Kevin Goldstein-Jackson: I’ll go with the flow: Weir it is

Last month my self-invested personal pension scheme (Sipp) had more than 25 per cent of its assets in cash. Investments were heavily weighted towards small companies – especially those in the pharmaceutical sector.

I was cautious about the general state of the stock market and somewhat reluctant to make further investments. But the prospect of receiving 910p cash per share from the Admiral consortium for my Sipp’s holding in Associated British Ports made me feel I should take another look at investing in a relatively large company. But which?

I thought again about Weir Group. I had been following this engineering firm since 1998 when I first started collecting press cuttings, reports and other information on the company. It is one of the world’s leading pumps, valves and controls businesses.

In 1999 Weir rejected a £600m takeover approach from US pumps firm Flowserve. Since then it has undergone several restructurings, as well as making a number of business acquisitions and disposals.

Over the years I hoped I might spot a “pivotal point” at which to invest. But the share price and profits performance often seemed to be too erratic and too risky for an investment. Now, with bankers and hedge funds keen to facilitate takeover and other activity, perhaps Weir Group’s share price will outperform – especially as Sir Robert Smith, Weir’s chairman, stated at the annual general meeting in May: “Overall we have started the year well against the comparably weaker first quarter last year. This improved performance, together with ongoing operational improvements and our restructured portfolio of businesses increases our confidence in the outlook for 2006. We now expect profit before tax, goodwill and exceptional items to be at the upper end of recent market estimates.” The range of market estimates was £69m-£73.2m.

Looking at Weir’s 2005 report, I was again struck by the importance of the areas in which Weir plays an important role: mining, power generation, oil and gas and the demand for both “new build activity” and “life extension programmes” for nuclear reactors as well as “decommissioning solutions” and “equipment to handle nuclear waste during processing and storage”.

Predators and astute investors often take action when companies are nearing the completion of a restructuring process – and before general market “sentiment” has fully appreciated the changes that have been made.

In Weir’s annual report, major financial groups Fidelity International and FMR Corp were stated as having a total interest of 6.69 per cent of Weir’s shares as at March 21, 2006.

I therefore looked at subsequent share transactions and noticed that Fidelity had gradually increased its stake and by July 4 its interest was just under 10.2 per cent. This helped to end my indecision and my Sipp made a modest investment in Weir, paying £4.36 per share.

According to Weir’s website, the company’s interim results are due to be announced on August 17. I hope market reaction will be favourable.

As it appears to be acceptable by government, regulatory and other organisations for UK utility firms such as water and power supply operations to be owned by French, German and other foreign companies – and some of Britain’s ports are in foreign ownership – I wondered what the reaction would be if a foreign group were to acquire a large stake in another company in which my Sipp has a shareholding.

The company concerned, which I will name below, is listed on Aim and on July 4 announced results for the year to end-March: “profit before taxation, including exceptional items” increased “to £3.1m (2005: £0.9m)”. This company owns the Portsmouth Harbour Ferry Company in Britain and has major operations overseas – including port services and stakes in mining and oil exploration companies. My Sipp has already made good profits from its investment in this company, having bought shares for 190p each in 1998, and sold some of them for 537p in 2004 and some for 440p earlier this year.

As yet, there is no indication that anyone from Argentina has acquired a large stake in this UK company – but I wonder what the reaction would be if it did. The company concerned is Falkland Islands Holdings and, as its name suggests, it operates in the Falkland Islands.