The American humourist Will Rogers gave the most definitive advice on how to make money in the stockmarket: “Buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.”
If only real life were so simple. Although several global markets saw decent returns in 2014, the UK stockmarket wasn’t one of them. Both the FTSE 100 and the FTSE All-Share fell by more than 2% in price terms for the year as a whole. The impact of dividend income (that is, including dividend payouts) meant that their overall return crept into positive territory, but only just. That made it a genuine stock-picker’s market, for once.
Even identifying the right sectors to buy in advance wasn’t easy. Food and drug retailers (supermarkets) lost more than a third of their value in 2014 as a price war, Tesco’s accounting problems, and the incursions of discount chains Aldi and Lidl took their toll on the biggest players in the sector.
Meanwhile, the oil equipment services sector fell by more than a quarter, and oil and gas producers lost more than 15%, triggered by a stunning collapse in the oil price itself, which is ongoing even as we enter the new year. Miners and general industrial stocks also fared poorly, suggesting that the global economy could be in for a tough 2015.
The nature of the winners pointed to the triumph of defensive investing in 2014 – pharmaceuticals and biotech did well, as did food producers, and other stalwarts of defensive investors, such as healthcare and tobacco. Anyone lucky enough (or conservative enough) to own the likes of drug giants AstraZeneca or Shire, or cigarette seller British American Tobacco, ended the year with double-digit gains across the board.
So how did Fleet Street’s finest fare with their share tips during this tricky year? The Daily Telegraph’s Questor column came out ahead of the field with gains of 12.2%, thanks in large part to semiconductor device maker CSR. Just pipped at the post was The Times, who generated 10% overall, helped by a 33% gain from Kazakhmys. Stablemate The Sunday Times could only manage a 13.5% loss, fuelled primarily by a 43% fall by media rights business Rightster. Meanwhile, the Mail’s portfolio suffered from a focus on oil-related companies.
So who has the shiniest selection of tips for the year ahead ? It has been a rocky start to the year already, not helped by Greek (and UK) election fears, ongoing concerns over eurozone deflation, and bond markets widely signalling the end of the world, or at least the end of economic growth. That points to continued outperformance for defensive stocks that are less exposed to the fluctuations of the economic cycle.
The Independent reveals an intriguing contrarian streak, with tips including investment platform Hargreaves Lansdown and Tesco, both of which had a dreadful 2014. The Times goes with a similarly contrarian selection of beaten-down energy companies and engineers, including one of my favourites, Weir Group. But for 2015 I’m backing last year’s winners, Questor for The Daily Telegraph. Rather saucily they advocate selling Apple, and also the support services company Capita. But the balance of their picks are pure defensives, the likes of healthcare groups Glaxo and Smith & Nephew, and tobacco giant Imperial Tobacco.
Methinks that overall, the easy gains in stockmarkets are now behind us. Either way, the best of luck in what may prove to be a challenging year.
• Tim Price is director of investment at PFP Wealth Management. He also writes The Price Report newsletter.
What they’re tipping for the year ahead
Shares
Performance last year: up 5.9%
Best tip: Restore +82%
Worst tip: Trinity Mirror -20%
4Imprint (FOUR)
Media
This small-cap marketing outfit – which sells promotional goods – has a great track record of delivering and should benefit from the buoyant US economy.
Price tipped: 800p 52-week high/low: 850p/611p
Bonmarche (BON)
Aim
Earnings upgrades could be on the cards for the women’s fashion retailer. Changes to pension laws could mean the over-55s have more cash to spend on clothing.
• Price tipped: 284p, 52-week high/low: 316p/244p
Breedon Agg. (BREE)
Aim
The aggregates firm could enjoy a “bumper year” thanks to increased government infrastructure spending. The acquisition of Scottish quarry group Barr also makes sense.
• Price tipped: 43p, 52-week high/low: 51p/34p
Burford Capital (BUR)
Aim
Burford provides funding for commercial litigation. According to analysts at Macquarie, annualised returns are 26%. Neil Woodford owns a 7% stake.
• Price tipped: 120p, 52-week high/low: 137p/108p
Caretech (CTH)
Aim
The disability care provider should continue to benefit from the ring-fencing of the NHS budget from cuts. Profits are forecast to rise 19% this year.
• Price tipped: 227p 52-week high/low: 268p/193p
ClearStar (CLST)
Aim
Georgia-based US tech firm ClearStar joined Aim in July. Its powerful software screens job applicants and it boasts 20,000 clients, including IBM and Toyota.
• Price tipped: 57p, 52-week high/low: 63p/54p
Entertainment One (ETO)
Media
A re-rating could be due for this TV rights specialist. It aims to double in size in the next five years and a price/earnings (p/e) ratio of 13.5 is cheap.
• Price tipped: 299p, 52-week high/low: 368p/263p
Gamma Comms. (GAMA)
Aim
Shares in the cloud telecoms technology firm could hit 350p this year. Gamma targets growth areas and sells its products via 650 partners, reducing costs.
• Price tipped: 232p, 52-week high/low: 250p/195p
Genel Energy (GENL)
Oil & gas producers
An oil price recovery would boost the Kurdistan-focused oil producer. A new production-sharing deal with Kurdistan’s government is also good news.
• Price tipped: 603p, 52-week high/low: 1,144p/594p
Horizon Disc. (HZD)
Aim
The genomic research company provides models of diseases to help drug firms test new products. It boasts 1,000 clients and should pick up new contracts in 2015.
• Price tipped: 183p, 52-week high/low: 218p/143p
Pets At Home (PETS)
General retailers
The pet retailer is a strong cash generator and should benefit from a new TV advertising campaign, reduced debt and growth in the lucrative veterinary market.
• Price tipped: 201p, 52-week high/low: 267p/162p
Red24 (REDT)
Aim
This travel security firm is a recovery play. The company was hit hard by the loss of a contract with HSBC, but it pays a 5% yield and delivers double-digit returns on equity.
• Price tipped: 10p, 52-week high/low: 21p/10p
Safestay (SSTY)
Aim
Analysts think shares in this boutique hostel owner could double in price. With hostels in Holland Park and York, it enjoys strong pricing power and occupancy levels.
• Price tipped: 63p, 52-week high/low: 76p/43p
Tyman (TYMN)
Construct. & materials
The US recovery is good news for the window and door hardware producer. Most of its revenue is generated in the US and the order book continues to grow.
• Price tipped: 300p, 52-week high/low: 325p/228p
Wilmington (WIL)
Media
Shares in this training and professional data provider trade on a rating of just 13.8 and could enjoy upgrades this year driven by a new online portal and a fresh strategy.
• Price tipped: 215p, 52-week high/low: 290p/185p
The Independent
Performance last year: up 4.3%
Best tip: Man Group +89%
Worst tip: Ladbrokes -39%
Aberd’n Asset Management (ADN)
Financial services
Aberdeen is relatively cushioned against the slowdown in emerging markets thanks to the Scottish Widows deal. It is also well run and boasts a chunky yield.
• Price tipped: 432p, 52-week high/low: 498p/361p
AstraZeneca (AZN)
Biotech & pharma
AstraZeneca shares languish below the level seen during the Pfizer bid, but they are rising again. The firm has a solid pipeline and predators may circle again.
• Price tipped: 4,556p, 52-week high/low: 4,946p/3,367p
Hargreaves Lansdown (HL)
Financial services
The investment firm had a lousy 2014 due to regulatory changes but is still attracting new clients. Government pension changes could also provide a boost.
• Price tipped: 1,012p, 52-week high/low: 1,581p/827p
Ladbrokes (LAD)
Travel & leisure
The bookie proved a poor bet last year, but the arrival of a new chief executive later this year could provide a boost. The general election could also increase business.
• Price tipped: 111p•,52-week high/low: 183p/106p
Mulberry (MUL)
Aim
Shares in the handbag maker took a pasting in 2014 due to poor sales figures, but are worth buying. “Positive noises” ahead of Christmas augur well.
Price tipped: 825p 52-week high/low: 970p/563p
Partnership Assurance (PA)
Life insurance
This specialist company provides pensions for clients with medical conditions. It was hit by last year’s pension changes, but new products or a merger could boost the shares.
• Price tipped: 140p, 52-week high/low: 352p/85p
Secure Trust Bank (STB)
Aim
Consolidation is on the cards for the “challenger” banks, and Secure Trust is likely to spearhead the process. The share price has quadrupled since it floated.
• Price tipped: 2,836p, 52-week high/low: 2,975p/2,245p
Serco (SRP)
Support services
If “Winston Churchill can come back from Gallipoli”, his grandson, CEO Rupert Soames, can come back from recent bad figures at this services group. The shares are a bargain.
• Price tipped: 161p, 52-week high/low: 525p/145p
Tesco (TSCO)
Food retailers
Despite a dismal 2014, the supermarket giant still has a huge market share and its large property portfolio should support the share price. It’s a high-risk play.
• Price tipped: 189p, 52-week high/low: 342p/155p
Tullow Oil (TLW)
Oil & gas producers
Tullow’s share price halved last year due to exploration disappointments, but analysts think it’s oversold. Capital spending has fallen by 60% and it boasts quality assets.
• Price tipped: 414p, 52-week high/low: 920p/351p
Daily Mail
Performance last year: down 18.1%
Best tip: Berkeley -9.6%
Worst tip: SeaEnergy -22.5%
Hayward Tyler (HAYT)
Aim
This engineering company is in recovery mode. It makes more than 60% of its revenues from the energy sector and is seeing good growth in the US and China.
• Price tipped: 79p, 52-week high/low: 95p/63p
Michelmersh Brick (MBH)
Aim
Michelmersh is benefiting from a brick shortage in the UK and is enjoying strong demand for its high-quality bricks, which were used for St Pancras. The dividend may also return.
• Price tipped: 71p, 52-week high/low: 78p/55p
Midatech Pharma (MTPH)
Aim
The nanotechnology specialist uses gold particles to treat cancer and diabetes. Its chairman is former Shire boss Rolf Stahel and Neil Woodford is an investor.
• Price tipped: 265p, 52-week high/low: 285p/260p
The Daily Telegraph (Questor column)
Performance last year: up 12.2%
Best tip: CSR +42%
Worst tip: GSK -14%
Apple (Nasdaq: AAPL)
Technology
SELL: Shares in the iPhone giant are overvalued. It is overly reliant on the iPhone and suggestions that it may do share buy-backs hint that it is “running out of ideas”.
• Price tipped: $113, 52-week high/low: $120/$71
Capita (CPI)
Support services
SELL: Elections are always bad news for outsourcers, as governments tend to delay spending decisions. Capita is also winning fewer contracts and recently lost its CEO.
• Price tipped: 1,081p, 52-week high/low: 1,248p/969p
GlaxoSmithKline (GSK)
Biotech & pharma
Shares in this drug giant are cheap, and the 5.8% yield is attractive. The market is too pessimistic about falling sales, and a potential Ebola vaccine could provide a boost.
Price tipped: 1,376p 52-week high/low: 1,709p/1,297p
Imperial Tobacco (IMT)
Tobacco
The tobacco giant’s shares are a “classic” defensive play and boast a 5% yield which is due to grow by 10% this year. Cost cutting will offset falling sales volumes .
• Price tipped: 2,836p, 52-week high/low: 2,973p/2,156p
Smith & Nephew (SN.)
Healthcare
Smith & Nephew has long been seen as a takeover target, and 2015 could be the year it happens. US rival Stryker’s cooling-off period ended in November. A new bid may emerge.
• Price tipped: 1,188p, 52-week high/low: 1,207p/857p
Tracsis (TRCS)
Aim
Software firm Tracsis helps train operators to run their networks more efficiently. Although the shares are highly rated, Tracsis generates lots of cash.
Price tipped: 412p 52-week high/low: 450p/197p
The Times
Performance last year: up 10%
Best tip: Kazakhmys +33%
Worst tip: President Energy -52%
Aveva (AVV)
Technology
This software provider has fallen in value after problems at Brazilian state oil firm Petrobras, a major client. But it is oversold – the market underestimates its opportunities.
• Price tipped: 1,280p, 52-week high/low: 2,460p/1,184p
Aviva (AV)
Life insurance
Although this insurer’s shares do not have a good track record, the acquisition of Friends Life is a decent one and the boost to cash flow could mean higher dividends.
• Price tipped: 485p, 52-week high/low: 542p/431p
Bodycote (BOY)
Engineering
Bodycote shares pay an attractive yield, while its specialist metal treating business is growing fast and enjoys high margins. A special dividend could be due.
• Price tipped: 654p, 52-week high/low: 822p/543p
BT (BT.A)
Telecoms
If BT succeeds in buying mobile network EE it will provide huge cross-selling opportunities. But even if the deal fails, the telecoms giant’s share price should recover.
• Price tipped: 401p, 52-week high/low: 421p/350p
Debenhams (DEB)
General retailers
Although Debenhams’ share price has hardly budged since last year, it trades on a p/e of just ten and the dividend yield of 5% offers some support to the share price.
• Price tipped: 76p, 52-week high/low: 87p/57p
Informa (INF)
Media
New CEO Baron Carter of Barnes, a former regulator, is shaking up the media firm and beefing up its exhibitions side. A p/e of 11 is a good entry point.
• Price tipped: 466p, 566p/441p
Laird (LRD)
Technology
Laird makes electronic products for telecoms networks. Investment in research and development is finally paying dividends and this is not in the price.
• Price tipped: 309p, 52-week high/low: 335p/259p
President Energy (PPC)
Aim
Shares in the oil and gas producer halved last year due to the oil price plunge. But the company has assets in Paraguay and is seeking partners. “Speculative.”
• Price tipped: 14p, 52-week high/low: 50p/14p
Tullow Oil (TLW)
Oil & gas producers
The west Africa-focused oil producer could benefit from any increase in merger and acquisition activity. It plans to cut its exploration spending this year.
• Price tipped: 395p, 52-week high/low: 920p/351p
Weir Group (WEIR)
Engineering
The falling oil price has knocked a third off the value of shares in this engineering firm. But it earns half its revenues from mining and a p/e of 13 looks cheap.
• Price tipped: 1,883p, 52-week high/low: 2,848p/1,639p
The Sunday Times
Performance last year: down 13.5%
Best tip: RIT Capital +9.6%
Worst tip: Rightster -43%
BAE Systems (BA)
Aerospace & defence
US military budget cuts look to have bottomed out, while the Sony hacking attack could boost sales at this defence company’s cybersecurity arm. The 4% yield is also attractive.
• Price tipped: 472p, 52-week high/low: 487p/374p
Barclays (BARC)
Banks
New CEO Antony Jenkins has successfully overhauled Barclays and the bad news looks to be in the price. The shares are now trading below asset value.
• Price tipped: 244p, 52-week high/low: 298p/202p
Boohoo.com (BOO)
Aim
Shares in this online fashion retailer have dipped following the “hysteria” after its initial listing. But while the rating is still toppy, it has a strong following among young customers.
• Price tipped: 40p, 52-week high/low: 85p/36p
Genel Energy (GENL)
Oil & gas producers
The oil and gas firm run by ex-BP boss Tony Hayward is high risk, but could pay a special dividend if three major deals happen – two have transpired so far.
• Price tipped: 700p, 52-week high/low: 1,144p/594p
Kier (KIE)
Construction
Although Kier is labouring under pre-election uncertainty, the shares are oversold.
It should also benefit from government infrastructure spending on roads.
• Price tipped: 1,491p, 52-week high/low: 1,943p/1,374p
Old Mutual (OML)
Life insurance
The South African insurer may seem dull, but operates in potentially lucrative markets.
It aims to launch new financial services for the African middle class.
• Price tipped: 191p, 52-week high/low: 212p/164p
Poundland (PLND)
General retailers
Since its market debut in March, the discount retailer has “outperformed”. But 60 new store openings in the UK and expansion on the continent mean there is more to come.
• Price tipped: 328p, 52-week high/low: 402p/284p
Severn Trent (SVT)
Utilities
A regulatory crackdown on water pricing has not been as grim as painted, plus the firm could be one of the last takeover targets left in the sector.
• Price tipped: 2,006p, 52-week high/low: 2,086p/1,626p
The Guardian
Performance last year: up 2.3%
Best tip: Apple +41%
Worst tip: Salamander Energy -41%
AstraZeneca(AZN)
Biotech and pharma
A new bid for this drug giant has yet to materialise, but it has a solid product pipeline. While some of this is in the price, the shares could rise further.
• Price tipped: 4,556p, 52-week high/low: 4,946p/3,367p
Aviva (AV)
Life insurance
Last year was a poor one, which saw Aviva’s market value hit by the Friends Life deal. But if investors learn to like the deal, the shares could recover.
• Price tipped: 485p, 52-week high/low: 542p/431p
AO World (AO)
General retailers
Shares in this online white goods retailer now trade below the February float price. It has “slick logistics” and its expansion into Germany is well thought out.
• Price tipped: 280p, 52-week high/low: 412p/150p
Boohoo.com (BOO)
Aim
The online fashion retailer has suffered from comparisons with Asos, but has great growth prospects in the UK and abroad. Shares are trading below the float price.
• Price tipped: 40p, 52-week high/low: 85p/36p
B&M (BME)
General retailers
Shares in the discount retailer have disappointed, but could recover. The firm is benefiting from customer frugality and plans to expand in the southeast.
• Price tipped: 285p, 52-week high/low: 301.5p/227p
CityFibre (CFHL)
Aim
Tiny infrastructure firm CityFibre is installing fibre optics into areas under-served by BT. Backed by Sky and TalkTalk, it is rolling out a pilot in York.
• Price tipped: 63p, 52-week high/low: 84p/60p
Good Energy (GOOD)
Aim
If you’re searching for an ethical investment, the green electricity provider is a good
choice. Profits more than doubled last year and there is scope for further growth.
• Price tipped: 211p, 52-week high/low: 295p/190p
IAG (IAG)
Travel & leisure
Airline shares are benefiting from the fall in fuel prices. While easyJet’s shares have peaked, IAG’s could have further to go. Profits at BA are steady.
• Price tipped: 486p, 52-week high/low: 502p/306p
JD Wetherspoon (JDW)
Travel & leisure
The high-street pub chain plans to open 200 new pubs, including expanding into the Irish market. Chairman Tim Martin knows his stuff and is worth backing.
• Price tipped: 820p, 52-week high/low: 905p/688p
Software Rad. Tech (SRT)
Aim
SRT enjoys a 95% market share in providing tracking technology for marine vessels. New US regulations requiring more boats to use it could boost sales by $35m.
• Price tipped: 31p, 52-week high/low: 33p/19p
Category: Market updates