My top 10 Stock Market shares for 2005

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Ten for 2005

I managed to beat the market last year with my predictions, but I want to really clean up this year. I think that this will be a great year for IT shares, both in the software area and in IT recruitment – so that‘s where all my shares will be from.

Here are my 10 to beat the market for 2005. Eight of them are the same as last year. One of last year‘s got taken over, London Bridge Software, and I‘ve decided to dump Marlborough Sterling. I‘ve added two new ones, CPL and Highams, which are both IT recruitment companies.

We‘ll see how I do. I‘ll keep you up to date monthly.

1. Retail Decisions

Buying Price – 28.5p
Current Price –
Percentage Rise –

They supply software in the area of Card Fraud Prevention.

I picked these ones last year and they rewarded me by more than doubling. Recently they announced that their profits would be more than analysts had been predicting. I take this as a really good sign.

You want shares that are surprising analysts on the upside – as this sends the share price rising again. At the peak of the boom they stood at 388p but were one of those ones punished badly by the dotcom bust. They went down to just a few pence at the bottom of the downturn

The share options of the directors were given to them a while back at around the current price. That should give the management team an incentive to get the share price rising again.

2. Innovation Group

Buying Price – 34.75p
Current Price –
Percentage Rise –

These did OK for me with a 12.1% rise, so I‘ll stick by them.

3. Xansa

Buying Price – 93p
Current Price –
Percentage Rise –

They rewarded me with a rise of 10% last year – which is OK. Earlier in the year I was very disappointed with them as they had a profits downgrade. They should have been doing better as they were in the right area, i.e. IT outsourcing, and they have a facility in India. However, they had a restructuring of their business in mid-year, getting rid of the US operation and concentrating on UK customers supplied by their Indian outlet.

I‘ve decided to keep them on.

4. Intec

Buying Price – 63.5p
Current Price –
Percentage Rise

They made me a small profit last year. They are in the area of supplying IT software to the telecoms industry – which is very lucrative when it gets going. I think it will get going again this year.

5. Parity

Buying Price – 9.88p
Current Price –
Percentage Rise –

They fell by 8.3% last year but I‘m still pretty keen on them as a recovery stock. This is one of the UK‘s major IT staffing companies. The share price stands at only around 1.5% of what they were at the peak of the boom.

During the past few years they have moved up from 7th position to 1st for IT Training. The training market tends to lag the rest of the market when the purse strings are being pulled tight. However, when the market really picks up this should show dividends for them.

6. Spring Group

Buying Price – 92p
Current Price –
Percentage Rise –

Spring Group are now the biggest IT staffing company in the UK. This market leadership should stand them in good stead when it comes to getting put on Preferred Supplier Lists.

They also have a very strong balance sheet with more than £30 million in cash alone. They became the biggest IT staffing company when they took over Best International for a snip of £7.5 million.

Now that they have fully assimilated Best, they intend to use their strong Balance Sheet to make further acquisitions of other IT staffing companies.

Watch this space!

7. LogicaCMG

Buying Price – 192.75p
Current Price –
Percentage Rise –

Logica didn‘t have a good year in terms of share price. However, this is mainly because they had a good 2003 and the market turned against software companies in 2004. However, their performance in 2004 shows how they can roar ahead when conditions in the IT software market are right – which I expect them to be this year.

8. Lorien

Buying Price – 52.5p
Current Price –
Percentage Rise –

Lorien were our Agency of the Year in 2002 and 2003 as they came through the downturn so well. However, 2004 wasn‘t a great year for them in terms of share price. However, I am confident that the IT recruitment market will continue to grow in 2005 and that IT recruitment companies are a good area of the market to be in.

9. CPL Resources

Buying Price – 90p
Current Price –
Percentage Rise –

This agency actually had a decent rise in 2004 – one of the very few who achieved it. They are actually an Irish recruitment company but their quote is on the UK Stock Market.

The Irish market is a booming market. As regular readers of this site are aware, it is a little known fact that Ireland is actually the biggest offshore outsourcing centre in the world for software. They get 25% of all US investment in technology in the EU despite having only 1% of its population.

The economy is predicted to grow by 6.5% over the next 5 years – about the same rate as India and China.

CPL is Ireland‘s biggest staffing company and is sure to benefit from the Celtic Tiger‘s emphasis on IT and technology in particular as a growth area.

10. Highams Systems

Buying Price – 5.5p
Current Price –
Percentage Rise –

This IT agency is a bit of a hunch. They didn‘t have a particularly good year last year and trod water whilst other agencies were doing well. However, this is reflected in the share price, which is a small percentage of what it used to be. I‘m going for this as a recovery stock.

2005

I managed to increase my portfolio by 10.1% last year – beating the Stock Market which grew at 6% and beating the Software sector, which most of my shares are in, which fell by 5.3% last year.

However, I‘ll be looking for a much better performance this year – and expect to get it. I think that 2005 will be a boom year for software and IT recruitment stocks and shares.

The Footsie stands 4814.30. I‘m confident I‘ll beat it this year.

Narrowing it Down

If I had to narrow my selections down to just three, they would be Retail Decisions, CPL and Spring Group.

If I had to narrow it down to just two it would be Retail Decisions and CPL.

If I had to narrow it down to just one – that would be very difficult. However, CPL might just shade it, because of their performance last year and because of their position in the booming Irish IT market.

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