Two Irish companies are among Standard Life's top picks for this year, although the Irish market as a whole has lost some of its attraction, according to Stan Pearson, the group's head of European equities.
Drinks group C&C, whose share price more than doubled last year on the back of strong demand for its cider brand, and Kingspan, the building materials group currently benefiting from substantial growth in the housing market, both remain good bets for 2007, according to Mr Pearson. Kingspan stock also doubled in value last year.
"We believe cider penetration in the UK is still underestimated," said Mr Pearson, pointing out that not only has the company had success in the domestic Irish market with its Bulmers cider brand, but that market penetration in Scotland has also been significant. Recent market share statistics from AC Nielsen show that C&C's Magners cider brand, as it is known in the UK, had a 2.4 per cent share of the long alcoholic drinks market in the region in September, though commentators believe the real figure is higher.
C&C recorded a 66 per cent increase in profits in the first half, a gain the group attributed to strong take-up of its cider brand.
Kingspan, meanwhile, operates in several niches that are all growing areas, according to Mr Pearson.
As a result he believes the company has significant potential for growth in 2007.
"They are bringing modern manufacturing technology to house construction," he said, adding that the recent focus on environmental concerns and in particular the introduction of tax incentives for energy efficient housing in the UK would greatly enhance the company's activities.
"We see the overall demand for housing construction in the UK remaining strong, and someone like Kingspan will help meet that demand," he said.
Kingspan last month released a very positive trading update for 2006, saying that its operating profit would grow by about 33 per cent, helped by a particularly strong performance in its insulated panels business. This business in particular is benefiting from the trend for energy efficient housing.
Mr Pearson said that while he was optimistic about growth at these two companies, he was less enthusiastic about the Irish market as a whole. "We are not expecting a precipitous collapse, but we are less enthusiastic than we have been in the past," he said.
The Iseq rose 28 per cent in 2006, adding about €24 billion to the value of Irish shares. This compares with an 11 per cent gain in the FTSE.
"Ireland is a great story, but everyone knows about it now so the positives are priced in," he said, adding that there were some local issues such as infrastructure problems that weren't reflected in share prices and that may affect the Irish market in the future.
According to Mr Pearson, following a very good 2006, the Irish banks, which rose on average 25 per cent last year, are now more vulnerable than other sectors, and much better value can currently be found in the Greek and Turkish banking sectors.
He believes that while Ireland has seen phenomenal success compared with other parts of Europe in recent years, the time has now come to either look further afield or to focus on some of the new, smaller growth companies coming through. This, he believes, is the way Ireland can remain attractive to investors.
