Midas: 2010 share tip winners and losers

By Joanne Hart for The Mail on Sunday
Updated: 08:34 EDT, 11 March 2011

Investors were cautious on 2010 but Midas outlined a set of share tips it believed could be winners whatever the weather in the year ahead. We reveal how they fared

Roll the dice: Midas' 2010 share tips proved to fare well

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Back at the end of 2009, there were high hopes that the first year of the new decade would bring increased economic certainty and growing optimism about the future.

But as 2010 draws to a close, the mood among consumers, business leaders and financial markets is decidedly cautious.

The past year has seen a number of shocks. In Europe, the very survival of the euro has been called into question.

In the US, the economy is under enormous strain and over here, the Government has laid bare the dire state of Britain's finances and stressed the need for severe measures to put the country back on an even keel.

Against this backdrop, shares have been volatile. The FTSE 100 index started the year at 5,397. By July it was down to 4,800 and now it is up near 6,000, so it has risen 10% over the past 12 months.

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The winning Midas picks

Fortunately, several Midas recommendations have done as well or better than that.

At the beginning of this year, we tipped four stocks for 2010 - Babcock International, Marston's, Domino Printing Sciences and FuturaGene. The intention was to provide a broad range of companies, from the solid and dependable to the adventurous and rather risky.

Ironically, the least successful performance has come from the most well-established stock - Babcock. The others have all done rather well. Domino has delivered a stellar performance, Marston's has made strong progress and Futura-Gene was acquired at a premium five months after our suggestion.

Back in January, we explained that FuturaGene was an early-stage company involved in pioneering technology to make trees grow faster and thicker and other plants more resistant to cold and drought.

We suggested FuturaGene was two or three years from profitability so the road ahead could be tricky.

At the time, the shares were 76p, but just seven weeks later, the company admitted it was in takeover talks. By May, a deal had been struck with Suzano Papel e Celulose, a Brazilian paper and pulp business valued at more than £2 billion.

Suzano paid £60 million for Futura-Gene, equivalent to 90p a share in cash, so investors made an 18% return in just a few months.

Our other tips are all still independent and Domino stands out from the pack. The company makes and maintains the machines that enable companies to print barcodes and other data on their products, ranging from simple 'best before' information to intricate facts about precisely where, when and how a product was made.

The business operates all over the world and its biggest market is China. When we tipped the shares, they were 330p. They closed at 628p on Thursday, so they have almost doubled in price.

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Two weeks ago, the group unveiled results for the year to October 31, showing a 53% rise in pre-tax profits to £52.1 million and a 20% lift in the dividend to 15.62p.

Not only was this impressive in itself, but it also marked the 25th consecutive year of dividend growth, an achievement shared by just a handful of quoted British companies.

So what should investors do now? Having done so well in the past year, it would be wise to take some profits by selling a third to a half of existing holdings. But Domino chairman Peter Byrom is upbeat about the future and his track record lends confidence, so investors should retain at least half their stock.

Marston's has rewarded shareholders this year, too. The brewer makes a range of ales, including Banks's, Brakspear and Mansfield, as well as more specialist brews such as Wychwood Hobgoblin and Ringwood Old Thumper. It also owns and manages 2,000 pubs, including the Pitcher & Piano chain.

Chief executive Ralph Findlay has been expanding the pub estate, focusing on premium ale and good food. The strategy seems to be working and this month the firm delivered a 4.6% increase in profits to £73.5 million and a dividend of 5.8p.

The results were ahead of expectations and the shares were 1121/2p on Thursday, a 29% rise since we tipped them at 871/2p. Brokers expect good growth from this company and the dividend offers a solid yield. Hold the shares.

Babcock is the weakest link in the 2010 quartet. Recommended at 596p, the shares had fallen to 563p by Thursday, reflecting fears about the effects of the Government's Comprehensive Spending Review.

Babcock is mainly involved in complex engineering projects needing a high degree of expertise, such as nuclear decommissioning or submarine maintenance. The Ministry of Defence is a major customer.

The company has had an eventful year. In February, it launched a hostile bid for rival VT Group. In March, it persuaded VT to consider its offer and by July it had spent £1.4 billion acquiring the company.

The deal was well received but brokers are worried about the impact of the Spending Review on Babcock's prospects in defence. In November, however, chief executive Peter Rogers delivered robust interim figures for the six months to September 30, including an eight% increase in the half-year dividend to 5.2p.

Babcock inevitably faces a challenging environment, but it has integrated VT Group smoothly and is involved in other sectors besides defence. Investors should not sell now as the stock should improve.

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But HMV has had a stinker

Looking back over the year, two more stocks stand out, both in a sector that is under the spotlight right now - retail. Last February, we recommended HMV in the belief that chief executive Simon Fox could find a way to improve the business.

Fox is still trying but the group has been hit hard by online competition and the weather. The shares have fallen from 92p to 31p and prospects are not great. It is probably time to sell, particularly as the interim dividend was recently halved to 0.9p.

Many retailers are finding life tough but some are managing to defy the snow and the gloom. In June, we recommended Mulberry, the luxury goods group whose handbags are a must-have for many well-to-do women. Back then, the shares were 202p. They were a staggering 899p last week.

The group is doing extremely well, but investors who bought in June are sitting on a tidy profit. Now would be a good time to sell a chunk of stock - and perhaps buy a bag with the proceeds.