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PERSONAL FINANCE: Footsie prices on road to recovery.

Despite war in the Middle East, London's top shares in FTSE-100 are in range of the key 6,000 level again, after the spring crash saw investors lose a tenth of their money, writes Jeremy Gates.

It's also a comment on UK economic prospects that a pounds 1 billion battle is raging over McCarthy & Stone, Britain's biggest builder of retirement homes for over-70s. Rival takeover bids have doubled its share price since October.

Says Jim Wood-Smith, head of research at Christows, a private client stockbroker handling portfolios of pounds 25,000-plus: "More bids by private equity are on the way, for businesses with predictable cash flows which the stock market doesn't value properly.

"McCarthy & Stone is an ideal target for private equity, because a bidder can borrow the money and look forward to predictable and growing cash flows."

Wood-Smith's year end FTSE-100 prediction is 5,900 - roughly where it is now. He tips telecomms companies, food manufacturers, and the media sector, where hidden value could emerge in "intellectual property", for further excitement.

At discount broker Hargreaves Lansdown, head of UK Equities Richard Hunter predicts a year-end 6,000 for FTSE-100 - with Tesco and Royal Bank of Scotland, unloved by investors for four years, as good prospects.

Hunter says that with rates still at historically low levels, autumn bid targets for private equity could include Whitbread (whole or parts), Standard Life, and possibly Argos and Experian, soon to be demerged by GUS.

Stephen Whittaker, who has had an impressive run managing the New Star UK Growth Fund, says UK banks are still good value, including Royal Bank of Scotland.

If UK economic prospects are darkening, asset manager Keydata's Protected Portfolio Plan, for minimum pounds 3,000 sums which can be fitted into a Mini ISA, will invest in five funds - Asia, Europe, North America, UK and cash - with 100 per cent of the original investment guaranteed to be returned at the end of five years.

On the buy list of fund wizard Mick Gilligan, at brokers Killik & Co, are Schroder European Alpha Plus, Merrill Lynch UK Absolute Alpha Fund and Jupiter Financial Opportunities, particularly after its recent dip.

For any of these, try to use a discount broker who doesn't charge standard commission of five per cent-plus upfront.

Paul Ilott, at Bates Investment Services, thinks markets worldwide are at "a tipping point", depending on whether or not the US keeps raising interest rates.

"If that process has come to a full stop", he says, "it's a positive sign for equity markets."

He likes Rensburg UK Select Growth (which keeps up to 20 per cent of funds in cash and gilts) and Schroder European Alpha Plus for Europe.

As a defensive bet in uncertain times, New Star Tri-Star unit trust will hold equal proportions in UK shares, bonds and commercial property. It launched in June, with minimum investment pounds 1,000 or pounds 100 per month. New Star specifies a five per cent initial charge - so this is another to buy via a discount broker.

Information: Killik & Co (0207 337 0400)' Keydata (0207 710 6906)' Discount broker Hargreaves Lansdown (0845 345 0801)' Bates Investment Services (0800 0131 1 31).
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Title Annotation:Features
Publication:The Birmingham Post (England)
Date:Aug 12, 2006
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