Article date: 18 December 2001
The new millennium champagne quickly went flat for investors in2000, as a collapse in technology stocks and IT spending draggedthe market down. Surely things could only get better in 2001? Sadlynot. During the next nine months the global economy slumped,terrorists destroyed the World Trade Centre, the US mail system andgovernment were paralysed by anthrax attacks and the US and UK wentto war in Afghanistan.
Just about everything that could have gone wrong has done overthe last eighteen months, and in the process equity markets havegone from ludicrously expensive to cheap. With value returning andthe worst of the economic news hitting right now, we anticipate afar better year ahead for investors with our year-end FTSE 100target for 2002 at 6000.
With the US and Japanese economies in recession, the good newsis that the UK slowdown has been far less pronounced. We expect theUK economy to recover strongly in the second half of next year,helped by the Monetary Policy Committee’s (MPC) proactive useof monetary policy. History suggests equities should run 4-5 monthsahead of the economic news, and should perform well over the nextsix months as the markets anticipate improving fundamentals. Thedownside of the UK’s robustness and low rates is thatinterest rates will need to rise in the second half of 2002 as theglobal economy recovers.
One word of caution. Longer run concerns about over- capacity,weak consumer and corporate balance sheets and still low profitmargins remain largely unresolved by the shallow downturn we haveexperienced. These concerns should not prevent the market risingfurther but may mean it is better to travel than to arrive. Thesecond half of next year may well see a muted economic and profitsrecovery in America providing some disappointment for investors,but markets should make significant progress before then.
Our three stock picks for 2002 are:
2001 has been a miserable year for CMG with the stock not onlysignificantly under-performing the index, but also Logica, its mostobvious competitor. Whilst there is a risk of further profitdowngrades the company is taking action to cut costs. Additionallywith a new head of the wireless division and new product trials inthe second half of 2002 CMG looks well placed to benefit fromincreased demand for mobile services
Media was a big loser in 2001. Aegis is a small quality play in anindustry still consolidating. Top two shareholders own c. 25%.Geared to economic recovery, 2002 could be the year that somethingfinally happens.
NMT manufactures a patented world-leading safety syringe that isnow being successfully mass-produced by this Scottish-basedcompany. The US alone uses 7bn syringes per annum and NMT has abest of breed product to satisfy the requirements of the recentlyintroduced Needlestick Injury legislation. Even a small share ofthis market would make NMT an extremely profitable company.
For further information please contact:
Gay Collins Tel: 020 7786 4882 firstname.lastname@example.org
Caroline Deutsch Tel: 020 7786 4871 email@example.com
Notes to Editors:
- The opinions expressed are based on Morley FundManagement’s internal forecasts and should not be reliedupon as indicating any guarantee of return from a Morley FundManagement investment.
- Morley Fund Management (‘Morley’) is anindependently managed, London based, asset management businesswith over £100 billion under management. It has investmentmanagement operations in London, Tokyo and Singapore and anassociate office in Boston*.
- Morley is a wholly owned subsidiary of the CGNU Group andmanages both institutional and retail funds under the Morleybrand. It also acts as investment manager for a range of retailinvestment funds, marketed in the UK under the Norwich Unionbrand.
- CGU plc and Norwich Union plc merged on 30 May 2000 to createCGNU plc, the UK’s largest insurance group and one of thetop-five insurers in Europe with substantial positions in othermarkets around the world, making it the world’s seventhlargest insurer based on gross worldwide premiums.
*Norwich Union Investment Management, a CGNU Group company
Morley Fund Management is a business name of Morley FundManagement Limited, registered no. 1151805, 1 Poultry, London EC2R8EJ and Norwich Union Investment Management Limited, registered no.2152949, 8 Surrey Street, Norwich NR1 3NG. Both are CGNU Groupcompanies and are regulated by the Financial ServicesAuthority
The content of this document should not be construed as arecommendation to buy or sell stocks.