Investment Column: A good time to return to Premier Farnell

Charles Stanley Group; Park Group

Our view: Tentative buy

Share price: 136p (+7p)

Harriet Green, chief executive of the electronic components distributor Premier Farnell, says she is sick of hearing about the green shoots of economic recovery.

However, a bet on the group may be justified partly on the fact that the company says that while trading is still tough, there are signs that it might be getting a shade better. As part of yesterday's first-quarter results, Ms Green said sales over the last two months were up on March. Profits were still down, but the rate of decline has slowed compared with the previous quarter.

Its finance director, Mark Whiteling, argues that yesterday's 5.4 per cent rise in the shares was less to do with improved performance but rather a realisation among investors that the group's strategy – to increase web sales, provide a greater role for its own engineers and concentrate more on what it says are its key markets in China, India and eastern Europe – is working.

Buyers should not forget that companies like Premier Farnell are inextricably linked to the industrial and manufacturing sectors that, of course, have had a pretty tough time recently, and that still makes any punt risky.

Nonetheless, we are buyers. The experts at Panmure Gordon point out: "The calendar 2009 price earnings ratio is 11 times, which remains at a discount to [rival] Electrocomponents on 14.3 times. The dividend yield is attractive at 7.1 per cent, with the payment still covered 1.3 times by earnings and 1.2 times by cash." This makes us think that yesterday's hike in the share price will not be the last time shareholders make money.

The company's shares trade at just a touch over their year lows, which we think places them in cheap territory. If you believe the latest reports that indicate the recession has reached its nadir, now is probably a good time to dip your toe back into groups such as Premier Farnell. Tentative buy.

Charles Stanley Group

Our view: Buy

Share price: 238p (-12.5p)

George Bush has been out of office for nearly six months now, but that does not stop him being blamed for many of the world's ills.

Peter Hurst, finance director of the stockbroking group Charles Stanley, says the last six months have been hard and, in retrospect, the decision to allow Lehman Brothers to fail, much like many of Mr Bush's other decisions, made everything a lot worse.

For Charles Stanley this has meant falls in revenues and profits and, yesterday, the share price, which closed the day down 5 per cent. Assets under management (AUM), were also down over the 12 months.

There is more than a glimmer of hope for investors, however. In yesterday's full-year results statement, the firm said it was optimistic about the future, with clients demonstrating greater confidence in recent weeks.

Investors' confidence will also have been helped no end yesterday after the group increased its dividend by 2 per cent, and for those that fancy a bet on something a little bit racy, Charles Stanley is a strong candidate.

Some, particularly those at Numis, think the shares are overvalued, but we would still be tempted to take a punt, and tend to agree more with the analysis of those at Canaccord Adams. They say: "Our target price [310p] implies upside potential of 24 per cent, even though our methodology excludes [the] securities [business] entirely and recognises only 50 per cent of fair value for non-discretionary investment management. Nor does it capture the 11 per cent growth in Charles Stanley's AUM since March. The stock looks like a good way to play a market recovery, while progressive dividends offer additional attractions." Buy.

Park Group

Our view: Buy

Share price: 22p (+1.5p)

One company the downturn appears to have passed by almost completely is the Christmas savings and corporate reward outfit Park Group.

Park's stock was up another 7.3 per cent yesterday, adding to a 26.2 per cent rise over the last 12 months, after the group announced its final results. Revenues, profits and, most importantly, the dividend were all up, it said.

Ordinarily, we would be a bit nervous about recommending such a share, given its rapid rise over recent months: surely there will be some that see a future bit of good news as an opportunity to take profits? Conversely, however, we do think that investors should back a rising company.

The chief executive, Chris Houghton, insists the shares are still undervalued given the potential the company still has to exploit online sales and sell more incentive vouchers to more companies.

Despite our caution, Park has proved itself a recession winner. Buy.