Sunday press tips: Avocet, FirstGroup, Sage, perpetual bonds

3rd Oct 2010 14:15

Gold is an essential part of any portfolio, suggests the Sunday Telegraph's Questor, but the best time to buy the metal itself is when the price has dipped, which is clearly not the case at the moment. In Questor's view the best way to play gold at the moment is to buy gold companies that are increasing production, and has highlighted Avocet Mining, which has gold assets in West Africa and South-East Asia, as a case in point. Last week, Avocet announced a 25% increase in gold reserves at the Inata mine, which has extended the life of the asset to eight years. The figures indicated that there are 1.1m ounces of gold. Even after recent share price gains following the positive statements, Avocet shares are only trading on a December 2010 earnings multiple of 18.7, falling to 12.5 in 2011. Buy, says the Telegraph. Rail and bus company Firstgroup gave a reassuring update on trading last week and the share jumped more than 6% immediately after the news, notes the Sunday Times.The shares are still yielding 6.1%, however, making this a very attractive for income seekers.The shares are trading on a March 2011 earnings multiple of 8.8 times falling to 8 next year. The prospective yield this year is 6.1%, rising to 6.5% in the year to March 2012. The shares are a buy for income, says the Times. The London Stock Exchange added 65 names last week to its fledgling retail bond market, which means that individual investors can buy bonds in 89 companies. Many of these bonds have been issued by household names, such as FirstGroup, Legal & General, Rolls-Royce and United Utilities. The Exchange has also added new types of issue - subordinated bonds and callable bonds. Companies issuing these bonds include Anglian Water, Aviva, the Co-op, HSBC and Nationwide building society.The Mail on Sunday reckons that perpetual bonds should be off limits to all but the most sophisticated investors, even if they can be repaid early. Subordinated bonds are also a little risky but their coupons can be attractive - Lloyds being a case in point - though it is important to gather enough information before investing serious money. More conservative investors may choose something more standard. Many of the bonds on the Stock Exchange are very highly priced but one looks slightly fairer value - engineer GKN - paying a coupon of 6.75 per cent, maturing in 2019 and priced at 102p. Worth a closer look, the Mail on Sunday reckons.The Sunday Times thinks patience with safe and dependable accountancy software firm Sage is wearing thin, and new boss Guy Berruyer will see the need to 'inject some zing.'The market has been putting Sage in the frame as a takeover target, with SAP or Microsoft mentioned as potential buyers, but The Sunday Times is not convinced a bid will materialise. In fact, the newspaper thinks the firm should be active in the mergers & acquisitions market itself, possibly selling off its healthcare business, valued at £0.5bn, to give it the necessary firepower.