Value still available on Irish markets despite 66% slump in ’08, says Davy

THE Irish equity market’s 66% fall in 2008 made it the worst performer in western Europe for the second year in a row, and one of the worst markets globally.

Despite the poor prognosis, a new analysis says investors should not turn their backs totally on Irish shares in 2009. It argues that some stocks ought to deliver against the odds in the year ahead.

Government spending remains the one bright spot in the economy with the Government “continuing its investment programme despite the deterioration in public finances”, according to Davy Research.

Though the stockmarket is now down about 76.5% since its 2007 peak, over half of the market’s decline in 2008 was attributable to the financial sector, which fell a whopping 91.4%, Investors would be mistaken to turn their backs on the Irish market totally in 2009. Some companies still offer good value provided they are selective in their stock choices.

Davy suggests investors need to seek out those with strong balance sheets and stable earnings going forward.

On that basis “Ireland should still be very relevant to investors given the world-class nature of a number of Irish companies, including CRH, Ryanair, Kerry, Glanbia, ARYZTA and Smurfit Kappa Group”, says Davy forecasts.

Even as the country faces an economic recession with GDP due to fall by more than 4% this year, the analysis argues investors still have good investment opportunities to pick from in the Irish market: “Over the past 20 years this economy has produced world class companies with good balance sheets and an ability to deliver results even in hard times.”

Another key point when considering investing this year is the “outstanding value” many companies offer, given their low share prices.

It identifies its key stock selections as CRH, Kerry Group, Irish Life & Permanent, DCC, Dragon Oil, Glanbia and United Drug.

Regardless of your economic view people will still “want to invest in quality names that are unlikely to produce any nasty surprises”, said analyst Barry Dixon.

For smaller-cap investors, he selects Origin Enterprises, Abbey and AGI Therapeutics as potentially interesting opportunities in the current difficult investing environment.

“We remain cautious on the highly-geared international building material companies including Lafarge, Holcim and Heidelberg-Cement, and we believe that Wolseley will continue to suffer from high levels of debt,” said Dixon.

Investors have become more risk averse across all asset classes with and “one consequence of this is a flight to quality assets”, said Dixon.