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Another year of outperformance

Our 2004 Company Watch and Company Profile recommendations have once again outperformed the wider market – not to mention a raft of very well remunerated investment managers. In total, our 2004 stock picks are ahead by a handsome 18.75 per cent*. That's double the performance of the FTSE 100 Index and above the performance of the AIM Index.

ASOS leads the way

The overwhelming star turn of 2004 was online fashion retailer ASOS. It rocketed from our tip price of 7p to a 68p high in July. In August, the stock fell back, triggering our automatic stop-loss of 54.4p. Those who sold at this stage banked amazing gains of 677.1 per cent. If you held your nerve and persevered with the group, you have been well rewarded, as it now trades at 83p – a colossal gain of 1,086 per cent.

In terms of trading, ASOS' half-time numbers to September showed it converting losses of £283,000 into profits of £126,000, on a 72 per cent sales jump. This year, analysts are suggesting profits of £1.55 million, giving earnings of 2p and a very demanding forward multiple of 40.25p. If you've yet to lock in gains, now is the time to do so. Top-slice.

While not quite so spectacular, ISP play PlusNet has leapt 73 per cent since our 104.5p recommendation in August. The shares went on to touch 188.5p before settling at 180.5p. We remain buyers.

We're all still fans of Avanti Screenmedia, the in-store television services firm led by CEO David Williams. It has served us well in a short space of time, clipping ahead 70 per cent to 215p since November 2004. The London-based firm only joined AIM in July, raising £3 million on flotation. As well as securing a batch of very welcome contracts recently, Williams announced the completion of the £1.9 million acquisition of a provider of television services to shopping centres. Hold firm.

Floors 2 Go further?

In December, wood and laminate flooring retailer Floors 2 Go received an approach that could lead to an offer from a private equity player, an announcement that sent the shares higher. Great news if you bought in at 62.5p on the strength of our advice last summer. For 2004, analysts estimate the retailer will make £6.9 million ahead of a spike up in profits to £11.6 million in 2005. All in all, Floors 2 Go is definitely worth holding for growth and potential further bid upside.

Time to top-slice at Charteris

Company Profile Charteris has been a chipper recommendation for us, having moved 95 per cent higher from our 28.5p price. We flagged up the speculative attractions of the business and IT consulting group in December/January and, by all accounts, the company continues to trade well in the current year to July. KBC Peel Hunt forecasts profits of £1 million pre-tax, nearly double the 2003/04 surplus, and a 30 per cent earnings leap to 1.7p. At the current price, the shares trade on a lofty 32.6 times forward earnings. We still like Charteris but some savvy profit-taking is in order – and adhere to our new stop loss of 47.2p.

In September tool hire firm Brandon Hire re-affirmed our faith by reporting a 101 per cent profits leap to £2 million for the half to June on sales up 19 per cent to £22.3 million. We reckoned the shares were a strong buy at 102.5p, and investors who trusted our judgement have recorded gains of 47 per cent. Forecasts in the market for December 2004 suggest profits of £4.7 million, earnings of 11.1p and a 4.6p payout. On those estimates, the forward rating is a palatable 13.6 times and the shares yield a prospective three per cent. In our view there's still a compelling investment case here, as businesses continue to outsource equipment ownership. Buy/hold.

A few other stocks we remain bullish on are White Young Green (WYG) and Caffyns. WYG is the professional consultancy firm backed at 193.5p whose markets generally remain rosy and which recently reported that its half time profits to December will 'significantly' beat last year's £2.9 million. Recent purchase IMC Consulting, the group's biggest ever acquisition at £10 million, has provided a great platform for future international growth. Meanwhile, Sussex-based car dealer Caffyns has also made an auspicious start, motoring up 24 per cent from our recommendation price to 847.5p in a matter of weeks. Both should be held.

Lacklustre performers

As you might expect in the small company arena, not all of our companies have fared well. Our less successful endeavours include London & Boston Investments, our Company Profile in May. Although the group has been re-shaped, with the base laid for future growth, the stop loss level was breached in June and the stock has continued to move south. The market valuations of fellow Company Profiles Independent Media Distribution and Business Serve have also weakened.

Hold your nerve on iTrain

Another conspicuous faller was AIM-listed iTrain, which recently warned on profits in a disappointing pre-close update that came as a surprise to us. Sales for the year to December will now come in at around £1.1 million, falling short of the forecast £1.6 million, due to 'contract slippage'. This means pre-tax profits will hit £100,000, lower than the £600,000 predicted by the City. But the recent drop in price should not panic investors. If you bought on our advice, hold your nerve at what we believe is an intriguing growth situation in the long term.

*12 months to 18 January 2005