Five strategies to keep you ahead of the game in 2010

Ladbrokes has a new chairman in Peter Erskine, and more recently a new chief executive, Richard Glynn. This turnaround is at an earlier stage and it will take time for management actions to translate into improved corporate performance, but nonetheless we see several relatively easy wins, for instance in improving the online offering.

The shares have tracked sideways so far this year as investors remain concerned about the current consumer environment and about potential changes to gaming taxation in the forthcoming emergency budget. Despite these headwinds, we see good potential for recovery.

Fourth, I suggested buying merger and acquisition (M&A) targets. Corporate activity typically lags moves in the stock market by about six months and at the start of the year we were already seeing signs of a resurgence, with Kraft’s bid for Cadbury’s being the most obvious example.

M&A activity has continued to pick up as the year has progressed and I certainly expect this to continue. The key to identifying likely M&A targets is to spot companies with strategic, often unique market positions or assets, operating in industries where there is a strong business and financial rationale for consolidation to happen. Although none of my suggested targets have succumbed to bids, I still feel that the likes of BG Group, Anglo American and Cobham display these characteristics.

Finally, I suggested taking another look at the unfashionable and unloved deep value asset plays. My argument was that the market doesn’t ignore value for ever so we should not worry too much about finding catalysts for performance. One of the suggested investments, Catlin Group, the non-life insurer, is now seeing an improving outlook and as a result investors are reappraising the investment case. As an aside, this is another sector that has seen signs of corporate activity returning.

In this more challenging environment, the winners will be the fund managers with proven track records of successfully picking stocks who can demonstrate how their own competitive advantage, such as superior corporate access, can be married with a process that has fundamental company analysis at its heart.