The Investment Column: Aegis offers long-term growth

Time to take property profits in Brixton - Wellington might be worth a look at this price

Aegis is a share for the cynics among you.

Aegis is a share for the cynics among you.

Because products from different companies are all pretty much the same, it is the skill of a company's marketing message that may persuade a consumer to choose one toothpaste, beer or whatever over another.

This base fact means that marketing becomes inexorably a more sophisticated process, requiring the sort of specialist services that Aegis can offer. Companies require a wider range of marketing services, such as in-store promotions and direct mail, rather than just the traditional placing of ads in papers and television.

Aegis offers clients the big advantage of independent advice. Unlike integrated rivals, it does not have in-house agencies that actually make ads. The company plans and buys advertising space on behalf of corporate clients including Renault and Cadbury, and it is winning more and more new business.

Also, as clients need to come to an ever more complex understanding of consumer behaviour, Aegis can offer further help, for instance through its consumer psychology research.

So advertising is generally an expanding industry, despite the few duff years we have seen recently. Aegis says ad spend is growing again pretty strongly in most countries.

For a number of reasons, Aegis is better placed than bigger rivals to benefit from the recovery. It is growing fast, according to its chief executive Doug Flynn, because it does not mess around with big acquisitions. The alternative - bolt-on purchases and investment in its existing network - does seem to have paid off. Pre-tax profit, before exceptionals, was up 18 per cent in the first half of the year, at £36.4m.

In addition, Aegis is focused mainly on Europe, so as the advertising upturn takes hold here (it has lagged the US and Asian recoveries), the company will benefit proportionately more than the big boys. The shares, at 92.75p, may not be obviously cheap on a forward multiple of 17, but are worth buying for the long term.

Time to take property profits in Brixton

You don't have to invest in BAA, the airports operator, or its building contractors to get exposure to the great riches that the new Heathrow Terminal Five are promising. You could invest in Brixton, the property company which owns great swaths of industrial estate around the growing airport in west London.

As a long-term story there is lots going for Brixton, including the prospect of conversion to investment trust status when the Government and the property industry agree tax terms.

Yet those who already own the share might want to follow the example of some investors yesterday and take a little of their recent profits. The stock fell 4 per cent to 309p after Tim Wheeler, the chief executive, told investors: "While we remain positive about letting prospects, we believe that investment market expectations may be running a little ahead of themselves." Debt-funded property speculators could disappear now that property values have risen strongly and as interest rates are jacked up, he says.

Terms for conversion to investment trust status, which ought to narrow the discount to net asset value at which property companies trade, might not be as uniformly positive as the market is hoping, too. And, with 40 per cent of Brixton's property being distribution warehouses, a fall-off in consumer spending might mean less product to distribute and, consequently, rising vacancies.

We could only manage a "hold" recommendation last year, and the shares are up 30 per cent since then. Sell a few at this point.

Wellington might be worth a look at this price

The US hurricane season has been just bad enough to be good.

After months when investors have fretted over falling insurance premiums, Wellington Underwriting's chief executive, Julian Avery, says that the relatively severe impact of Charley and Frances had scared people into paying higher premiums - without being so severe as to hinder the profitability of the insurance industry.

And what profitability. Yesterday, Wellington turned in an impressive set of results, increasing profits by one-third and tripling its interim dividend.

Investors' fears are about the months ahead, of course, and it appears we are at the start of the long-anticipated downturn in the sector. However, the doomsayers have gotten ahead of themselves. Premiums are more likely to decline gently than precipitously, and won't even start to filter through to bottom lines until well into the new year.

Last time this column looked at Wellington, a little more than a year ago, it was on a price to earnings ratio of 9, and we recommended a buy. With the price now some 6 per cent lower at 86p, the stock looks incredibly cheap at 8.5 times next year's earnings. With a renewed commitment to pay a 3p dividend this year, and 4p next, this is still well worth a look for the short to medium term investor.