FTSE in-depth: Is power firm on Buffett's menu?

 

Legendary billionaire investor Warren Buffett has been in the news a lot recently.

Geoff Foster

Geoff Foster: The Footsie jumped 86.29 points to a 14-month high.

His proclamation last week that the 'financial panic is over' and that 'the bottom has come in stocks' excited the bulls and put stock markets on both sides of the Pond in the mood for a strong pre-Christmas run.

Those words came hard on the heels of his mega £16bn acquisition of the Burlington Northern Sante Fe railroad company, the septuagenarian's biggest deal yet. Whispers now suggest that he is ready to go shopping in the UK's utility sector.

Fingers were pointed at electricity generator International Power, which has in recent years often been mentioned in the same breath as French company Suez, US giant General Electric and Powergen owner Eon.

Professional punters switched on to the shares, chasing them 3.2p higher to 269.4p.

International Power has a diversified portfolio of interests in over 40 power stations in more than 20 countries around the world. It recently sold its entire Czech business to Czech-Slovak investment firm J&T Group, banking a tasty £420m profit on the £619m sale.

Cazenove recently upgraded to outperform from neutral following an upbeat interim management statement and raised its fair value estimate to 390p.

Dealers described the day's proceedings as feeling a bit like after the Lord Mayor's Show with the volume of overall business leaving a lot to de desired. Nevertheless, the Footsie jumped 86.29 points to a 14-month high of 5,382.67 while the FTSE 250 advanced 149.53 points to 9,523.27.

Wall Street put its considerable weight behind the move north by rising 110 points in early trading. New York traders were delighted to see that US retail sales increased 1.4% in October, beating the consensus-expected gain of 0.9%.

One leading US economist said that the retail sales report shows that the American consumer is getting more confident about the staying power of the economic expansion.

The performance owed much to renewed strength in the mining sector. Further dollar weakness and news that Japan's economy grew at the fastest pace in more than two years in the third quarter, fuelled demand for metals. Copper hit a 13.5 high of $6,770 a ton, while gold traded at a record $1,133.50 an ounce.

Lonmin's (148p better at 1740p) figures were well received too and that gave an additional-boost to its 24.7% shareholder, Xstrata, 79p up at 1,093p. Antofagasta added 66p at 934p and Rio Tinto 171.5p to 3,304.5p. Randgold Resources rose 227p to 4,934p and Anglo American 104p to 2,653p.

Daily Mirror publisher Trinity Mirror gained 11.8p to 186.5p after UBS moved its target price to 220p from 200p.

Housebuilders were lifted by Persimmon's (28.5p up at 488.6p) upbeat trading statement and comment that home buyers are back. Hopes that today's statement from rival Barratt Developments will also prove positive helped the shares rise 5.8p to 146p. Bellway soared 42p to 822p.

Buyers climbed aboard EasyJet, 10.2p higher at 392.2p, ahead of today's full-year results. Collins Stewart says the discounter is the strongest buy in the airline sector and has a target price of 469p.

Interdealer broker Tullett Prebon fell 15.2p to 334.3p after Numis downgraded its target price to 447p from 476p following the disclosure of the extent of the staff losses to rival BGC with the third-quarter interim management statement.

A Fox-Pitt Kelton recommendation-ahead of Thursday's third-quarterfigures lifted Lloyds underwriter Chaucer Holdings 1.19p to 46.85p. The broker pointed out the group is capitalised at £233m, has a yield of 8.8% and has around £300m of net assets.

It is well positioned for an upturn in UK motor rates - 20% of the book - while the statement could include new boardroom appointments.

On a day when Domino's Pizza (5.8p better at 322.8p) announced a tender offer to buy back up to 6m shares at 317p a share and return a further £19m to shareholders, four directors cashed in shares worth almost £18m. Chairman Stephen Hemsley sold £5.73m worth, while chief executive Chris Morre trousered £1.72m.

XP Power rose 20p to 357.5p following bullish comments from Investec. The broker has a target price of 450p and says longer-term prospects for the group look strong. XP is benefiting from its new manufacturing facility in China attracting larger customers.

Following its promotion to AIM from PLUS Markets, Avia Health Informatics attracted healthy buying and left its opening price of 60p miles behind, closing at 72.5p.

Formed by shell company Avia Investments reversing in to Plain Healthcare, the company plans to focus on Plain's clinical support software. The idea is to revolutionise the way GPs sort patients into urgent and non-urgent cases.