Amvescap a buy for bottom fishers

Although we are not proud of the third-quarter figures – Charles Brady, the executive chairman of the fund management group Amvescap, said yesterday – they are better than many people thought. There's nothing about this declining market that changes the need for people to put money aside for their retirement. If anything, it should increase the demand for our services.

His is a fair assessment. The company and its shares have had a torrid time since the start of the bear market and the swift collapse of private investor interest in the stock market. Even after yesterday's bounce, they are down nigh on 80 per cent since their peak.

True, yesterday's third-quarter results were awful by any yardstick. Pre-tax profits in the three months to 30 September were down by almost 28 per cent to £33.9m. The total value of the funds that Amvescap manages withered over the three months by 14 per cent, partly because withdrawals from its funds outstripped new business, but mainly because – as Mr Brady put it – the markets simply tanked. The size of the funds under management is important because Amvescap takes a percentage in fees. What is also important is the mix of assets in which its customers are investing. Because equities fell to 50 per cent of the total funds from about 55 per cent, and cheaper bond funds rose in popularity, Amvescap's margins are under pressure.

All this said, the company has cut costs, will cut more, and stands ready to benefit in a big way from any market rebound. If you snort with derision at the idea that there will be a substantial market rebound any time soon, then Amvescap shares are not for you. But if you agree with Mr Brady that a bottom is close, then Amvescap shares could be a lucrative way of placing your bet.

The shares are cheaper than their rivals and the group's balance sheet is more robust than many. The prudent investor may wait until clear signs that the market has turned, but Amvescap shares are now worth holding at least.

Jurys Doyle shows its defensive qualities

Most hotel company shares are notorious for going up and down with the economic cycle, which explains why investors checked out en masse over the summer. Against a backdrop of growing calls for war with Iraq from US President George Bush, anxiety over the possibility of more terrorist attacks and fears of a double-dip recession, business from air travellers remained subdued.

Jurys Doyle, Ireland's largest hotelier, duly suffered, and its share price plummeted. The good news, though, is that not all of Jurys' hotels are as dependent on business travel and consumer confidence as its four and five-star properties.

In Jurys Inn, the group has a strong no-frills brand that sits at the top of the three-star market. Modelled on Marriott's Courtyard brand, these city-centre hotels keep margins high and room rates low by cutting back on frills such as room service and hotel porters.

The group has five Jurys Inns in Ireland and six in the UK, but will have added 1,000 more rooms by early 2004, with new properties in Newcastle upon Tyne, Glasgow, Leeds and south-west London. A total of 25 Inns in the UK are slated to have opened by 2007. The Inns already contribute about 40 per cent of group operating profit; this is forecast to grow to nearer 60 per cent by 2004.

In a trading update yesterday, the group confirmed that the profit trend was up, promising single-digit percentage growth for the six months to end of October. This reflects the defensive properties of the Inns brand, which should support Jurys even if the economy takes a turn for the worse. Pat McCann, the chief executive, was candid about the prospects for his smarter hotels, such as the five-star Westbury and Berkley Court in Dublin, ruling out a recovery before 2004.

The shares, unchanged yesterday at 420p, are undervalued against their European peers and, while there will probably be better times to buy, they are a solid hold.

Power surges make Chloride too unpredictable

If only Chloride could invent something that does for the business cycle what its products do for power systems: smooth out surges and ensure an uninterrupted supply.

The company has suffered a thumping hangover from a surge in capital investment in the tech and telecoms industries around the turn of the millennium. It has had to slash its workforce, close factories, transfer manufacture to cheaper locales, and generally trim all the fat and more out of the business.

But now...? Things seem to be back in balance again, and pre-tax profits for the half year to 30 September were £1.4m, compared with a £4.5m loss in the same period last year. Chloride held its interim dividend and, assuming it does the same for the full year, will have a dividend yield of 5 per cent.

The best thing to come out of all the recent turmoil is the company's increasing focus on high-margin service contracts (constantly monitoring customers' power systems, rather than simply turning up occasionally to repair them).

The risk is that the global economy wrongfoots management again. Yesterday, it predicted a flat second half, but with manufacturing confidence having taken a turn for the worse, the prospects for next year are really not clear.

The shares, up 1.5p to 32.5p, are on a toppy-looking multiple of 17 times this year's forecast earnings. That's too high.