It’s been an awful year for most investments. Unless you had the lion’s share of your money in cash or government bonds, your chances of making a positive return were slim. Our tipsters found it tough going too. Nearly 50 fund managers and investment experts gave us tips this year, but as of 11 December, only a handful had made gains – we list the best below.
Before reading on, be aware that this is not a scientific exercise. Most of the tips were intended for long-term investors, but our performance data reflect progress after less than a year. And the views given were written at different points – some in January, others just weeks ago. This year, that hands an advantage to the later writers. And we don’t include dividend payouts in the quoted returns. With those caveats in mind, here (in percentage gain terms) is our top ten.
1. Fen Sung, Premier
In October, Fen Sung argued that China was in a better position to ride out the global economic recession than the Western world due to “its huge fiscal surplus”. His three tips have risen 7.06% since then – an impressive result, given the losses hitting most fund-manager portfolios. His big winner is coal producer China Shenhua Energy, which is up 15.17%. Sung recommends holding onto the shares along with his two other tips – water treatment firm EPURE International (+2.44%) and Shandong Weigao (+3.56%), which makes single-use medical products. “They are all key themes in China.” Strong spending in the health sector should benefit Shandong Weigao, and demand for utilities is rising.
2. Peter Jarvis, F&C
In the two weeks since he tipped them, Peter Jarvis’s shares have risen 4.14%, with digital set-top-box manufacturer Advanced Digital Broadcasting up 11.59%. As a long-term investor Jarvis recommends holding onto all three of his tips, including Severn Marine (+3.32%), which makes unique equipment for offshore oil wells. He also still believes in publisher Wolters Kluwer, despite the fact that it has fallen 2.48% since he tipped it, as it has a “fairly defensive business model and a high dividend payout”. He reiterates his argument from his original article that investors “should focus on companies with strong balance sheets, a defensive earnings profile and robust cash flow”.
3. Mike Jennings, Premier
“My pre-requisite for stock-picking in this market is a strong competitive position and a sound financial footing,” says Mike Jennings, whose tips from earlier this month are up 4.03% on average. Tobacco firm Altria (-0.07%) fits the bill, as it is situated in a defensive sector and offers an 8.4% gross dividend yield. Kidney dialysis product and services firm Fresenius Medical Care (-3.19%) “remains a highly attractive safe haven” because its sales should be unaffected by the recession and earnings growth of 12%-13% is likely in 2009. His “most aggressive” pick was clothing retailer Esprit (+15.34%), which he still suggests holding, despite its position in a fast-deteriorating retail industry. That’s largely due to its “historic yield of 8.8% and its substantial net cash balance”.
4. George Lee, Eclectica
Despite share-price falls in October, George Lee still felt then that the case for long-term investment in agricultural equities was “compelling”. Since then, his tips have risen 4.02% on average. “Demand for food isn’t affected by the weak economy,” he says. And underinvestment means that, despite a good harvest this year, “inventories are still very low”. Hence crop yields are still crucial. As a result, Lee recommends holding GM food firm Syngenta (+18.23%) and fertiliser company Potash Corp (-4.70%). The recent pullback in his third tip, Monsanto (-1.48%), a food biotechnology firm, gives the opportunity “to buy into a company growing earnings at 20% per annum but trading on a p/e of only 15 times”.
5. Francis Brooke, Trojan
Francis Brooke’s picks from the start of this month remain among his “favoured holdings”, having risen 2.49% on average. BP (-3.55%), Cadbury (+2%) and AstraZeneca (+9.02%) are all “strong, cash-generative companies with limited exposure to the UK domestic economy”. Brooke believes that all three firms’ dividends should continue to grow, and on yields of 5.5%, 4% and 3% respectively, they “represent an increasingly attractive home for investors’ cash as interest rates fall”. Sectors to buy in 2009 are oil, pharmaceuticals, consumer goods and utilities because current valuations make them “as attractive as they have been for 20 years” and making now “an excellent entry point for long-term investors”.
6. Alec Foster, Hiscox
Since July, Alec Foster’s three stocks have risen 1.96%. “Prospects in the insurance sector are on the up as we go into 2009”, says Foster, because it faces “increased demand in a frightened world”. PartnerRe (0.56%) is a hold as its “prospects over the next two years look excellent”. Admiral (35.71%) should continue to prosper, but Foster would “prefer to own” Berkshire Hathaway in order “to capture the opportunities in reinsurance” where the firm has a “significant presence”. As for Chaucer Holdings (-30.38%), Foster suggests holding onto the share because it’s a company that “should benefit from an increase in business flowing into the Lloyd’s of London insurance market”.
7. Sandy Cross, Standard Life
In November, Sandy Cross predicted that volatility would “remain an ongoing feature of markets” as global economies come to terms with the near-collapse of the banking system, the deleveraging crisis spreading to emerging markets and “the unwinding of hedge-fund positions”. Overall, his tips are down 0.89% – a good result, given the turbulence of the markets. Cross recommended food and consumer goods producer Unilever (-0.07%) and oil firm BP (-1.71%) because they were good defensive stocks. He now says he would continue to buy them as they are “large international firms with strong financial positions and reasonable valuations”.
8. Nick Ford, Scottish Widows
Since October, when Nick Ford wrote his article, his tips have fallen 2.47% overall, but US auto parts retailer O’Reilly Automotive has shot up 19.21%. Ford likes the stock because “demand for auto parts is relatively steady because Americans cannot live without their cars”. Ross recommends holding onto that share, IBM (-16.41%), and hair and skincare firm Alberto-Culver (-10.21%) for the long term, because his “conviction in the names remains the same”.
9. Bradley Mitchell, RLAM
In November, Bradley Mitchell recommended selling Tesco, which wasn’t “firing on its normal eight cylinders”. The shares have fallen 2.6% since then. Mitchell says keep selling, as he believes more price cuts will arrive soon. That’s “good for shoppers, but bad for shareholders”. He tipped British American Tobacco (-4.37%), Imperial Tobacco Group (0.43%) and oil services firm Amec (-6.13%), saying all had “a strong market position, a proven management team” and “healthy balance sheets”. Now he recommends holding all three. His overall return is -3.36%.
10. Steve Waddington, Insight Investment
Last month, Steve Waddington tipped three funds that would do well in a downturn. Since then they have returned -3.84%. Waddington recommends holding the Impax Environmental Markets Fund (-1.20%) and JPM Highbridge Statistical Arbitrage Market Neutral Fund (2.71%). But readers should sell Proshares Ultrashort Russell 2000 ETF (-13.04%) and replace it with the M&G European Leveraged Loan Fund because “historically holders of senior secured loans are the first to be re-paid in the event of a company defaulting on its debt obligations”. Yet European leveraged loans have fallen in price, so they “are pricing in a 1930s Depression-like outcome, which I feel is unlikely”.
And the best of the rest…
Alex Illingworth, director of international equities at Insight Investment and manager of the Insight Investment Evergreen Fund, picked the best performing stock out of this year’s ‘personal view portfolio’. Xantrex Technology has risen 71.89% since Illingworth tipped it at the start of May. The firm makes ‘inverters’, which are used to convert raw electrical power into a form that can be fed into the national grid. Xantrex had “successfully positioned itself to be a key technology leader” in the solar power sector and was bought out by Shneider Electric in September. Illingworth recommends buying Republic Services (NYSE:RSG) for 2009. It is the second-largest waste-management company in the US and has merged with the third largest (see page 8 for more). Illingworth believes the firm’s “positioning is much enhanced” by the merger.
Steven Maxwell, head of European Equities at SWIP, also picked a winner this year in Grifols. The firm develops pharmaceutical products. The shares have risen 29.53% since Maxwell tipped it in February and he recommends holding it as “it will continue to outpace the competition over the long term”. For 2009 Maxwell suggests buying K+S AG (DAX:SDF). The potash miner has “strong long-term prospects” as demand for fertiliser rises in line with the increase in protein-based diets in Asia.