Good options for growth investments
Jul 27 2009 by Andrew Miller, The Journal
BHP – BHP offers good exposure to rising commodity prices, high-quality assets and a superior operational track record. It has relatively low gearing for a large-cap miner.
We, therefore, believe the company will have better optionality for growth investments, including investing in new commodities, while continuing to offer the highest yield in the sector. We are confident management will remain disciplined and that execution risk is relatively low.
Man Group – Amid improving news flow around the hedge fund industry, Man Group's shares have once again come into favour.
Although there remains the threat of adverse regulatory intervention, investors are recognising that, hedge funds are relatively uncorrelated with the market and performance has been better than many other asset classes.
We continue to see Man Group as a world-class franchise and long-term winner, though the flagship AHL fund may find current conditions difficult.
Prudential – Prudential's shares have been weak in recent weeks, amid little company news flow and corporate activity elsewhere in the sector. The fundamental story remains the same: the Asian franchise will deliver long-term growth far greater than that of its UK-focused rivals.
The company finances are in good shape, following the astute disposal of the Taiwan agency business just before the results. The main risk to our recommendation is with the valuation, which on simple valuation metrics looks fuller than its riskier competitors, but we remain cautious on the riskier plays.
Wood Group – Wood Group's recent IMS confirmed operational performance was in line with expectations.
We expect the group to be negatively impacted by the capex reduction of oil & gas companies and margins are likely to stall this year.
However, we continue to believe the company is better positioned and has better growth prospects than other oilfield services companies.
Long-term contracts also offer better visibility on profits and we continue to see financing risk as low.
Andrew Miller is regional office head of Barclays Wealth in Newcastle
