Last year not only marked the top of the private equity bubble, when it seemed that the whole of the FTSE 250 had a for sale sign hoist above its company HQ, but it now looks as if 2007 will also be remembered for when the four-year bull market in equities came to an abrupt end.
The fact that the FTSE 100 held up well relative to the mid-caps – the blue chip index rose by 3.8 per cent in 2007 versus a 4.6 per cent decline in the FTSE 250 index – owes everything to the bumper returns from the mining sector. In fact, the FTSE 350 miners surged by 50 per cent over the course of 2007. Add to that stellar returns from the oil & gas sectors, mobile telecoms and defensive tobacco giants, and 2007 is likely to be remembered, too, for the moment when the underperforming mega caps started their period of catch up. This trend appears to have continued into 2008 with the mid caps plunging by 9 per cent in the first eight trading days of the new year – double the loss on the FTSE 100. Worries about a consumer slowdown on both sides of the pond, and the fall-out from the credit crunch, have dealt a savage blow to anything interest rate sensitive/cyclical.
What’s more, until economic news points towards a soft landing on both sides of the Atlantic, investors are likely to remain very cautious which gives clear scope for further falls in hyper -sensitive equity markets. True, the market does not look expensive trading historically on around 12 times earnings, but with growing evidence that the ‘e’ in the PE ratio will come under increased pressure, expect this caution to be a feature for most of the first half of 2008.
However, despite the doom and gloom – the FTSE 250 index officially entered bear market territory in the second week of January having fallen over 20 per cent from its all-time high of 12,282 reached in May 2007 – there are selective opportunities emerging for investors willing to take a long-term view. For instance, the real estate sector – having plunged almost 40 per cent in 2007 – is now discounting some savage falls in commercial property prices. In some cases, where lowly-geared property companies trade on historic 40 per cent discounts to net asset value, their property books would have to drop by almost 25 per cent to erase these discounts altogether. And the dividend yields on the housebuilding sector – ranging from 8 to 12 per cent at the low point of the sell off last week – either implies that cuts are on their way, or that investor risk aversion has gone too far in some cases.
So, to help spot the winners in the year ahead, we have provided key data on all of the FTSE 350 constituents (share price, market value, PE ratio, dividend yield, and the Investors Chronicle's most recently published recommendation on each company).
You can access the individual sector outlooks using the links at the foot of this page. You'll need to be an IC online registered user to read these (you can register FREE here). We'll be adding new pages every day up to and including next Thursday. Alternatively, you can get the whole lot now by picking up a copy of the 18 Jan issue of Investors Chronicle at your local newsagent.
A couple of notes on the data:
• the shares prices in the table are not dynamic. Live share prices (with a 15-minute delay) are always available from the IC's data pages; just use the search box at the top of the page.
• the sector classifications used are the 'old' ones. In many cases, they are the same as the current ones, but there are some differences; telecoms is now split into fixed-line and mobile telecoms, while housebuilders now fall into household goods, rather than being included with construction.
