Goodbody Stockbrokers expects this year to be another positive year for equities but warns that the upside potential will be more modest than in recent years.
In a newsletter to private clients, the brokers forecasts a volatile year for equities. But it advises clients to buy into market dips. The brokers suggested six international stocks which may appeal to investors: IBM, MCI/ WorldCom, Vivendi, Great Universal Stores, Berkshire Hathaway and Associated British Foods.
In the Irish market it forecasts recovery for both AIB and Bank of Ireland, recommending the latter more strongly because of its current significant discount to international peers. Elan is expected to recover from negative investor sentiment, while some of the smaller Irish equities are considered undervalued. In this category Goodbody places Golden Vale and the Kingspan Group and Waterford Wedgwood as well as Northern Ireland-based pharmaceutical company, Galen.
On the international shares suggested, while IBM's price earnings multiple at 26 times was close to its historic high levels (at the time the briefing note was produced), the broker feels they will benefit further from the rapid growth in e-commerce, internal cost savings and share repurchases.
MCI/WorldCom is expected to benefit because of its "first mover" status in many of its markets in the fast-growing telecoms sector and because of its low cost structure.
Shares in French conglomerate Vivendi should benefit from moves to refocus on two core businesses - utilities and communications. Close to its six-year low, the Great Universal Stores share price is seen as inexpensive and is on a substantial discount to the UK market.
Berkshire Hathaway, the holding company of legendary investor Warren Buffett, is expected to have opportunities to capitalise on attractive investment opportunities because of its strong cash position. It is recommended to investors with a long-term horizon.
Associated British Foods under-performed the market in 1999 by 47 per cent, reflecting poor performances in a number of its core businesses as well as negative investor sentiment towards the food sector. But management's dual strategy of consolidation of mature businesses and direct investment in growth areas is expected to make the shares a good bet for investors looking for defensive characteristics.
