Stock Watch

18 - November - 2008

Nick Raynor, Investment Adviser at The Share Centre

The Share Centre's top 5 buys from the last 7 days (10th - 14th November):

1. Royal Bank of Scotland - Continuing volatility still appeals to investors.
2. Barclays - Investors hoping that banks will eventually recover.
3. Taylor Wimpey - Investors still hoping for a recovery in the housing sector.
4. Lloyds TSB - Banks continuing to find investors.
5. BP - Investors finally turning to oil and its defensive nature.

The Share Centre's top 5 shares to follow (10th - 14th November):

1. National Grid (Lower Risk) - Defensive qualities prove attractive in these markets.
2. BP (Lower Risk) - Oil is getting weaker but certainly a commodity we cannot live without.
3. Imperial Tobacco (Medium Risk) - Despite unhealthy product the shares have good defensive qualities.
4. Babcock International (Medium Risk) - Ship building contract with Government and extensive railway contracts also.
5. Albemarle & Bond (Higher Risk) - Pawn broker may do better from these tougher times.

Ratio of buys to sells = 75:25

Top 5 most searched for companies on www.share.com:

1. RBS
2. Barclays
3. Taylor Wimpey
4. Vodafone
5. Hambledon Mining

The Share Centre's Share of the Week
Imperial Tobacco - 1588p - Sector:

Recommendation: Buy
Risk Category: Medium
Investment Class: Balanced

Opinion

Imperial Tobacco's take over of Altadis, the Franco-Spanish tobacco firm, owner of Gauloises, was confirmed on 25th January 2008. This has been an important deal for Imperial, as there are relatively few opportunities for large- scale consolidation left in the sector.

Takeover bids can be distracting, and it is easy to lose sight of the fact that Imperial is running a good business as well. While its core UK market is under pressure - despite owning the country's most popular brand, Lambert and Butler, as well as having a good position on the own-roll market - its overseas activities are performing strongly in Central and Eastern Europe, and Asia, with brands like Davidoff doing the running there.

A trading statement by Imperial released in September noted that turnover and profits were in-line with expectations and that the integration of Altadis was making good progress. Over the last five years Imperil has grown its pre-tax profit margin, earnings per share and dividend. Imperial is also on a Price Earnings ratio of 13.86 trailing the sector average which is on a PE of 17.48.

Imperial is a classic defensive stock and should be attractive to investors investing in these current markets looking for growth and income. And it is a long way from suffering financial woes due to its strong cash flows and existing lines of credit. However, it has borrowed heavily to acquire Altadis which could weigh with £3.6 billion of debt maturing in 2009 and a further £4.4 billion in 2010 may be expensive to cover.

This data is from Graham Spooner, Investment Adviser at The Share Centre. This is not intended to constitute an offer or agreement to buy or sell investments. Moneyextra.com Ltd recommends you should consider taking advice before acting on any article. Share prices, their values and the income from them can go down as well as up and investors may get back less than their original investment. Past performance is not a guide to future performance.