Melrose enters the FTSE 100

Following the FTSE 100 reshuffle yesterday Graham Spooner, investment research analyst at The Share Centre, shares his thoughts on specialist manufacturing investor, Melrose, and explains why it has been added to our ‘buy' list.

"We have been aware of the attractions Melrose offers investors for some time and its arrival in to the FTSE 100 highlights this. The group's policy to 'buy, improve and sell' is appealing to growth seekers and the management has an excellent track record of improving the businesses that it acquires. Improving and selling off businesses can also lead to investors receiving special dividends

"Melrose's most recent acquisition was of German water and gas meter making group, Elster. The focus for 2013 will be to implement change in order to improve its margins. Going on past record, management is quick to make changes however, investors will need to be patient as the effects may take some time.

"The group's management has many years of experience and success in the engineering field and we believe there is more of the same to come. We recommend Melrose as a ‘buy' for medium risk investors looking for both income and growth. However, investors should be aware that the group's acquisitive nature means sometimes additional funding will be required by asking shareholders to stump up more cash."