Standard Life Investments is favouring transport stocks including bus companies with diversified tra...
Standard Life Investments is favouring transport stocks including bus companies with diversified transport exposure in its UK portfolios.
Amanda Forsyth, investment director at the group, favours companies including National Express, which she says is running the Scotrail train franchise successfully. The company also runs the Gatwick Express, Midland Mainline and Central Trains franchises and Forsyth adds that the group could be in line to pick up further franchises. National Express has seen its share price rise by 10.35% in the 12 months between 7 January 2000 and 8 January 2001 and the stock is on a P/E of 13 times.
But Forsyth added that bus companies have tended to be hit by high fuel prices as well as higher employee costs - with the UK economy relatively buoyant it has been difficult for bus companies in general to attract and retain drivers while passenger growth has also been fairly flat.
Forsyth says: "We hold National Express as it has not put a foot wrong in UK rail. Although some are talking about people being scared off using trains in the wake of the Hatfield disaster, I think rail companies will be able to encourage people back on to the trains again with effective marketing strategies."
BWD Rensburg also holds National Express, and Colin Morton, UK fund manager at the group, points out that National Express has exposure to running school bus services in the US which provides it with a steady stream of income.
Standard Life Investments also holds British Airways which Forsyth says is increasing its focus on shareholder value. British Airways is on a P/E of 16.74 times and saw its share price fall by 0.18% in the 12 months to 8 January 2001.
She says: "Historically, airlines have destroyed shareholder value - what we may be seeing is British Airways changing that and adding to and creating shareholder value by trying to make sure that everything that they do is creating value or contributing to this."
Internal research by British Airways has found that short-haul economy flights are relatively uneconomic compared to more premium rated flights and the firm is looking to focus more on the more profitable fares for example, corporate business.
Standard Life Investments also holds car hire firm Avis Europe which has seen the sterling value of its profits generated on the Continent hit by the weak euro since the launch of the currency. But Forsyth adds that the group is set to benefit going forward from a strengthening euro which will increase the sterling value of profits generated in euros. The euro has risen by 13% against the dollar since the end of November last year and as of 8 January was trading at 0.95 to the dollar. Avis Europe's shares have risen by 1.4% in the 12 months to 8 January 2001 and the stock is on a P/E of 15.2 times.
Morton has also looked at investing in Railtrack, which has been hit by poor sentiment towards the stock since the Hatfield train crash last year. He does not currently hold the stock but added that once the rail network is running normally again he may look to invest.
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