Sainsbury's flourish as M&S flounder

Angus Rigby, Chief Executive Officer, TD Waterhouse comments: The round-up of Christmas trading figures have proved to be a mixed bag. Much loved retail stock M&S seems to have lost some of its shine after announcing a 7.1% downturn in sales in its third quarter, resulting in the loss of 1,200 jobs and closure of 27 stores. Dutch investment house ING went so far as to say that it did not expect any growth in profit for M&S until full-year 2012.

"In stark contrast, some of M&S's competitors reported robust performances with Sainsbury's declaring they had their best ever Christmas and Tesco meeting market expectations, with especially glowing results coming from its overseas division.

"When at the end of last year we asked respondents in our annual Investor Confidence Index which company they would invest £5,000 in, Tesco was the most popular choice. In fact, 2008 was a bumper year for Britain's most loved supermarket.

"However, it is clear that market downturn and ensuing recession has not been kind to all retailers and TD Waterhouse customers, perhaps hesitantly, have reacted to the bad news and placed M&S at the number ten position in this week's top ten sells.

"On the other side of the fence, there is a new entrant in our top ten buys list in the form of FTSE Small Cap Aricom. The Anglo-Russian iron miner experienced a share price jump of more than 50% last Friday, when the company confirmed speculations that it entered preliminary merger talks with gold miner Peter Hambro. Aricom was spun out of Peter Hambro in 2003, but they kept their relationship close, with Peter Hambro's son, Jay Hambro, running the company.

"The decision to cross paths again is due to both parties believing they will be stronger together again and therefore better equipped to face the current tough market conditions and weakening commodity prices.

"The prospect of this deal coming to a close has prompted TD customer's appetite for the stock. It is also worth noting that respondents of our recent Investor Confidence survey chose mining as the sector they expect to perform best in 2009, second only to the defensive pharmaceutical sector.

"The crown of the most bought stock this week goes to Taylor Wimpey, although it has also entered our top ten sells list at number five. The UK's biggest house builder continues to suffer from what it yesterday defined as ‘very challenging markets' and, after announcing sales had fallen well over a third over the last twelve months, added it remains pessimistic about an improvement in the short term.

"Taylor Wimpey announced before Christmas that it had reached an agreement for the deferral of certain covenants with its debt providers until the end of March, however talks with lenders still continue over the refinancing its £1.55 billion debt. With Taylor Wimpey's share price down by 96% since its peak in 2007, our customers, perhaps seeing an opportunity to make the most of the continuing volatility in the shares, have made the decision to trade on the house builder this week."