The Week In Review: Sweet music to the ears of investors

This will be the year that the irresistible force of UK consumer spending finally thumps into the immovable object of one trillion pounds of personal debt, so you probably don't want much of your investment portfolio in the retail sector.

This will be the year that the irresistible force of UK consumer spending finally thumps into the immovable object of one trillion pounds of personal debt, so you probably don't want much of your investment portfolio in the retail sector.

But you might want to keep a little in HMV shares. The company, which owns the eponymous record shops chain and also Waterstone's bookstores, sells relatively cheap items to people for whom books and music and movies are an important part of their lives. It ought to prove relatively resilient in any downturn, even more so this time because the DVD market is still new and growing fast.

Whatever happens, it has the cash to continue expanding the HMV chain by 25 a year from 200 now, while the performance of Waterstone's has also been turned around and can now be expanded. Plus it has the cash to fund a £50m share-buy-back programme.

We have said "buy" on four occasions since the flotation and, even though the shares are at a record, we think there is more to go for. Buy.

WOLSELEY

Bathtubs, pipes, tubes and bricks are all part of Wolseley's product range, which it sells to builders and plumbers. The group has been able to pass on the rises in raw-material prices to its customers, and its geographical spread across a number of economies means it is a solid, low-risk business. A core holding.

JD WETHERSPOON

People are drinking more, but because of the intense competition among high-street boozers, landlords practically have to give drink away these days. At the same time, JD Wetherspoon, in common with other chains, is battling with rising minimum wage, insurance and utility costs. Political momentum is also gathering for a levy on the pubs industry to fund "binge-drinking" policing costs. Sell.

SOPHEON

Sopheon's software helps multinational companies kill off their duff new product ideas before they spend too much money on them. It assimilates information on the product's market, and also ensures that different bits of an organisation are not duplicating development work. Disappointing recent sales growth ought to put off the cautious investor, but Sopheon isn't for them. This is high-risk, high-reward, and worth a punt.

GALLAHER

Tobacco firms must shift their focus to the East, as health campaigns and tax hikes in the West cut the numbers of us puffing our lives away. This will, however, be a slow process, and Gallaher, the company behind Silk Cut and Benson & Hedges, is going to be dominated by the West for a long time. The possibility of a takeover has sent the stock up by 16 per cent since we said "hold" last May, but the chances of a bidder paying a premium seem low. Quit.

GW PHARMACEUTICALS

This company's under-the-tongue cannabis-based spray is being considered by UK regulators as treatment for multiple sclerosis, and Canada will soon allow it on the market, pending trials which prove it is effective. But it is hard to imagine enough sales for Sativex to justify GW's current market valuation, let alone the price the shares are sure to jump to if approvals are forthcoming. Avoid.

ENTERTAINMENT RIGHTS

The intellectual property company behind children's characters such as Basil Brush, Postman Pat and The Tweenies, has also now found a partner to distribute DVDs of He-Man, the cartoon superhero, in the US. The company now has 1,800 hours of children's entertainment programming and cracking the US market is key for 2005. It has moved from being a gambler's stock to a serious investment proposition. Buy.

LEGAL & GENERAL

An exodus of customers from Standard Life, one of the industry's biggest players helped Legal & General turn 2004 into its best ever year. With more of us starting to worry about our pensions, there ought to be even better times ahead for the companies who will invest our money for us, and L&G is one of the best positioned to benefit. Buy.

INTER LINK FOODS

In the decade since it was set up, Inter Link Foods has successfully digested ten acquisitions and has grown from a small loss-making bakery in Blackburn to become Britain's third-largest cake supplier. It is now also pursuing growth opportunities in mainland Europe where it gained a foothold with a Polish acquisition in December. Like a good cake, the shares should continue to rise.

LUMINAR

The nightclub owner's takings are still going down and its venues need a great deal of refurbishment work if that is to be reversed. The money it will get for its up-for-sale non-branded venues must be reducing as sales there plunge at almost 9 per cent a year. Worse, the Government is promising to slap a levy on the bars and clubs to pay for the policing involved. Avoid.

Boots bucks the high-street trend

The great strides Boots had made to convince the City that it was a focused health and beauty retailer took a knock at Christmas when curiosities began creeping into core Boots the Chemists stores.

Amid the shampoos, lipsticks and novelty gift packs that are supposed to set its stores apart from the high street's general retail melée lay televisions, DVD players and even the odd Freeview box.

On top of knocking its credibility, this back-of-a-lorry approach to retailing highlighted just how far the likes of Boots had to go to capture sales over Christmas.

And it came after the company had already slashed prices to stop customers defecting to supermarkets and other, keener-priced competitors. The "lower prices you'll love" campaign boosted sales but hit profit margins.

But the quest to make Boots more modern, more competitive and more efficient is paying off. Unlike some of the historic retail chains which have fallen on hard times, there are still plenty of reasons to believe customers can be wooed back to Boots.

At least most of the stuff the chain sells is genuinely useful.

But Boots' Christmas shows it is having tactical, rather than strategic, success, and it left many analysts asking where it goes from here. With so much uncertainty over the retail sector, the shares look high enough for now. Hold.