Over the past 12 months, nearly 50 fund managers have been kind enough to write their own personal views on which investments they thought would perform well, and how MoneyWeek readers could profit from them. And some of those tips have been very profitable indeed, with our top tipster, Henderson’s Mileen Rash, managing a hefty 31.6% return since the middle of June. Here we take a look at who’s done best over the year to 11 December. Beware: this is not a scientific process. Most of the tips are long-term views, and so were not intended to be judged on performance less than a year later. And as each view was written at a different time – some in January, others just a few weeks ago – the timeframe on which each performance is calculated varies from case to case. And dividend payouts aren’t included either. But fair or not, we have to draw the line somewhere… so here are our top ten tipsters, in terms of percentage gains, and what they’ll be buying in 2007.
1. Mileen Rash
Henderson Global Investors
Mileen Rash’s confidence in UK housebuilders has paid off nicely, with Redrow (+60.8%), Bellway (+46.2%), and Bovis Homes (+40.5%) all performing impressively since he picked them in mid June. McCarthy & Stone was up 24.9% when taken over in August. He’s still “pretty happy” with Benfield Group (–58%), which is cash generative and on a cheap multiple, and with retailer Halfords Group (+17.4%). In total his six picks returned 31.6%. For 2007, he likes Investec (INVP). It is more than 50% exposed to the South African market, and has been out of favour with investors wary of the weak rand. But on a dividend yield of 4.6%, a p/e of 10, and with 15% earnings growth, the financial group “is just too cheap”.
2. Peter Ewins
F&C Investments
The pick of Ewins’s September tips is software supplier Aveva (+102%) – and despite the sharp rise, he is still a fan after some “pretty positive trading”. Other picks were kitchen maker Omega International (+24%), military consultancy Cohort (+12.8%) and Japanese telecoms service provider Daimei Technology (–6.3%). In the near term, he’s keenest on City of London Investment Group (+11.7%), which “relative to other fund management companies… is still lowly rated”. In all, his stock recommendations are up 29.0%.
3. Colin Morton, Rensburg UK Equity
Colin Morton’s stock picks have had a pretty phenomenal run since he chose them in February, running up a return of 25.1%. However, while he will continue to hold utilities National Grid (+21.9%) and Scottish & Southern Energy (+34%). He probably wouldn’t be buying the latter “aggressively at this level”. But Imperial Tobacco (+19.3%) is still a buy; a takeover approach for rival Gallaher Group has set the tobacco sector alight with consolidation fever. He thinks any approach could value Imperial at £27 a share. It’s on just £20 a share at the moment, which means he reckons it’s “a great long-term story”.
For the year ahead he’s pretty keen on drugs giant GlaxoSmithKline (GSK). It’s free of debt, has a dividend yield of 3.8% and – thanks to a share buyback scheme – will return £2 billion a year to shareholders. And it looks good value too: “on a simple p/e of 13 and a half times, I’m very interested at this price.’
4. James Henderson
Henderson Global Investors
James Henderson tipped eight stocks in January. They broadly fell into two categories: first, large companies that have been showing good dividend growth, including Diageo (+18.7%), RBS (+11.8%), HSBC (–3.3%) and Vodafone (+11.8%); and, second, out-of-favour smaller companies, such as electronic components distributor Abacus (+4.6%), transport firm Autologic (+0.9%), engineer Metalrax (–3.9%) and chilled foods group Uniq (+85%). He attributes Uniq’s superb performance to “good disposals at good prices”. He still sees “good value” in Vodafone and Metalrax. Diageo and Abacus, with “undemanding ratings”, also remain attractive. Overall, his tips returned 21.0%. Looking ahead, he likes the insurance sector because it provides a “diversifying” opportunity. He specifically favours specialist insurer Hiscox (HSX), which is trading at a “nice price” and is “growing as a business”.
5. Andrew Jackson
Allchurches Trust
Andrew Jackson only picked his three stocks at the beginning of August, but his tips have already returned an extremely healthy 19.1%.
The best-performing stock – which he says he will hold for the next three to six months – is wallpaper and furnishing group Walker Greenback (+61%). Trading at 42.5p a share, he is “reasonably confident” that an earnings upgrade in January will “support a share price in the high 40s”. Funeral home group Dignity (+15%) “remains a solid hold”. And he remains confident, after conversations with management, that despite “a little scare early on”, a large “order backlog” means laser manufacturer SPI Lasers (–21%) will recover. A tip for next year is Dolphin Capital Investing (DCI), “a company that is developing integrated golf and leisure resorts in Greece and Cyprus”. It is a Greek group and so understands the local property market. And because Greece and Cyprus are under-served by golf courses – unlike Portugal and Spain – he believes it will get more projects in the future and begin trading above its net asset value in around 12 months.
6. Peter Thomson
Taylor Young Investment Management
Peter Thomson tipped Standard Chartered (+13.9%) and Prudential (20.7%) in late July, turning in a 17.3% return overall. He remains upbeat on Standard Chartered, but is less keen on Prudential, as we have already seen a “significant proportion” of the stock’s upside. He plans to keep pursuing the overseas investment theme, focusing on trophy asset firms (National Grid, British Gas) and luxury goods (Swatch, Tiffany) in particular. In relation to luxury stocks, he says he expects proceeds from petroleum and domestic demand growth in Asia to continue to “feed aspirational spending” in 2007.
7. David Morrow
ABN Amro
In July, David Morrow recommended three stocks on the basis of their sustainability: utility group Scottish & Southern Energy (+31.4%), computer giant Dell (+1.6%) and banking group Barclays (+15.6%). He said that over the long term, “investors who take account of environmental, social and corporate governance issues are likely to enjoy better returns.” He is sticking to his long-term investment view and remains positive both on Scottish & Southern Energy and Barclays. His overall return was 16.2%.
8. Sandy Cross
HSBC Investments
In September, Sandy Cross tipped Templeton EM Trust (+13.5%), Legal & General (+15.3%) and Prudential (+13.5%), giving an overall return of 14.12% only three months later. He says that there may still be a bit left to go with these holdings, although he is circumspect about prospects for the markets overall next year. “That said, Japan seems worth re-visiting for a number of reasons, not least the improvements in property values and the labour market”. He sees the Baillie Gifford Japan Investment Trust (BGFD) as a good way of getting exposure.
9. Jamie Allsop
New Star Asset Management
At the beginning of October, Jamie Allsop said he liked building supplies group Wolseley (+8.13%), house-builder Taylor Woodrow (+12.85%), water butt supplier Straight (+0.5%), and Congo-based junior miner Central African Mining (31.8%). He remains positive on each. Central African Mining is still his favourite, offering “diversification from country risk”, strong cash generation and an “attractive p/e”. On Wolseley, he is not positive about the US housing outlook, but he believes “the bad news is priced in”. His overall return was 13.3%. He likes industrial services firm Bateman Litwin (BNLN) for 2007. It has a strong balance sheet, and, on a p/e of 12.5 for next year, is trading at a discount to its peers.
10. Guy Monson
Sarasin Chiswell Investment Management
In late June, Guy Monson tipped Tesco (+17.8%) and Citigroup (+6.5%), returning 12.19% overall. Citigroup hit a five-year high recently and he remains very positive on the outlook. The stock is cheap and has, he says, the “best franchise in the emerging world”. But he is now less keen on Tesco. The stock is “fully valued” and, despite an increase in online shopping, he is concerned about a slowdown in UK consumer spending. One large cap that he likes for 2007 is Microsoft (MSF), reflecting his growing interest in tech stocks. He believes the group’s Vista operating system upgrade and the effect of the weak dollar on US corporate earnings will lead to a strong performance for the stock in 2007.
And the best of the rest…
In March, Stephen Grant of Revera Asset Management tipped Restaurant Group, and the stock has performed spectacularly since, with an 89% return. However, he says that he would now be wary of a drop-off in consumer spending next year. While there is always the chance of a private equity buyout, the stock has come a long way this year, and he reckons that now is a good time to “lock in profits”.
Marina Bond, manager of Rathbones Smaller Companies fund, tipped Renew Holdings (+50%) in April. She remains “very keen” on the stock, which was among the best this year, and is benefiting from a cash-rich balance sheet and a successful restructuring programme. Trading on a forward p/e of eight and with “good growth prospects”, the stock remains “good value”, Bond says.
Other notable tips included European media group Mecom, tipped by Ted Scott of F&C Asset Management, which rose by 47%. Electricity generator International Power (+41%) was tipped by Rathbones’ Carl Stick; while Magners cider maker, C&C, has risen by 40% since Makis Kaketsis of F&C tipped it in August.