Companies: BSS    BTSM    ETR    TXR   

Arbuthnot believes the consensus forecast for UK economic growth in 2006 ‘looks pessimistic’ and expects four factors to force these predictions to be upgraded. ‘The slump in consumer spending will level off; public spending will continue to drive the economy; business investment will pick up markedly and net trade, having been a drag on the economy for two years, should turn positive in 2006.’

Having sketched out the macroeconomic factors behind the economy’s better-than-expected growth, the broker highlights a slew of ‘key stocks’ that could benefit from the envisaged acceleration in corporate earnings.

Among them is plumbing and heating materials distributor BSS. It is ‘well positioned to benefit from exposure to social housing, health and education spend’. The company is ‘significantly undervalued relative to its peers’. Similarly cheap is Enterprise, operating in a related field. It has just won a significant housing maintenance contract from the MoD.

Arbuthnot remains keen on the soaring mining sector and chooses client Titanium Resources Group as ‘a low-risk play’. The company aims to re-commission two mines in Sierra Leone with proven deposits, where activities were suspended because of the country’s civil war. With peace returning, revenues should start to flow this year.

Finally BETonSPORTS is expanding in the Far East and away from its over-reliance on the US market. The shares have been weak because of fears it may be hit by poor American Football results this season but ‘its leading position means it could be a bid target for a larger operator.’