Shares to buy, hold and sell

Easily the most spectacular set of results in March will come from Tullow Oil (TLW).

Analysts forecast that pre-tax profits will surge from £97 million to £752 million. The figures will reflect higher oil production and much higher prices - up an average of 45% on a year earlier. The group is expected to make profits of around £850 million this year.

Tullow has a track record of discovery off West Africa second to none, and two-thirds of its production now comes from the continent, where it claims to be the largest independent oil group. It is now expanding across the globe and has recently made encouraging discoveries in South America.

Its shares dipped with last summer's market malaise but are back close to their all-time peak. They have risen fivefold in the past five years and still look excellent long-term value, selling on 24.5 times prospective earnings.

Tullow's chief financial officer, Ian Springett, talked to Interactive Investor about the firm's spectacular year. Read: View from the top: Tullow Oil interview, for more.

House builder Taylor Wimpey (TW.) should celebrate a return to profits in March after four years of losses. Profits look like coming in at £90 million for the year just ended, compared with a £71 million loss last time. There is even the prospect of a modest 0.7p dividend - the first payment to shareholders since 2007.

The shares have recovered steadily from the low point in late 2008 of 11p to reach 37.5p but remain a long way from their all-time peak of 500p in 2007. Brokers believe the steady recovery can continue and expect profits of £136 million this year. Panmure Gordon targets the share price to hit 50p.

Few companies symbolise better the renaissance now going on in UK manufacturing than the remarkably successful Glasgow-based pumps and valves engineer Weir Group (WEIR). At the bottom of the bear market in December 2008 the shares were languishing at 328p. They now change hands at more than 2,000p.

Weir's revenues, profits, earnings and dividends have grown steadily as it has expanded its operations across the globe in a wider range of industries. The key drivers have been the oil and gas industry, mining and power generation. Its operations now reach 70 countries.

Profits for the year just ended are expected to reach £382 million (£277 million last time) and the projections for this year and next are for £454 million and £505 million of profits respectively.

These forecasts suggest the shares are still good value. Despite their strong performance, they still sell on only 12.7 times expected earnings for 2013. The majority of brokers who follow the stock still rate them a strong 'buy'.

Shares in Yule Catto (YULC), a world leader in polymer chemicals, went on a spectacular run from below 50p in early 2009 to a 253p peak last summer. The profit-takers moved in as the market went sour in the summer, but lately the shares have found support and look good value on the market's encouraging growth projections.

Profits for the year just ended are likely to hit £87.6 million, compared with £57.8 million last time, and the forecasts from brokers suggest that this year profits could top the £100 million mark or even hit £114 million in 2013. Such forecasts bring the forward earnings multiple down to just 6.56.

This cautious rating reflects doubts about Yule Catto's ability to ride out another global economic downturn. Shareholders suffered last time when the dividend had to be slashed and then dropped altogether. Even so, the shares now have a strong supporters' club among brokers.

If the market's forecasts are correct, profits at Advanced Medical Solutions (AMS) are set to treble over three years. Results due in March from this specialist in wound-care technology are expected to show pre-tax returns leaping from £4.3 million to £6.4 million. They are then forecast to hit £10.6 million this year and £12.72 million next.

The shares have recovered well since early December and at 92p now sell on 16 times forecast earnings for 2013.

Chime Communications (CHW), the international public relations group better known as Bell Pottinger, has an impressive track record. Profits have grown steadily through difficult times from £11 million in 2006 to £21 million in 2010.

For 2011 the expectation is that the group will achieve a pre-tax return of £31.3 million and that returns will rise steadily over the next two years.

Dividends - a mere 0.58p a share in 2006 - are forecast to reach 8.09p for 2013. That implies a yield of 4.5%, which, coupled with the forward earnings multiple of only 6.4, suggests the shares are undervalued. They were just 50p at the bottom of the last bear market, touched 300p last summer and now change hands at 171p.

Dramatic profits growth is also in prospect over the next couple of years for SOCO International (SIA), the oil explorer, where profits for 2011 are expected to surge from £19.7 million to £113.7 million.

Soco's discoveries in Vietnam have set it on a growth path, and hopes are high that these will be followed by finds in the Democratic Republic of Congo.

Even more gushing results are in the pipeline for 2012 and 2013, according to City forecasters. They say profits should reach £308 million this year and £400 million next. The shares reached a peak of 400p last year and are now down below 300p, where they sell on just five times expected earnings for 2013.

Spotlight on high street baker Greggs

Cake and snack retailer Greggs (GRG) struggles these days to rekindle the growth formula of the past, when it rolled out new shops across the nation as fast as a chef rolls out pastry. But some analysts are convinced the company will expand steadily over the next couple of years.

Profits for the year just ended are expected to reach £54 million - just £1.5 million up on the previous year. But forecasts for the current year are more encouraging. Profits are expected to reach £57 million this year and just over £62 million next.

Nothing spectacular perhaps, but the shares - at 506p - now sell on a prospective yield of 4.4%.

Meanwhile, management retains ambitious growth plans. The company plans to add a further 500 shops to the existing network of 1,500 outlets across the country "over the next few years".

One venture now being tried is a franchise with Moto, the leading motorway service station operator. There is no sign yet, then, that Greggs's particular fast food formula has run out of steam.

Review and outlook: companies featured last year

We featured three re-rated engineers in this column a year ago: GKN, IMI and Melrose.

GKN (GKN) made a spectacular return to profit in 2010. The 2011 results out at the end of this month should show pre-tax returns up from £345 million to £402 million. Analysts expect a figure of £467 million for the current year. The shares - 222.2p a year ago - are down to 190p from a peak of 245p. But they look good value on a prospective yield of 4.6%.

IMI (IMI), a specialist in fluid control systems, could not buck the market trend either. The shares rose from 945p a year ago to a peak of 1,119p in July but have slipped back to 760p. Profits surged from £186 million to £306 million in 2010 and should reach £353.3 million for 2011.

Modest growth to £361 million is on the cards for this year. Again, the shares hardly look expensive on a forward yield of 4.5% and are selling on 9.3 times earnings.

Melrose (MRO) shares showed a healthy gain over the year. Tipped at 311p, the shares now change hands at 340p, having hit a July peak of 373p. On top of that, shareholders received 75p a share when the company sold its Dynacast offshoot.

Profits for 2011 should be up from £155 million to £162.5 million. Profits of £168 million are forecast for 2012. Dividends have more than doubled in the past five years and the prospective yield is now 4.1%.

Back in March 2010 this column suggested First Quantum Minerals (FQM) was a "mining giant in the making". The shares performed spectacularly until August, rising from the equivalent of 1,380p to a peak of 1,863p before plunging back to just 778p under the combined pressure of weaker copper prices and disputes over Congo mines.

The shares have since recovered strongly. Early in January the company settled its dispute with Kazakh miner Eurasian Natural Resources (ENRC) in a deal worth £1 billion. Profits for 2011 should reach £846 million, compared with £281 million last time. The current year might produce £1,270 million, according to analysts.

Motor dealer Lookers (LOOK) turned down a 70p a share bid from its largest shareholder Trefik last year. With the shares now trading at 50.75p, some holders may regret that decision. But shares are now yielding 5.1% and prospects are good for steady profits growth this year.

The hoped-for return to growth at hand-held computer firm Psion (PON) failed to materialise last year. But after racking up losses of £2.84 million in the first half, because of component supply problems, the group is at least back in the black.

Profits for the full year are expected to be down from £5.68 million to £2.7 million. Analysts hope the profits will bounce to £6.78 million this year. The shares, down from 95p a year ago to a lowly 44p, sell on a fat 9.5% yield.

Because Psion has disappointed so often in the past, the rating is cautious.

Within a couple of months of our tipping the shares at 198p as "a tiddler to watch", Ideal Shopping Direct, the only quoted TV shopping company, accepted a £78 million bid from private equity firm Inflexion worth 220p a share.

Raven Russia (RUS), the property outfit with interests in warehouses in Moscow and St Petersburg, is expected to announce a small loss with its 2011 results next month.

But analysts are confident profits will top £20 million this year, while dividend increases will boost the yield to 4.3%. The shares, mentioned here a year ago at 62p, now change hands at 52p, having earlier topped the 70p mark.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.