The FTSE 100 has now been rising steadily for three years, and although we'd be nervous predicting that nothing will go wrong this year, most analysts have no such qualms.
The consensus opinion is that it will rise another 7% or so this year, and the bulls over at Shares magazine even think this is conservative given the index's "undemanding" p/e of 14.1 times. The question for the bullish, then, is which of the stocks on offer to put their money into.
Both Shares and Investors Chronicle have conducted a review of the index, and eight firms have had the honour of being rated buy' by both of them. The prices of some have risen significantly since the publication of the recommendations, so the number we think both would still agree on is now just three: the Royal Bank of Scotland (RBS, £17.33), GlaxoSmithKline (GSK, £14.26) and BT (BT/A, 207p).
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RBS offers "class" management, says Shares, and, after a string of acquisitions, it is now less exposed to the UK retail banking market than others in the sector. Its shares are "absurdly" undervalued on a p/e of 9.6 times and a yield 4.4% with a share buyback "on the cards".
Glaxo's drugs pipeline has improved in recent months (it has the cervical cancer vaccine, Cervarix, for example), and the shares trade on a multiple of 16.4 times earnings and offer earnings-per-share growth of 8.6%, with a yield of 3.2%.
Finally, says Shares, despite the gloomy predictions, BT's management is "well used" to weathering competition in the UK telecoms market; new services, such as mobiles and broadband, now account for 30% of (albeit lower-margin) revenues, but its "strong residential base and TV-over-broadband paint a good story". BT trades on an 11 times multiple with a 5.7% yield.
No companies are rated a sell by both magazines, but those who enjoy an arbitrage opportunity might be interested in firms where there is a definite difference of opinion: four companies were rated buy' by one, but sell' by the other. They were Capita (CPI, 426p), Morrison (MRW, 190p), Gallaher (GLH, 848p) and Land Securities (LAND, £16.32).
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