Investment: Sharewatch

BUY

Buy Bunzl (289p), says Charterhouse Securities. Bunzl's current valuation does not reflect its medium-term profit growth potential in its largest divisions. A positive trading statement at the AGM said prices were moving up, following three years of deflationary pressure on prices growth. A forthcoming analysts' trip to Bunzl's US operations should bolster the stock. Whilst the shares have outperformed after Bunzl's recent move to the support services sector, the broker's price target remains 330p.

Buy National Power (468p), says Salomon Smith Barney. The energy group is likely to change from a dividend stock to an asset stock. The happy history of British Gas since it cut its dividend sets a precedent for NP doing the same. NP has hinted at a dividend cut, and this would reveal the value of its assets more fully. The group also has a sensible overseas investment strategy. NP is at the worst stage of a British Gas-style transition at the moment, and sentiment will improve from here on. The broker's target price is 616p.

SELL

Sell Railtrack at 1318p, says Commerzbank, highlighting the impact of regulatory concerns. Railtrack is embarking on a long-awaited phase of heavy investment - around pounds 1.6bn this year - but says itself that no matter how much it improves it will not be enough for the media, its regulator or the travelling public. Commerzbank says the earnings outlook is dull and that the shares are likely to underperform despite dividend growth prospects.

UNDERPERFORM

Northern Foods. The combination of a tough trading environment and problems at key customer Marks & Spencer make shares in Northern Foods an under- perform, according to BT Alex.Brown. Full year profits next week are forecast at pounds 92m compared top pounds 92.4m last time. Much will depend on a recovery at M&S and the payback on heavy capital expenditure but at 134p the outlook for the shares looks uncertain.