Cutting carbon emissions will cost households £530 a year, says the Committee
on Climate Change, but increased funding for green technology and other
sectors could offer a silver lining for investors.
The FTSE 100 fell after the budget and closed the week up 1.5% at 4,156.
Investment experts are turning increasingly bullish, however, on areas
likely to benefit from extra government funding — green energy, housing and
the automotive industry. Many stocks in these sectors have done badly over
the past 12 months but now look cheap.
We offer some stock tips:
A scrapping scheme to give £2,000 toward a new car to owners of vehicles older
than 10 years has boosted investor interest in the motor industry. Inchcape
entered stockbroker TD Waterhouse’s top 10 buys last week and the dealer’s
share price rose from 16p to 18.8p since the budget announcement.
Electric car development is also likely to get a boost after the government
said it would introduce a £5,000 incentive for buyers of eco cars in 2011.
Firms that develop car batteries — which account for nearly half the price
of an electric car — could be a good bet.
Simon Webber, manager of the Schroder Global Climate Change fund, likes the
French firm Saft, which recently signed a contract with Ford to produce
BYD, a Hong Kong battery manufacturer, is also a big player in this area. It
produces electric cars for China and plans to target the US market. Warren
Buffett, one of the world’s most successful investors, bought a stake in BYD
late last year.
With government plans to invest £525m in renewable power — providing a boost
for firms involved in clean energy — Webber favours wind turbine makers such
as Vestas in Denmark and Gamesa of Spain, which is part of Iberdrola, one of
the world’s top energy firms.
Chancellor Alistair Darling also gave £435m toward supporting energy
efficiency in businesses, public buildings and households. Seb Beloe, head
of socially responsible investment at fund manager Henderson, said Kingspan
and SIG, based in the UK and Ireland respectively, are well placed to
benefit from this — being leaders in insulation products.
He also likes Bglobal, another UK-based firm, which produces smart meters that
help businesses and households to monitor their energy usage. It has signed
agreements with British Gas, Npower and Scottish & Southern Energy.
Webber thinks video conferencing technology will benefit and likes Tandberg, a
Norwegian firm and Cisco in the US.
David Miliband, the energy and climate change secretary, said last week that
up to four “clean” coal testing plants would be built to trap C02 emissions
and bury them underground.
National Grid, which maintains Britain’s electricity and gas pipelines, stands
to benefit. It could convert gas pipelines to carry C02 in four years.
Terminals in Scotland and Teesside have been identified for coal collection
before the carbon will be shipped offshore and then pumped underground.
Beloe said: “North Sea oil and gasfields which have been depleted can now be
used to store gas for thousands of years.”
Another good play is RPS, an environmental consultancy that assesses the
geographical suitability of areas for the purposes of carbon capture.
Nviro Cleantech, which develops technology to make coal “cleaner” — by
extracting chemicals such as sulphur and nitrous dioxide before it is burned
for fuel — could also fare well.
OUTSOURCING AND TRAINING
The government is planning to tackle part of its debt mountain by making
“efficiency” savings of £9 billion by the 2014-15 tax year. One of the ways
it could do this is to outsource back office jobs to private business.
Jonathan Jackson at financial services firm Killik tips Capita, which already
provides back office services for the government. That contract accounts for
about 50% of its business. Serco is another big player.
Darling’s budget guaranteed a place in education and training for all 16 and
17-year-olds. It could result in 54,000 extra students in the next academic
year. Shares in Pearson, the educational publishing giant, could reap
rewards. It could also benefit from the $228 billion (£155 billion) that the
US administration plans to put towards a programme of school building.
A £600m boost for the house-building sector is likely to help the construction
industry, which has been battered by the economic and property market slump.
The government’s aim is to build 240,000 homes a year by 2016, though in the
last tax year only 207,000 new houses were completed.
Shares in builders have begun to rally. Taylor Wimpey is down 71.5% over 12
months, but in the past six months is up 331%, broker Cantor Fitzgerald
said. Barratt Developments is down 60% over 12 months but up 168.8% over
INFRASTRUCTURE AND TECHNOLOGY
More than £15 billion will be ploughed into the rail industry by the
government in the next five years. This is in addition to £3 billion of
infrastructure investment that was brought forward to this financial year as
part of last year’s economic stimulus package. That money will be put
towards upgrading the water distribution network as well as railways,
research and development.
Beloe at Henderson tips the Keller Group. It specialises in assessing
foundations for infrastructure projects, such as railways, utilities and
public buildings. He is also attracted to Invensys, a consultancy that
specialises in the rail signalling business.
Tax credits for research and development are to be extended, which should help
companies in the biotech industries. Lee Robertson, chief executive of
Investment Quorum, likes pharmaceuticals group Vectura, which specialises in
“inhaled therapies” and has developed a range of inhalers for asthma
sufferers, as well as Renovo, which develops products to prevent and reduce