Stocks to watch in December

Carnival Corporation

Giant cruise liner operator Carnival Corporation, whose brands include P&O, Cunard and Princess, looked set to have a disastrous 2012 when the year began with the sinking of its ship Costa Concordia.

Not surprisingly this cast a pall over prospects that had already been affected by global recession, the crisis in the eurozone, unrest in North Africa and worries over rising fuel prices.

In the end, though, the company's management has proved very nimble footed, cutting costs and expanding operations in new markets such as Japan and China. So profits will be down for the year to November - but the expected fall from £1,216 million to £923 million could have been a lot worse. Meanwhile, the shares have defied the bearish predictions of a number of brokers such as Panmure.

In contrast brokers Investec recommended the shares to clients back in June and suggested a target price of 3000p. At 2367p they are now not far short of the year's peak of 2376p and most analysts suggest Carnival's earnings will be back on a growth tack this year and next.

TUI Travel

The leading tour operator formed in 2007 from the merger of First Choice with the German TUI group - has done followers of this column proud in the past year. Recommended at 149.3p in this column in November last year, the shares recently hit 247.80p.

We said then that the shares were due for a bounceback after earlier weakness. The bounceback duly came and proved more vigorous than we expected.

Profits should more than double to £328 million when the trading bulletin comes out in early December.

The consensus forecast among analysts for the current year is for profits approaching £400 million. That puts the shares at 232p on a forward earnings multiple of 8.9 and a prospective yield of 5.2%. UBS recently raised its target price to 300p.

Brewin Dolphin

Tipped here at 119p a year ago, stockbroker Brewin Dolphin's shares had a strong run up to a peak of 177p by the end of March before falling back to 138p three months later. They have since recovered well and have lately been back near their earlier peak.

Profits due in December are expected to be of the order of £39.5 million (£21.9 million last time) and projections suggest the figures might top £45 million this year - a level not seen since the precrisis days of 2007. A yield of 4.3% provides further support for the shares.

Now close to their all-time peak, shares in RWS Holdings have also done well - rising from 460p to 560p at one point recently. In the nine years since the shares were listed at 112.5p this global patent and technical translations business has been one of the steadiest performers on the Alternative Investment Market.

Profits should be up from £15.6 million to £17.3 million when the results come out next month and forward projections by analysts suggest the figure could reach £18.8 million this year.


Victrex shares have also done well in the past year, rising from 1093p to a recent high of 1516p. The company makes tough plastics for electronics for cars, trains, planes, artificial hips and other medical devices. Chief executive David Hummell made clear in a trading update in early October that he believes the group can keep the growth momentum going by finding applications in new markets for its materials.

New capacity that could double output is now coming on stream. Upcoming profits, however, are expected to show little change on the previous total of £94 million. For the coming year brokers hope for a figure approaching £100 million.

CareTech Holdings

We highlighted the dire performance of the shares of CareTech Holdings a year ago. Aff ected by the troubles of rival care homes operator Southern Cross, CareTech shares had slumped from 465p two years earlier to a lowly 118.75p. We pointed out that the underlying growth performance of the company was at odds with the share price action.

A year later and the shares are back up to 167p with upcoming results expected to show profits reaching £16.7 million compared with £7.3 million last time. The shares yield 3.7% and still sell on only 6.4 times prospective earnings.

Alternative Networks

Bespoke telecommunications systems and solutions for more than 5,000 companies forms the bedrock of Alternative Networks' business, a company that came to Aim in 2005. So far the company has had only one small blip in its steady growth record, when profits slipped a little in 2009.

The dividend growth record has been maintained throughout, and for the year just ended profits are expected to surge to a record £14.22 million against £9.36 million previously, while analysts expect £15.4 million for the current year.

The shares now sell on 9.4 times prospective earnings and the forward yield is an attractive 5.4%.

This article was written for our sister publication Money Observer.