Traders reveal top tips for 2002

INVESTORS should ditch retail shares in 2002 and head for the safety of defensives such as BG Group, according to spread betters.

Research by Cantor Index, a spread betting firm, reveals a list of investors' 10 best and worst performers for 2002. The buy list included Vodafone, Wolseley, Unilever, ICI, Smith & Nephew, Northern Foods, Rolls-Royce, Amec, Scottish & Newcastle and BG, which owns British Gas. The sell list comprised Logica, Land Securities, Schroders, Dimension Data, Colt Telecom, Michael Page, Next, Arcadia, Debenhams and Filtronic. The lists were based on trades made at the end of December and the beginning of January and on views gathered over that period.

Vodafone was picked because of its dominance of the mobile phones market while Smith & Nephew, which makes replacement joints, is expected to benefit from increased Government health service spending. Manufacturer Northern Foods, brewer Scottish & Newcastle and utility BG were popular because of their vulnerability as takeover targets.

Building materials company Wolseley, food to household goods maker Unilever, engineering consultant Amec and chemicals group ICI were picked as strong defensive plays and engine manufacturer Rolls-Royce was expected to benefit from a 'renaissance of the aircraft industry'.

On the sell list, IT consultancy Logica, the most traded stock at Cantor last year because of its volatility, was sold because traders believed that its earnings did not justify the price. However, it was stressed that the price would rise if a predator launced a takeover bid.

Investors were warned away from retailers Next, Debenhams and Arcadia, which owns Top Shop, Burtons and Dorothy Perkins among others. 'They have had a terrific run since last year – can it go on? People will grow more concerned about how they are going to pay their credit card bills when their job security begins to look shaky,' David Buik, marketing manager at Cantor, said.

Property developer Land Securities is predicted to suffer from a slowdown in commercial price rises in London, while recruitment consultant Michael Page made the list of sellers with 'unemployment staring the country in the face'.

Traders said investment bank Schroders appeared disorganised and that the earnings of computer services groups Dimension Data and chip maker Filtronic did not justify their share prices. Colt Telecom was also viewed unfavourably. 'It was thought that if BT and Vodafone are struggling, why should Colt be able to keep its share price premium,' Buik said.