It pays to keep an eye on the shares of North-East companies, discovers Vinay Bedi, divisional director of Newcastle-based investment management firm Wise Speke in his regular half-yearly review of the North 40 stocks.
Without wishing to be accused of unnecessary repetition, we should not be afraid to celebrate the fact that The Journal North 40 list of regional stocks has once again provided investors with an astonishing outperformance against the FTSE All-Share Index.
To the six months ending April 30, 2007, The Journal North 40 rose, as a portfolio, by 14.1%. Over any six month period investors would surely be delighted with this level of return. However, when one compares it to the FTSE All-Share Index which only rose by 6.9%, one realises how strong a return this has been.
We have for many years been emphasising the quality of our regional list of quoted stocks. Not only do we have a good, varied selection of well-established blue-chip companies which provide a strong bedrock for the list, we have benefited significantly from additional flotations over recent years especially on AIM. It is this process that has brought into the North 40 stocks which have helped provide quite exceptional growth.
However, we are delighted to report that our second piece of repetitive news is that the top performing stock within The Journal North 40 list over the last six months is once again Tanfield Group. Following an enormous 87.1% increase in the previous six months, the County Durham engineering group has not only beaten this level of performance in the six months to the end of April 2007, it has more than doubled it, rising by an amazing 204%. Much of the share price upside came following an agreement for an initial order of 200 electric trucks towards the end of last year with the global logistics group TNT. With the environmental lobby strongly in Tanfield's favour one would not be surprised to see us announcing further strong share price progress in future reports.
The second strongest performing stock in The Journal North 40 was Boldon-based biotech company IDS (Immunodiagnostic Systems). A good set of interim results and trading statement issued last November has been the catalyst for an excellent increase in the share price and this was only accelerated with news of an exclusive sales agreement which was signed in early December. IDS is now demonstrating signs of becoming one of the region's major smaller company success stories and has certainly hit the headlines with its 69.0% share price increase over the last six months.
As if to underline the volatility of the stock market, it is important to mention Premier Direct in this half-yearly report. You may recall, Premier Direct suffered a horrendous 72% fall in the previous six months. This followed indications of losses that would be made to its July 2006 year end. Since then, Premier Direct has started to claw back some of its share price disappointments and was the one of the strongest performing stocks in the list in the six months to April 2007. Premier Direct enjoyed a 38.2% increase in its shares and indeed at one stage during the turn of the year, the shares were trading even higher than this level. There is still a long way to go in the recovery process but shareholders will be relieved that progress is now being seen.
With the environmental and ethical lobbies gaining increased recognition, not least amongst investors, it is pleasing to see the North East leading the way in many of these areas. However, our two leading bio-diesel producers, Teesside-based Biofuels and D1 Oils both endured a tough six months in share price terms. But in the case of Biofuels this is sadly something of an understatement. The company has had to renegotiate another tranche of working capital from its bank which will keep it going until the end of June. Further funding will then be required and it is likely shareholders will be faced with a debt for equity swap in due course. Over the six months to the end of April the share price fell by over 77%.
The story at D1 Oils has continued to be much more robust, albeit with a share price fall during the period of 8.1%. Results to the end of 2006 demonstrated that the group was progressing as anticipated and could well claim to be the global leader in the development of the crop jatropha for bio-diesel production.
Scanning the rest of the leader board over the last six months, Darlington-based care home operator Southern Cross ranks third in our list of top performers with a 64.7% rise. This maintains the fantastic performance of the shares since floating at 225p last year, as the group's programme of acquiring increasing numbers of care home beds strengthens further its position as the largest provided of care homes in the UK.
Opsec Security Group announced sparkling interim results in November with indications that the full year results would also be very strong. Hence, a share price increase of 47.5% during the six month period.
It was very pleasing to see 2006 North East Business Executive of the Year Gordon Banham enjoy another strong increase in the Hargreaves share price. A 38.1% rise was driven on by the strategic acquisition of the Maltby Colliery from UK Coal. This aligned with strong support from the City in the form of a placing and continued excellent results pushed the share price onwards and upwards.
Chieftain Group, which remains one of the strongest performing shares in our list since we commenced coverage, enjoyed a further excellent period with its shares rising by 33.4%.
Many of the very strong performances in the list have tended to come from AIM and small cap stocks. But we must also make mention of some of our core larger companies many of which have also enjoyed strong performances.
Go-Ahead's bus and rail units continue to perform very strongly and good first half results were the catalyst behind a 30.2% increase in the share price.
ICI has rewarded investors with another good six-month performance rising by 31.5% driven by a strong set of results and continued corporate activity within the sector. Investors in Sage may feel slightly disappointed with the share price performance recently, however, over the last six months the shares did go up by over 10% which is relatively a very good performance against the All-Share Index.
Scottish & Newcastle also outperformed the index rising by 9.4% although one has to note that much of this has been triggered by takeover activity, a threat the company has had to repel previously. Greggs continues to grow its business despite the usual vagaries in its markets and its share price continues to move upwards rising by an excellent 23.5% during the six month period.
Of course, there were some disappointments. Some of the smaller stocks such as Angel Biotech and Dermasalve were sharply down but it is pleasing to note that of the overall portfolio, 72% of the stocks saw increases over the six months. This simply reiterates our view that the North 40 list provides an excellent balance of a wide cross section of companies and sectors and there is plenty of investment opportunity within it.
Investors can also be very positive about the fact that the regional media coverage of these stocks is much stronger than one would often see elsewhere, especially for the AIM listed and smaller companies. This provides investors with added knowledge in an accurate and well-informed manner which should enhance their opportunities for finding the next Tanfield Group from amongst The Journal North 40 listings.
(IN SMALL PRINT)
* Brewin Dolphin acts as broker to Chieftain Group, Hargreaves Services, Newcastle United, Northern Recruitment, Romag Holdings, Stadium Group, Tolent, Vertu Motors and Zytronic and as joint broker to Go Ahead Group, Sage Group, Greggs, Grainger Trust and Northern Investors.
All prices are from public sources and are believed to be reliable and accurate, but without further investigation cannot be warranted as to their accuracy or completeness.
Vinay Bedi is a divisional director of the Wise Speke division of Brewin Dolphin Securities Ltd. The views expressed are not necessarily held throughout the Brewin Dolphin Group and no director, representative or employee of Brewin Dolphin Securities Limited accepts liability for any direct or consequential loss arising from the use of this document or its' contents
Prices, values and incomes may fall and you may get back less than you invested.
Past performance is not a guide to future performance. You should bear in mind that no investment is suitable for all circumstances and it is important to seek expert advice if in any doubt.