Last year, we wrote that “the easy gains” were behind us – 2015 could prove “challenging”. It was. The FTSE 100 lost around 5%, amid the damage inflicted on mining and energy stocks. And if the first session of 2016 was any guide, a slowdown in China has not yet finished mauling sentiment across the globe. But it’s not been all bad.
Those foresighted or lucky enough to follow smaller and mid-cap stocks did relatively well. The more domestically focused FTSE 250 rose 8.5%. Seven years’ worth of zero-interest-rate policies (Zirp) and quantitative easing (QE) have seen yield-starved investors pile into the shares of firms deemed sufficiently international or defensive enough to withstand a global slowdown.
In the process, many global mega-cap consumer franchises – such as Nestlé and Roche – have become awkwardly expensive by most traditional metrics, such as price/earnings (p/e) or price/book (p/b) ratios. We’ve been here before. In the 1960s and 1970s, the “Nifty Fifty” glamour stocks, including Coca-Cola, Disney and Kodak, which were viewed as bulletproof, traded at eye-watering multiples – until they didn’t any longer. Last year, we saw a reprise of the Nifty Fifty in America – the “Nifty Nine”, including the “Fangs” (Facebook, Amazon, Netflix, Google), without which the broad US indices would all have ended in the red. Investors in 2016 buying stocks irrespective of valuation: you have been warned.
As for 2015, few investors did well. Even Warren Buffett’s crown lost a little shine; Berkshire Hathaway stock fell by 11.5% in 2015, its worst performance relative to the US market since 2009. So how did Fleet Street’s tipsters navigate these choppy waters? They mostly crashed into the rocks.
Most tipping columns lost money for their readers last year. A mention in dispatches goes to Shares magazine (average pick: up 11.8%), but the standout was The Daily Telegraph’s Questor (up 14%). So what does Questor like for 2016? Manufacturing, for one. This year’s tips include Carclo (industrial chemicals), McBride (household goods) and Keller Group (construction). This last looks intriguing – its shares trade on a comparatively lowly p/e of just nine – and I hate overpaying for anything.
Shares’ tips are wider ranging – everything from temporary power rental (Aggreko), to Big Oil (BP – a bold call), to support services (Serco), to sandwich making (Greencore).
The Daily Mail (2015 performance: down 10.2%) plumps for an Aim-listed lithium producer (Bacanora Minerals), banking giant Lloyds and retailer Ted Baker. Is this the same Ted Baker that Questor advocates selling, citing soggy Christmas trading? Nobody ever said tipsters needed to be consistent.
The Times (down 8.6% for 2015) likes a lot of quite stodgy large caps, including BG, Greene King, Home Retail Group and Whitbread. It uses the word “defensive” quite a lot – if that characteristic gets delivered, it will be no bad thing.
Overall, as I did last year, I’m backing Questor, who has good form in this contest. But at the risk of sounding like the Grinch, I’d add a few caveats. New Year stock tipping may all be a bit of fun, but it does trivialise the business of investing. Twelve months is not really long enough to assess whether a stock has merit as part of a sensibly diversified portfolio. Perhaps most strikingly, measures of valuation rarely feature as part of the rationale. There are rather too many glib references to stocks being an each-way bet, on the basis that they’re either “too cheap”, or they’re likely to get taken over.
But 2015 showed that the markets can deliver us a curve ball out of nowhere. Forecasting market returns isn’t remotely easy and the same holds for stocks. Just as they did last year, the stockmarkets already feel a little heavy and jaded. Investors will probably be justified in being more than usually sceptical when it comes to the merits of some unsolicited stock tips during the year to come.
• Tim Price is director of investment at PFP Wealth Management. He also writes The Price Report newsletter.
… and what they’re tipping for the year ahead
Shares
Performance last year: + 11.8%
Best tip: Red24 +89%
Worst tip: Genel -69.2%
| Company | Reason | Price tipped *52-wk high/low |
|---|---|---|
| Aggreko (AGK) Support services |
The firm is one of Britain’s few truly world-class businesses, with a 40% market share in temporary power equipment globally. It’s a compelling proposition. | 925p 1,719p/876p* |
| BCA Marketplace (BCA) Consumer discretionary |
The UK market leader for car auctions hopes to replicate its success in Europe. Demand is growing and its debt is down. The shares look attractive. | 165p 180p/126p |
| Bellway (BWY) Household goods |
Bellway should benefit as Help to Buy is extended and new planning reforms come in. New home completions and margins should both grow in 2016. | 2,746p 2,848p/1,711p |
| BP (BP) Energy producers |
BP is uniquely well placed to ride out low oil prices because the Deepwater Horizon disaster forced it to take cost-cutting measures ahead of its peers. | 342.75p 484p/323p |
| Breedon Aggr’g’te (BREE) Aim |
Breedon is the largest independent aggregates business in the UK behind the global majors and is in a sweet spot to benefit from UK construction recovery. | 65p 67.5p/45p |
| Dalata Hotel (DAL) Aim |
The Irish hotelier should produce double-digit profit growth over the next three years as it benefits from a robust economy and earnings-enhancing acquisitions. | 367.5p 405p/216.5p |
| Digital Barriers (DGB) Aim |
The surveillance technology supplier is making a transformational acquisition of Brimtek, which supplies the US federal government and defence agencies. | 42.5p 60p/33p |
| Eagle Eye Solutions (EYE) Aim |
Eagle Eye has patent-protected technology that helps retailers get customers through the doors. The shares had a scorching 2015 and there’s more to come. | 230p 239p/158p |
| Greencore (GNC) Food |
Booming UK employment means workers buy more sandwiches – great news for Greencore, which supplies them. Its American operation has room to grow. | 337.5p 361p/273.25p |
| Prudential (PRU) Insurance |
Prudential will benefit as Asian consumers get richer and demand financial products. And unlike the banks, Prudential is not dogged by a bad reputation. | 1,495p 1,752p/1,330.5p |
| Serco (SRP) Support services |
A new strategy has cleared up the outsourcer’s balance sheet and refocused on the juiciest government contracts. Serco could yet be the toast of 2016. | 94p 184.5p/91.5p |
| Shawbrook (SHAW) Banking |
The specialist lender to small businesses will benefit from government reforms and holds more than twice the minimum capital to protect it from shocks. | 336.25p 382p/301p |
| Tarsus (TRS) Media |
The events firm seems to have had a strong year, with signs of strong growth in visitors at the Dubai Airshow last November. If confirmed, the shares could rise. | 218p 233.5p/200.25p |
| Telecom Plus (TEP) Telecom operators |
Telecoms Plus is still a small player in the utility market, but should benefit as people turn away from the much criticised big six suppliers. | 1,043p 1,272p/752.5p |
| Zambeef Products (ZAM) Aim |
The African agribusiness hopes to evolve into a major regional food supplier. The shares look very cheap and the growth potential is considerable. |
7p 16.25p/5.75p |
The Independent
Performance last year: -6.77%
Best tip: Hargreaves Landsown +48.8%
Worst tip: Tullow -60%
| Company | Reason | Price tipped *52-wk high/low |
|---|---|---|
| 888 Holdings (888) Tourism and leisure |
Expect renewed bidding interest in the year ahead. The gaming sector has seen a mergers frenzy and 888’s marketing expertise is the envy of the industry. | 182.5p 185p/133.25p |
| Aldermore Group (ALD) Banking |
This is a promising low-cost ”challenger” bank serving the buy-to-let and small business markets. The sector is getting a boost from government support. | 230p 316p/202p |
| Alliance Pharma (APH) Aim |
The niche healthcare business’s £132m buy of Sinclair IS Pharma’s dermatology business is seen as a big step up by analysts and the firm’s track record is solid. | 43p 61p/33.75p |
| Galliford Try (GFRD) Construction |
The builder has picked up a spate of contract wins in the education and defence sectors, and is well placed to benefit as the UK builds more houses. | 1,525p 1,813p/1,220p |
| Mulberry Group (MUL) Aim |
The brand’s shares did well last year and 2016 should be an exciting one as new creative director Johnny Coca unveils his first collection in February. | 945p 949.5p/845p |
| National Grid (NG) Utilities |
The utility delivered steady growth and kept costs under control last year. Buying now is a wager on continued UK economic growth. |
937.5p 956p/817.25p |
| Rio Tinto (RIO) Mining |
Rio Tinto is one of the better ways to take a punt on the struggling mining sector. A forecast 7.5% dividend yield may be cut, but if not a re-rating is on the cards. |
1,979.5p 3,237.5p/1,848p |
| Severfield (SFR) Engineering |
The battered engineer is under new management and is now paying a dividend again. Profit margins are fattening and 2016 might just be Severfield’s year. | 67p 73.25p/57p |
| Standard Chartered (STAN) Banking |
Shares in the bank have been hammered as its core emerging markets struggle, but with a new man at the helm, Standard should pull through. It’s a cheap buy. | 563.75p 1,086p/476.25p |
| Walker Greenb’k (WGB) Aim |
Shares in the maker of high-end wallpaper and fabrics fell after its Lancashire factory was flooded. But it is fully insured and should continue to grow in 2016. | 202.5p 242p/182p |
Daily Mail
Performance last year: -10.2%
Best tip: Mears +26.1%
Worst tip: Akers Bio -63.7%
| Company | Reason | Price tipped *52-wk high/low |
|---|---|---|
| Bacanora Minerals (BCN) Aim |
The lithium producer has signed a landmark supply deal with US electric car pioneer Tesla Motors, and its Sonora project should start production in 2018. | 73.5p 99p/41.5p |
| Lloyds Banking (LLOY) Banking |
Lloyds sailed through last year’s Bank of England stress test and is not hampered by a big casino banking operation or exposure to troubled emerging markets. | 73p 89p/68.5p |
| Ted Baker (TED) Retailers |
The fashion brand has managed to deliver consistent double-digit profit growth year after year. The juggernaut will continue. | 2,987p 3,555p/2,200p |
| Carclo (CAR) Industrial chemicals |
This plastics group’s LED lighting unit is enjoying good growth, with demand from luxury car brands including Bugatti and Aston Martin particularly strong. | 127p 169.75p/88p |
| Keller Group (KLR) Construction |
The construction group has an unbroken 29-year record of dividend payouts. It looks good value, trading on a price/earnings (p/e) multiple of nine. |
833.5p 1,099p/790.5p |
| McBride (MCB) Household goods |
The own-brand goods manufacturer saw pre-tax profits surge in recent results. It should continue to benefit as discounters battle the big four supermarkets. |
165.5p 172.75p/75.5p |
| Senior (SNR) Defence and aeronautics |
Senior endured a tough second-half, but the company is well placed in a consolidating sector with a solid order book from giants Aerospace and Boeing. | 229.75p 358.5p/219.25p |
| Vodafone Group (VOD) Telecom operators |
The largest mobile operator is not cheap, but the core business has returned to growth and is coveted by overseas buyers such as US cable giant Liberty Global. | 221p 255.25p/203.75p |
| Ted Baker (TED) Retailers |
SELL: Ted Baker is a British success story, but there are signs that the crucial Christmas trading period has been slow, which will drag the shares down. | 2,987p 3,555p/2,200p |
The Times
Performance last year: -8.6%
Best tip: Informa +31.7%
Worst tip: President Energy -59.7%
| Company | Reason | Price tipped *52-wk high/low |
|---|---|---|
| Babcock Int’l (BAB) Support services |
Babcock’s Avincis helicopter operation, which serves oil platforms, has been hit by the low oil price. But it should do well elsewhere and has a bulging order book. | 1,016p 1,145p/878p |
| BG Group (BG) Energy producers |
If Shell buys BG, and The Times’ tipster predicts it will, then the shares are a cheap way into Shell. The deal would give almost a quid’s worth of upside per share. | 985p 1,199.5p/795p |
| Breedon Aggr’g’t’s (BREE) Aim |
Breedon entered the big league with its acquisition of £336m of assets from Mittal Investments. This should boost the shares in 2016. | 65p 67.5p/45p |
| Connect Group (CNCT) Support services |
The former Smiths News has now expanded into deliveries – a difficult market, but the shares should take-off if it succeeds. The yield is near 6%. |
168.25p 171p/136p |
| Dairy Crest Group (DCG) Food |
Dairy Crest has cut its exposure to the UK consumer by selling its dairy side, and is now focusing on selling baby milk formula to the global market. |
680p 697p/439.75p |
| DS Smith (SMDS) Manufacturing |
DS Smith is a solid defensive stock. Its impressive acquisitions track record should continue to yield results. | 396.75p 421p/305.5p |
| Greene King (GNK) Tourism and leisure |
Greene King is The Times’ pick of the pubs. It got a great deal when it bought Spirit Pub Company. Growth there should boost the shares in the year ahead. | 930p 977.5p/732.5p |
| Home Retail (HOME) Retailers |
The shares in the owner of Argos and Homebase are a good two-way bet. If the shares go up, they were a cheap buy. If not, a takeover is likely. | 99.5p 218p/89.75p |
| Volex (VLX) Electronic equipment |
Financier Nat Rothschild has bought more than one quarter of the electrical goods company. If his play is right, the upside could be considerable. | 53.25p 88p/52.75p |
| Whitbread (WTB) Tourism and leisure |
Whitbread is a defensive play, with the Costa Coffee and Premier Inn operations enjoying strong positions in their markets and good overseas growth prospects. | 4,401p 5,440p/4,306p |
The Sunday Times
Performance last year: -15%
Best tip: Severn Trent +8%
Worst tip: Genel -69.2%
| Company | Reason | Price tipped *52-wk high/low |
|---|---|---|
| Barclays (BARC) Banking |
The lender is set to trim underperforming parts of the investment side and renew focus on its strongly performing retail and Barclaycard operations. | 219p 289p/209p |
| Diageo (DGE) Beverages |
Diageo’s cost-cutting programme and signs of recovery in North America make the future look bright for the drinks maker. It may also become a bid target. | 1,856.5p 2,022.5p/1,640p |
| Drax Group (DRX) Electricity generation |
The power station provides about 7% of the UK’s power needs. Britain remains heavily reliant on the black stuff, and where there’s muck, there’s brass. | 244.5p 454.5p/210p |
| Grainger (GRI) Real estate |
The landlord specialises in “regulated tenancies”. Hardly glamorous, but the shares trade on a 26% discount to net asset value. Watch out for a takeover bid. | 232.75p 254p/184p |
| GVC Holdings (GVC) Aim |
The Aim-listed gambling outfit will join London’s main market this year. This is an opportunity to buy the shares at just ten times annual earnings. | 463.5p 482.5p/372p |
| Imagination Tech. (IMG) Hardware |
The chips for smartphones maker has fallen from favour. But the rot will have to stop somewhere, and new management or a bid could spark a re-rating. | 133.5p 265p/123.5p |
| Journey Group (JNY) Aim |
Journey Group handles on-board catering and cabin management for American airlines. If the oil price stays low, Journey should profit in the year ahead. | 178.5p 183.5p/122.5p |
| Travis Perkins (TPK) Support services |
Travis Perkins is the biggest builder’s merchant in Britain. Low interest rates and acute housing shortages should keep the builders building. Safe as houses. | 1,979p 2,260p/1,767p |
The Guardian
Performance last year: -5.1%
Best tip: International Airlines Group +25%
Worst tip: AO World -44%
| Company | Reason | Price tipped *52-wk high/low |
|---|---|---|
| Cambria Auto. (CAMB) Aim |
Shares in the motor dealership have climbed to an all-time high, and profits came in 43% up on the previous year. Expect the momentum to continue. | 80p 82p/47p |
| Dixons Carphone (DC) Retailers |
The great high-street survivor is still standing. Earnings in 2016 may be boosted by a new US venture and new TV sales ahead of Euro 2016 and the Olympics. | 500p 501p/407p |
| FirstGroup (FGP) Tourism/leisure services |
Don’t bet your life savings on the Aberdeen-based transport group, but it has won the TransPennine rail franchise and the shares have room to grow. | 107.25p 127.75p/91p |
| ITV (ITV) Media |
ITV has been transformed in the last five years, and may now attract takeover interest from US media companies. One to watch. | 276.5p 281p/207p |
| Poundland (PLND) Retailers |
The bargain retailer has struggled to integrate its newly acquired 99p stores, but an experienced management team should see it through. | 208p 419p/207p |
| Restaurant Group (RTN) Tourism and leisure |
The Frankie & Benny’s owner has plans to double its outlets in ten years. More people dining out should make up for the rising cost of the minimum wage. | 686p 738.5p/638.5p |
| SuperGroup (SGP) Personal goods |
The owner of the trendy Superdry brand reported earlier in December that it was selling almost all of its stock at full price. That bodes well for a tough year ahead. | 1,646p 1,714p/769p |
| WPP (WPP) Media |
WPP’s CEO Sir Martin Sorrell has many fans in the City and most analysts remain bullish as the firm continues to buy back stock and invest in digital advertising. | 1,563p 1,611p/1,304p |
| WS Atkins (ATK) Support services |
The engineer should benefit from the Chancellor’s obsession with new transport infrastructure and reported a 40% increase in half-year profits last month. | 1,626p 1,656p/1,238p |
Category: Market updates