53 are a firm bet. Granted, the shares have trebled in the past two years, which would lead many investors to shy away for fears all of its best gains are behind it. But that is not the case. Demand for platinum is outstripping supply, and that has meant prices continue to rise. Lonmin is well positioned to take advantage of this.

In spite of problems at one of Lonmin's smelters of late, such setbacks are surmountable, and the increase in platinum prices will surely outweigh any extra costs.

Lonmin is also one of the companies that will do well from the ongoing green agenda, as more than 50pc of the global demand for platinum is driven by the need for catalytic convertors.

One not only for the commodity geeks but also for investors who are looking to see real returns.


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F&C
Ian Cowie

Foreign & Colonial Asset Management looks an attractive two-way play for risk-takers willing to bet the market has over-reacted to bad news. Losing nearly a quarter of its funds under management, mostly through cancellation of one institutional contract, hit the stock hard.

I tipped the fund manager on November 4 after a week in which the price fell as low as 180p, compared to an annual high of 234p, having plunged from nearly double that level five years ago. More importantly, the shares were yielding 6.1pc net of basic rate tax.

That seemed a generous comfort blanket for investing in a company with a market capitalisation of £980m and which looks after £105bn of other people's money. I bought shares the following week and now recommend them as my selection for 2007. They currently stand at 208p and yield about 5.4pc. This income stream makes it relatively painless to await an improvement in F&C's fortunes or the possibility of a bid.


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Ricardo
Philip Aldrick

The resurgence of coal, mostly due to soaring energy demand in China and India, lay behind Fenner's 31pc return, which I tipped last year. Profits at the world's largest maker of industrial conveyor belts more than doubled to £29.3m this year, and it would have been even better had the dollar, coal's trading currency, not weakened so much.

Ricardo Group, the engineering consultancy, had a brief brush with fame in August when it helped JCB break the world land speed record for a diesel-powered car. Exposure is not its typical style, though the shares should power ahead this year. Ricardo is shifting its focus to the Far East. GM and Ford remain major customers, though, and if they are to regain their dominance it will be through new technology. High oil prices and rising environmental awareness are driving more work in Ricardo's direction. At 313¼p the shares are not expensive on 14.2 times forecast earnings with a 4pc prospective yield.


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Friends Provident
Caroline Muspratt

Pub operator Punch Taverns was trading at 849p when I tipped the stock last year. By Christmas Punch shares reached £12.68, an increase of 49pc, as the market toasted

Punch's acquisition of Spirit, transforming itself into the UK's biggest landlord with annual sales of £1.5bn.

This year's tip is Friends Provident, rumoured to be a takeover target as it is a more manageable size to be swallowed up than larger rivals like Aviva or Prudential. Its strength in the UK could be attractive to an international insurer though it has also been linked with closed life fund consolidator Resolution.

The company has been a strong performer, with life and pensions sales up 46pc to £448m at the half year and new business profits up 51pc. Results have also been boosted by changes to the pensions regime in April which should help keep momentum going. The shares are currently trading around 219p putting the stock at just under 14 times forecast earnings with a prospective yield of 3.7pc.


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Mwana Africa
Ambrose Evans-Pritchard

Whoops. Highland Gold Mining (HGM) had another annus horribilis in 2006, falling from £2.45 to £1.59. Gold miners are five-times leveraged to the metal price, so almost all have been lacklustre or worse since gold fell back from its 24-year high of $730 an ounce in May.

My bet is that the gold bull is just pausing in a long multi-year rally linked to credit inflation and US dollar troubles. The next phase should see gold producers leaping ahead again, so long as they have not sold production forward through hedging contracts. A rising tide will lift Highland Gold with the others but I prefer Mwana Africa, an Africa-run gold, nickel, and diamond company trading on Aim at 38p with a value of £92m, a tiny fraction of its potential worth. Its key operations are in Zimbabwe, deterring all but the bravest investors despite first-half profits of £10.5m.

President Robert Mugabe is 82, and ailing. Zimbabwe may soon be a normal country again. The shares of Mwana Africa are strapped to a catapult.


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Avena
Josephine Moulds

Engineering software and services company Aveva is enjoying momentum in sales and profit growth. The company, which makes software to build ships, oil and gas processing plants, and nuclear or fossil-fuelled power stations, has thrived in the commodities boom. Sales in Asia drove growth this year and demand from China shows no signs of abating. At 816p Aveva is my maiden New Year tip.


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How the 2006 share selections of former City staff fared

Telegraph editor and former City editor, William Lewis, tipped Tesco at 331½p. With the shares now at 402¾p, that's a 21.5pc gain.

Chris Hope tipped Venture Production at 516¾p. At 882½p on Friday, the shares have risen 70.8pc.

Melanie Feisst tipped engineer Charter at 560p. The shares have risen to 895p, an increase of 59.8pc.

James Moore tipped Royal Bank of Scotland at £17.55. Now trading at £19.70 the shares have improved by 12.3pc