Every year the nation’s financial pundits stick their necks out and tip their favourite stocks for the New Year. Tim Price – who at the start of 2006 correctly backed The Mail on Sunday’s Midas as the best tipster for last year – runs through this year’s crop of tips. Who will he back for 2007?
Who were the top share tipsters in 2006?
Some festive traditions are hard to pass up, and seasonal stocktipping by the media is one. Against last year’s index performance (+13.4% for the FTSE All-Share), how did last year’s tipsters fare?
The Sunday Times’s team broadly matched the market, with average returns of 15%. Easyjet (+63%) was their standout winner, while 888.com (–33%) succumbed to adverse legal rulings from the US. ITV, which lost 4% for the year, was another laggard.
The team’s counterparts from The Times did less well, with an average of 8.4%. Winners included Petrofac (+48%) and Enterprise Inns (+44%), while losing picks included Wogen (–54%) and
ITV, again.
The Observer’s tipsters had a good year, with average returns of 25.5%. Their best performance came from Land of Leather (+80%). Once again, ITV did little to help overall ratings.
Market fortunes for The Daily Telegraph were mixed, with an overall average of 13.1%. Success with Cookson (+48%) and Centrica (+40%) was offset by Meggitt (–16%) and Clinton Cards, which delivered a modest loss for the year.
The laurel wreath for last year’s performance goes to Midas at The Mail on Sunday, whose average stock pick returned an impressive 34% for the year. Polyfuel (–6%) was the only disappointment, more than compensated for by tips like Cambridge Antibody Group (+89%), acquired mid-year, and Northern Petroleum (+76%).
What are the share tipsters backing in 2007?
So what’s popular in 2007? Banks are a common theme, with Shares magazine, The Times, The Sunday Times and The Daily Telegraph all plumping for Royal Bank of Scotland, a business regarded as “in the best shape” of all the high-street players. The Mail on Sunday puts its vote behind Barclays, on the back of its profitable fund management arm and rapid international growth. So does The Sunday Telegraph, citing the inevitable “prospect of a bid”. Patrick Edwardson for The Observer goes for Highway Insurance, an auto insurance underwriter he describes as “absurdly undervalued” at eight times 2007 earnings.
Pharmaceuticals have underperformed the broader market for some time, on the back of competition from generic drug-makers and a slowed pipeline of blockbuster patents. But The Sunday Telegraph, The Times and The Observer all tip drugs giant GlaxoSmithKline, citing a “modest valuation”, “sound” management and a solid dividend yield.
There is a growing consensus that a slowdown in the US could take some steam out of the commodities market rally. That hasn’t precluded widespread interest in the metals and mining sector by this year’s tipsters. Investors Chronicle favours BHP Billiton (as do I), Randgold Resources and Xstrata, between them offering exposure from nuclear and coking coal to gold, zinc and copper.
The Sunday Times likes Lonmin, the world’s number three platinum producer. The Sunday Telegraph recommends Anglo American (also a personal favourite), citing a discount to the sector and possibly accelerated restructuring under new CEO, Cynthia Carroll.
Which share tipsters to back in 2007
When choosing which tipsters to back, you have to weigh the prospects for capital growth against those of capital preservation, along with the somewhat artificial concentration of half a dozen recommended holdings. For 2007, I’m going with Investors Chronicle, which partially reflects my prejudices as a long-term commodities bull, but I also warm to the characteristics of some of their other picks. Augean is in waste management “with significant barriers to entry”; Intermodal Resources, a freight container group, trades on a p/e of below seven; Synairgen, Lipoxen and Intercytex offer ways into pharmaceuticals. But whoever and whatever you back, may I wish you every success for the New Year.
Tim Price is CIO of global strategies at Union Bancaire Privée, London
For the full list of the share tipsters and their tips for 2007, see Issue 314 on our Latest Issue page.