Winners and losers over 2001

Man Group; Next

The past 12 months have been a roller coaster ride for the UK stock market and there have been spectacular individual winners and losers along the way. Marconi came close to collapse, while Marks & Spencer staged a share price recovery that surprised virtually everybody.

The Independent's Investment Column had its fair share of successes and failures too. And we return to some of these today together with an updated recommendation.

Man Group is a company that came from nowhere during the course of 2001 and ended the year as a FTSE 100 star. The former commodities broker reinvented itself as a hedge fund manager and found itself beautifully in tune with the bear market. With the ability to short sell as well as offer a balance of bonds and currencies, Man found funds flowing into its coffers as fast as it disappeared from those of conventional fund managers. We recommended Man Group as a buy in July when the share were 924.6p and had already enjoyed a staggering run. That run continued taking the stock up to 1,335p in December.

With the shares now at 1,172p there is a strong argument for taking profits. The bull case is that the hedge fund market is tipped to continue growing with some analysts saying they could soon account for 5 per cent of the market. There is therefore headroom for further gains but the safest option is to lock in some profits.

We had mixed success with Vodafone. In January we said the shares were worth buying on the dips when they stood at 225p, which was then a 12-month low. Though we pointed out the exposure to a downturn and the questionable return on the 3G licence binge, we remained positive. Sadly the shares continued to fall hitting a low of 124p in the summer.

We returned to the stock in August saying the shares looked cheap at 128p. They have risen sharply since then and now stand at 177p. The outlook for mobiles is mixed with handset sales in the final quarter of 2001 expected to be just half the level of the previous year. And there remains a debate over how much mobile users are prepared to pay each month for added value services. Regulatory headaches also persist but Vodafone remains a quality company with a global collection of businesses. It is a long-term hold.

The same cannot be said of Marconi, which this column raised questions about last spring when the shares stood at 534p. Though Lord Simpson of Dunkeld, then chief executive, had just bought 133,000 shares at the time we pointed to the exposure to the weakening US market and emerging troubles at rivals such as Cisco and Lucent. The shares fell to just 13p in October. With Lord Simpson and John Mayo gone there has been some recovery to 41p. But, with some analysts saying debt needs to be halved, Marconi may struggle to devote sufficient resources to R&D to maintain its competitive position in the optical transmission market. The shares should still be avoided.

Retailing proved to be a much happier hunting ground last year and the sector was one of the best performers of the year as consumer spending remained buoyant. Electronics Boutique, the computer games specialist, was one of the biggest winners with a 180 per cent rise thanks to the success of the PlayStation 2 from Sony. We tipped the shares in January at 61p and again in April at 77.5p. They now stand at 135p and there is always an argument for profit taking after that sort of run. But investors may want to hang on a while longer. The cycle of new product launches is at a relatively early stage with the Microsoft X-Box and the Nintendo Gamecube due in the spring. The shares are still only valued on a forward multiple of 18, which is not expensive given the growth prospects. An aggressive price campaign from Dixons or Woolworths could upset the market but investors should hold on for the ride.

Next may be a different story. The fashion retailer has had a good start to the year but has been treading water since. We advised bargain hunters to look elsewhere in September when the shares stood at 860p. They bounced to 923p yesterday on expectations of a good trading statement, due on Tuesday. But Next stands to be one of the biggest losers from the Marks & Spencer recovery. Now could be a good time to sell.

One we managed to get wrong twice was Prudential. Our last recommendation was "avoid" in October on the grounds that the group's stellar growth in Asia may be coming to an end. The shares have recovered some ground since then as the market warmed to the restructuring of itsUK operation and the opportunities in the bulk annuities market. But fears persist that the group may blow the recovery on a big acquisition and we would still advise caution.