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FTSE in-depth: FTSE is expected to be best asset

By Geoff Foster for MailOnline
Updated: 03:26 EDT, 25 November 2010

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If you fancy the stockmarket to perform in 2011, fill your boots with shares of leading asset managers.

Geoff Foster: Bullish buyers lifted their heads above the parapet and chased the Footsie higher.

That's the message from Deutsche Bank, whose bullish strategists believe the FTSE 100 will end 2011 at 6,880, or 21% above its current level. They also think the index will have a 4% yield, to give a tasty total estimated return of 24%.

Deutsche says the asset manager sector will benefit next year from rising revenue margins and higher operating profit margins, which will continue to produce strong earnings momentum.

Aberdeen Asset Management rose 7.2p to 180.5p on buying ahead of next Tuesday's full year results.

Deutsche forecasts a 17% rise in assets under management (AUM) to £171bn, and a 94% increase in earnings per share to 12.2p, helped by higher AUM and last year's cost reduction measures.

The firm says Aberdeen has stopped making acquisitions and is instead focused on cash generation in order to pay down debt of £300m-plus.

Its 12-month target price is 210p. Rival broker Cannacord Genuity also likes the look of Aberdeen and has lifted its target price to 213p from 185p.

Meanwhile, the plot thickens at Aberdeen's struggling rival Gartmore. Its shares rallied 4.5p to 101.4p on hearing that a hedge fund vehicle linked to professional investor John Zwaanstra, a former protege of George Soros, has acquired a 5% stake. Goldman Sachs is still trying to find a buyer for Gartmore and perhaps Zwaanstra will be able to help.

Bullish buyers lifted their heads above the parapet and chased the Footsie 75.82 points higher to 5,657.1 and the FTSE 250 111.81 points to 10,731.10.

Shrugging off the problems in Ireland and Korea, their spirits were lifted by pleasing economic data. This included in-line third quarter economic output figures in the UK, stronger-than-expected German business sentiment and news that the number of people applying for unemployment benefits in the US fell sharply last week to the lowest level since July 2008.

Wall Street responded with an opening gain of 134 points.

Testing and inspection services group Intertek jumped 97p to 1851p after Goldman Sachs added the stock to its conviction buy list. Reflecting the firmer market trend, Legal & General rallied 3.75p to 95.1p.

Currys electrical group Dixons Retail added 1.46p at 26.62p ahead of today's interim figures. Shore Capital has a target price of 35p.

Analyst Ramona Tipnis reckons with market leading positions in each of its markets, and more than two years into its strategy it is the most likely to maintain, if not grow, its market share while rapidly improving profitability.

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Luxury fashion group Burberry strutted its stuff at 1051p, up 42p. Broker Bernstein raised its target price to 1150p from £10.

Sporadic bouts of small buying helped funeral services company Dignity improve 7p to 650p. Franc Gregori, analyst at Charles Stanley, reckons its time to sell a few. He has identified seven factors that gives some cause for concern, including rising competition, margin pressure and likely investment returns in pre-paid funerals. His target price is 520p.

Better-than-expected annual results lifted Avon Rubber 6p to 172p. Operating profits jumped 68% to £9.3m and the dividend is restated at 1.5p. The group has also agreed a new three-year banking facility at a reduced cost. Arden Partners say the shares are significantly undervalued.

Ultimate Finance, a company which provides invoice finance to clients, edged up 0.25p to 13p following the confident tenor of chairman Clive Garston's AGM address. He said that current trading is robust, and the board continues to view the future with confidence.

London-based international film group Intandem Films firmed 0.375p to 3p after selling the UK rights to The Veteran, starring Ally Sheedy and Bobby Hosea, to Revolver at the American Film Market. The rights to The Veteran, which is currently in post production, have also been sold to four other territories.

Jubilant Energy became the fifth Indian company to float on AIM in the last 10 weeks when dealings got underway at 77p. The shares touched 80.5p before closing at 78.5p. Jubilant is a holding company for a group of firms engaged in upstream oil and gas exploration and production.

Burford Capital, the AIM-listed fund that makes money from financing corporate lawsuits, eased 0.5p to 117p following a £110m fundraising. The fund sold 100m shares at 110p a share and expects the new capital to be invested within 18 months.

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