The FTSE 350 electronics sector has been whittled down to a meagre handful of companies over the years. But the UK's long-standing expertise in industrial electronics is well represented by the survivors, all bar one of which outperformed the wider FTSE 350 index in 2008.
As testament to the overall quality of the sector, two of the seven companies - and - were, in fact, tips of the year in 2008 and remain firmly on our buy list. Another, Renishaw, is a tip of the year this time round. All three companies are long-established players in highly specialised niches, and although they are exposed to the global slowdown in capital spending, all have engineered their business models to offer a degree of resilience when times get tough. They've also tended to invest heavily in research and development to ensure their products and processes remain one step ahead of their competitors.
Halma, for example, makes products such as building sensors, sales of which are driven by legislated health and safety requirements, and which generates high levels of repeat business as building owners are forced by law to upgrade. Halma's shares were the pick of the bunch, down just 4.5 per cent over the year, and the qualities that helped it to this respectable performance should see it do well in 2009, too, as investors continue to favour defensive investment opportunities.
Shares in solar power wafer manufacturer PV Crystalox Solar didn't do quite so well, scraping in just ahead of the wider index, but investors could have banked a 59 per cent gain if they'd closed their position when shares peaked at 200p in July. Interest in solar power and other renewable power sources may have waned throughout the year as fossil fuels suddenly got much cheaper, but the technology still has a very important role to play over the long term. With 20 years of experience, PV is one of the lowest cost producers in the business and will undoubtedly be at the forefront of the industry as it matures. Financially, PV is strong, too, with cash in the bank and high levels of contracted sales.
is another company we single out, once again because relentless investment in its products has made it a world leader in its field. Its devices are used in an ever growing range of industries, which now include highly defensive medical applications. And because the company is well established in every continent, it is relatively immune to weakness in any one geography. A high proportion of overseas earnings also means that the current weakness of sterling against other global currencies is providing a huge boost to the company's profitability.
SUMMARY OF THE SECTOR:
