US Edition JP Morgan Indian Investment Trust
329¼p +43¼
Questor says BUY
The results of the world's largest ever democratic election are in.
India's ruling Congress party secured a clear victory, with the Hindu Nationalist BJP and the Communist-controlled Third Front faring extremely badly. The Indian stock market greeted the results with glee and the 30-share Sensex Index jumped 17pc on the news. Markets love stability – and hopes are that a more stable government will now result.
Questor first recommended buying shares in JP Morgan Indian Investment Trust on January 14 at 224p.
The shares have risen 46pc since then, but they are still a buy at these levels, although Questor advises waiting a few days to make a purchase.
Yesterday's euphoric gains are likely to lead to some profit taking and Indian shares are likely to pull back a little in the next few days, so rushing in now may not be the best way to play the situation.
Trading was halted twice during the session, after gains hit upper allowed limits. Because of the truncated trading session today on low volume, there may be further gains when trade resumes tomorrow, but Questor still thinks it would be better to wait a few days before making a purchase.
Of course, any investment in an emerging market carries a degree of risk, but Questor believes that the long-term outlook for the economy of the world's biggest democracy is very bright indeed. Questor still believes that a pure India fund offers the potential for stunning rewards for investors who take a long-term view.
Of course, the trust does not pay dividends – it reinvests them – and it has an annual management fee of 1.5pc.
China is traditionally seen as the Asian economic growth engine, but there is one major way that India differs from China – one that will help it through the downturn.
India is significantly less exposed to a slowdown in the US and Europe because a smaller proportion of its GDP is generated by exports.
About 20pc of Indian GDP is generated through exports, with the figure being closer to 40pc for China.
The country's GDP growth is expected to ease this year, with the IMF forecasting growth of 4.5pc, which is still pretty good. Alistair Darling can only dream of a figure such as this.
The elections result may also revive foreign investment inflows into the country, which should help boost markets further.
K Ravi Kumar, the chairman of Bharat Heavy Electricals, said that the win will allow Congress to proceed with billions of dollars of pending orders with the group. Bharat is the fund's fourth-largest holding.
Goldman Sachs said the election results may help India decouple further from the global economy by boosting domestic demand. "There are now upside risks to our GDP growth forecast of 5.8pc for FY10," it said.
"We think pension, insurance, banking reforms and disinvestment may be back on the agenda. The election's positive impact on business confidence is the final tenor in the chorus of evidence arguing for a pickup in activity and investment demand," according to Goldman.
Of course, everything in the garden is not rosy. There are concerns about the country's credit rating, given that it has a fiscal deficit of more than 10pc of GDP and the global economy as a whole is far from being out of recession. However, Questor is positive on India's economic future.
On Friday, the trust's net asset value per share stood at 292.63p on a fully-dilute basis. Shares in this fund are recommended as a long-term core emerging market holding. Buy.
Garry White has an interest in 955 shares in JP Morgan Indian Investment Trust via a shareclub.
Cranswick
615p 0
Questor says BUY
There was no mention of swine flu in the full-year results statement form pork processing group Cranswick. This is probably because the company believes it is irrelevant to its business. Questor concurs.
The shares were first recommended as a buy in January at 600p and are now just a touch ahead of the initial recommendation price. The shares remain a buy.
Yesterday, the company announced a 9pc rise in full-year pre-tax profits to £36.7m and hiked its final dividend by 10pc to 14.7p, bringing the total payout for the year to 21.7p a share. The final dividend will be paid on September 4 and there is still time to get on the shareholder register to grab this payment. You have to be on the register before July 4.
There was a significant increase in the tax charge, with tax payments rising to £16m from £9.1m, but operationally the business looks sound.
The company was very cash generative in the period, with a total cash inflow over the year of £10.9m. Management said that the current year had started well.
Since the year end the company has made two significant corporate actions. The company bought Bowes fresh pork business, which has Tesco as a major customer, and divested its pet foods business. The two deals combined look set to be earnings enhancing from the off.
The shares are trading on a March 2010 earnings multiple of 9.7 times, which does seem too high, and yielding 3.8pc.
The shares remain a buy at this level.