The Faraj List of Exploding Stock Part 4.05

Weekend Press Roundup
an ADVFN competitor
A brief summary of the weekend's business comment...

SATURDAY

Business Commentary: A tongue in cheek list of things that may happen in 2005.

Boots – will go for an agreed takeover.
FTSE 250 companies will introduce an executive pay scheme where bonuses are set at a maximum of 20% of basic salary.
A large, high profile, hedge fund will not collapse.
FTSE 100 companies will decide that equity will play no part in the pay of executives in a company.
There will be a new chancellor of the Exchequer.
There will be no crash in UK house prices.
The US dollar will continue to slide.
The FTSE 100 will end the year virtually unchanged but most blue chip stocks will show rises.
The FTSE 250 index will rise by 12%.
Banks will be the best performing stock market sector.
The market will reckon that oil will get back to $50 a barrel.
Jonathan Bloomer will step down as chief executive of Prudential.
Euronext will buy the London Stock Exchange.
The owners of Wimbledon lawn tennis courts will go for a demutualisation thereby creating several millionaires.
John Ritblat of British Land will be commissioned to write a report on corporate governance standards at companies owned by private equity houses.
Google shares will crash.
International accounting standards will make it virtually impossible to draw any intelligent conclusion from stated headline profit figures.
Ryanair will merge with Easyjet.
Everyone will have a Happy New Year.

Tempus:

Amvescap – could be a bid prospect
Barclays - undervalued.
Carpetright – is vulnerable to lower consumer spending but the housing market may not materialise.
Easynet – taking on BT.
Hurveaux – profitable and pays a dividend.
Kier – looks good value.
Lonmin – possible takeover target.
PHS – there is more business for it than just cleaning toilets.
United Utilities a good year in 2004 and the prospective yield is still 7%.
Yell – should see double digit growth for the capital value of the shares.

Stockmarkets around the world echoed our own with a flurry in the final months. Strategists expect this relatively low level of volatility to continue with only modest returns from the markets

The Inside View: On the split cap saga, investors should check the list of the 18 firms involved to remind themselves of events that took place only three or four years ago

Aberdeen Asset Management's property fund had the strongest performance among UK investment funds. The bond market performed well. Tightening of monetary policy is a major risk in the UK in 2005, said Barclay Stockbrokers

Leaders and Laggards 2004

Stocks in FTSE 100:

Cairn Energy – a good start
Corus – the next best performer with a good chief executive
Reuters - continued its dramatic recovery
mm02 – the shares are now above the price talked about if there was a bid
Rolls Royce – saw buyers thanks to the rewards brought by its engines
Enterprise Inns – as the prospect of efficiency gains became clear, shares prospered
British Land did well
Capita Group – up a half on 2003
Tate & Lyle – did well with its Splenda product
Next – continued to steal customers from Marks & Spencer
Catering Group Compass – the worst blue chip performer
GlaxoSmithKline and AstraZeneca had problems last year
Rentokil Initial – lost two executives in 2004
Amvescap cut its interim dividend
Sainsbury – the bad year was all sacked Sir Peter Davis’ fault
BSkyB – persuading millions to switch to Sky is hard
Abbey National and Safeway both left the FTSE 100 after takeovers

Stocks in the FTSE 250:

Burren Energy did well.
Paladin Resources and Tullow Oil both have an investment agenda
Topp Tiles – did well
Lastminute.com – found itself among the losers
Avis Europe – shares lower due to strong car sales competition
Computacenter short circuited in 2004
Jarvis – fell 85.5% in the year
Courts – fell 95.6% in the year

Questor:

Useful tools:

Price-earnings ratios – good to compare shares within a sector. Trinity Mirror with a forward P/E of 12.5 looks cheap, while Headlam with a similar multiple looks a little pricey

Dividend yields – is a company digging into reserves to pay the dividend or is it making enough profit?

Sales to market capitalisation: not used much but useful. It is market capitalisation (the share price multiplied by the number of shares in issue) in relation to its sales

Director dealing – should ring alarm bells either way

Invest in companies you know and go with your gut instinct

The confrontation between Philip Green and Marks & Spencer's Stuart Rose could be refought this year and with a different outcome

Sainsbury can either revive or become a bid target

The long running chat about Matalan becoming a bid target could come to fruition this year with WalMart being the most likely contender

WH Smith having seen off Permira could be back in the frame in the spring

New Year tips: Babcock International, Wichford, Lloyds TSB, ArmorGroup, GlaxoSmithKline, GB Group, Forth Ports, Phytopharm, Incisive Media.

Roger de Haan sold his over 50s holiday and financial services group Saga for £774m. Let’s hope he and other new super rich will recognise their duty to be good global citizens as the challenges of 2005 unfold.

What to do in 2005? Housing market has had its run and it may be time for readers to reconsider the stockmarket


SUNDAY

Agenda: Scored 7.5 out of 13 predictions of events in 2004 – not too bad

Predictions for this year:

Bosses who will move on: Rod Eddington of British Airways, Sir Roy Gardner of Centrica

Bosses who will hang onto their jobs: Majorie Scardino of Pearson, Jonathan Bloomer of Prudential, Sir Tom McKillop of AstraZeneca

Jamie Oliver's relationship with J Sainsbury will come to an end, as will Martin Ackroyd finance director at Wm Morrison

One to watch: United Business Media's new CEO, David Levin

Deals likely to be attempted:

SSL International. Barclays Bank. Shell will merge as will Unilever, as will NTL and Telewest

J Sainsbury will receive a management buy-in approach from Allan Leighton

Singer & Friedlander will be bought by Kaupthing

Corus will merge with maybe Thyssen Krupp

Amvescap will be broken up

Invesco-Perpetual will try to spin off from the contaminated America company

GUS will also split itself up and Dixons will sell off the Dixons stores

Centrica and BG will think about re-uniting

BAE Systems will continue its acquisitions push in the US

Marconi will tie up an arrangement overseas

There will be no more proper takeover bids for either Manchester United or Marks & Spencer

Inside the City:

The owners of Ocado have to prove they have created a truly profitable and viable business. Thoughts of it coming to the market in 18 months seem premature

In a market when it is still exceptional if a share prices does not rise ahead of a deal, so is what the FSA is doing?

Tips:

2005 will be a rough year for the stockmarket with the FTSE100 only improving by 4%

The Sunday Times 2004 share portfolio rose 22% against a 7.5% rise in the FTSE100

Top takeover targets in 2005:

Barclays Bank, ITV, mmo2, WH Smith, Thus, London Club International, Stanley Leisure, MFI, Trinity Mirror, Hanson, SSL International, lastminute.com.

The Sunday Times 2005 Share Portfolio:

Waterford Wedgwood, Highway Insurance, Vanco, MyTravel, Rolls-Royce, Augean, Premier Oil, UBS, Homeserve, Reed Elsevier, National Express and Armor Group

Share Tips for 2005:

ITV

Vanco

Wm Morrison

Telecom Plus

Pearson

Hill & Smith

It may not have felt like it at times but 2004 was a good year for investors. Every asset class you can think of – property, gold, bonds, oil shares, property should at least have made some money for you

Aberdeen Asset Management is to pay a whopping £78m compensation to split capital investment trust investors, a third of its market value. But CEO, Martin Gilbert, has pulled off a great feat in damage limitation from the Financial Services Authority. The FSA enters 2005 as a regulator with blunt rather than sharp teeth

Tips Review:

Asia Energy was a top performer

Cambrian Mining - we locked in a profit but the shares have continued to climb.

Cairn Energy – we told investors to bank some gain, our timing was right

Peter Hambro Mining – got good returns

European Diamonds has fallen by 54%, Tertiary Mining down by 47%

Wm Morrison – a less successful purchase

Moss Bros and Halfords – solid profits

Wolfson Microelectronics is a boat we wished we had missed, ditto Tepnel Life Sciences and Ingenta

AsSeenonScreen (now called Asos) – we should not have sold the shares

Sold Abbey National before the bid – one of our biggest mistakes

One of our biggest gambles was to buy Easyjet. Investors should hold on for recovery

Elan Corp was a successful buy, while luck ran out with AstraZeneca

Thomson Intermedia is a success story for us

Edmond Jackson: Despite the risk of volatile oil prices I rate Dana an attractive share

Galahad Gold's remuneration committee did not get the package right when giving its outgoing chairman all those share options

I won't be subscribing to PlaneStation's hefty share offer. There are no projections to substantiate the business plan, among other queries

To watch:

Peter Newbould at WH Smith Travel Retail

Gareth Whiley of PPM is going to be busy

Marks & Spencer CEO Stuart Rose and Kate Bostock on the design side will have a tough year

Sainsbury's Justin King is under pressure too, but Mike Coupe, trading director, and Stephen Nelson, marketing, will help

The merger between Capital Radio and GWR will bring its bosses under the spotlight

Andy Duncan and Luke Johnson at Channel 4 may seek cost savings by merging C4's technical and education divisions

Vodafone’s boss, Arun Sarin, is expected to make a success of 3G, while rival Bob Fuller of Hutchinson is tipped to grab significant market share in the summer and autumn

As gaming grows, Damian Aspinall is set to be a big player

Watch Jim French, boss of new low-cost airline FlyBe

Abbey National – the arrival from Spain of Francisco Gomez-Roldan should be good

Look to ex-Egg man Jerry Tober, RBS' Jim Wallace and George Graham, adviser at RBS

Lisa Buckingham: Professor Peter Spencer of York University argues that people are borrowing to save. Cheap credit is being recycled into high interest savings accounts and even back into the stockmarket