LONDON (ShareCast) - (ShareCast News) - Dairy Crest shares are worth buying, said Danny Fortson in the Sunday Times' Inside the City column. Investors are currently awaiting a Competition & Markets Authority decision on 19 October whether to allow Dairy Crest to sell its dairy business, roughly two thirds of group sales, to sector peer Muller for around £80m. The milk business has been a lossmaking one since 2011 due to high costs and supermarket price competition.
Cheese and spreads are where the money lies for the FTSE 250 group, whose brands Cathedral City and Clover allow it to cream off profit margins near 15%. Offloading the dairy business would slash the headcount and allow for a likely increase in the dividend yeild from the current 3.5%. Dairy Crest also will soon move into the market for baby food ingredients, opening a gateway to emerging markets for the first time. Ahead of the CMA decision the shares have churned 50% higher, so a rejection by the competition watchdog would see a lot of this lost.

Shares in Cluff Natural Resources are a buy, wrote Midas in the Mail on Sunday, but only for those willing to bear the not-insignificant risks and sharp movements of its illiquid shares. This tiny and still lossmaking business, set up by North Sea oil pioneer Algy Cluff, is worth a look for the potential for it to make a profit from its five North Sea oil exploration licences operations and an high risk-reward bet on underground coal gasification (UCG).

As opposed to Victorian era coal-gas technology, nowadays UCG technology allows the production of gas without having to dig up the coal. Gas is created through raised temperatures at the coal seam, which is then pumped out for refining into other products. This process can extract gas from the North Sea at a fraction of previous prices. Cluff has several licences that it believes will throw up UCG gas but need to clear local planning resistance. Chairman Cluff maintains that drilling could be done offshore and still be economically viable if onshore processing is not approved, with central government intervention to encourage alternative gas extraction a possibility.

Some UK companies' shares are likely to do better than others in the post-US-interest-rate-hike world, explained Questor in the Sunday Telegraph. Commodities, clearly, is a sector that is very exposed after the falls in prices of natural resources. The debt built up in previous years will now cost miners such as Anglo American, Glencore and oil companies including BP and Shell more to service, as well as hitting companies that serve these markets, like oil engineers. Utility companies, normally seen as defensive, also have built up sizeable debt, putting this sector's outfits such as at risk of the Federal Reserve's lift-off too, along with banks and real estate companies, which historically underperform in rising rate environments, as will housebuilders.

Economist Simon French at Panmure Gordon has found telecoms and technology shares have historically performed best during rate rise cycles. Questor suggested companies such as Vodafone, Sage, BT and Sky should be able to weather the storm. If in doubt, there's always cash.


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