One company that has experienced a vitamin D-propelled growth spurt in its share price is Immunodiagnostic Systems.

It makes testing kits for bone diseases and one of its blockbuster products has been a test for vitamin D. It is one of the Alternative Investment Market’s biggest success stories – £1,000 invested in 2005 would be worth more than £14,000 now.

But the story is far from over.

Sales have risen from nearly £5 million in 2004 to £37 million in 2010. Most of this growth has come from manual test kits for vitamin D. However, the company has developed a machine called the iSYS to automate testing.

On average, annual sales of tests alone for each iSYS total £77,000, based only on the automated vitamin D test (the machine is sometimes placed for free as the tests are so profitable). So far, about 100 machines have been sold or placed, but this should grow significantly as more sales staff are recruited.

Having also just received approval by America’s Food and Drug Administration, the company can now sell iSYS and the vitamin D test in this massive market, where most people are covered by health insurance and the test is likely to be performed more frequently.

FDA approval is extremely difficult and expensive to get, which deters new entrants into the market. The only major competitor in the US is Diasorin, a £1.3 billion company that has a slower machine than iSYS.

More machines equal more revenue and profit. But what if you could have other tests with markets as big as that for vitamin D?

There are ambitious but achievable plans to broaden the test menu for iSYS from the current seven fully automated tests to about 12 by the end of 2011, while at the same time moving into areas related to bone disease, such as kidney disease and hypertension. The company intends to be selective and target only niche but highly profitable tests within these markets.

So next time you are out enjoying this glorious summer and making lots of vitamin D, think about putting some in your portfolio. On a prospective price-to-earnings ratio of 16 times, the business is valued mainly on the vitamin D potential and takes little account of that of an enlarged test menu. There is also the possibility of a bid.

Companies pay Telecity to put their servers in data centres in return for security, reliable power and rapid connections to the world’s key telecoms networks. Well-known customers include Facebook, the BBC and music service Spotify as well as many top-tier telecoms firms and investment banks.

The internet has become an umbilical cord for people of all ages. Even my mum is addicted. Each time you watch something on iPlayer, browse Facebook or have a flutter on Betfair, you are adding to the exponential growth in data transfer. According to the London Internet Exchange, which measures data transfer, traffic has risen 12-fold in the past five years.

All this demand requires servers to be hosted in well-connected, high-power data centres in prime locations. It will also lead to a steadily increasing pricing for these centres because of capacity constraints. Given that the running costs of a data centre are relatively fixed, any increases in pricing flow through to the profit line – so Telecity should do well.

So why isn’t everyone building data centres instead of turning rundown buildings into flats? Planning permission is hard to obtain but the real barrier is getting enough power to a site. Supplying a single building with enough electricity for a town of 30,000 people is a big challenge, especially when you have to dig ducts in congested places. Many power firms simply cannot supply some areas with more electricity and this also constricts capacity.

The final barrier to entry is connectivity. Customers like to be near connectivity hubs (places were lots of network cables join) so that they can easily link with the networks and serve content as fast as possible. This is especially important for video content.

All the top telecoms operators are usually in Telecity’s data centres, so connecting from one to the other is literally a matter of running a cable. The more connected a data centre is, the more clients want to be there, and the more they will be willing to pay. It is a virtuous circle. Telecity’s London Docklands data centre is in fact the most connected place on earth.

With a market price of 17 times forecast earnings for 2011, the shares are not cheap, but this is a quality defensive business that should increase its earnings in the uncertain economic environment.

If you have any doubts, ask your children. It will have to be by email as they will be attached to their electrical devices. And won’t be able to speak, of course.

Traded on: Main market
Ticker: TCY
Contact: 020 7001 0000
www.telecitygroup.com

Following on from the article about Telecom Plus last month and the theme of saving money, my colleague Kunal suggested it was time to have a look at moneysupermarket.com. 

The website makes most of its money from commission selling mortgages, credit cards, insurance and savings accounts.

With nearly 50% market share, it is by far the most popular price comparison website and leaves rivals such as gocompare.com and comparethemarket.com a long way behind.

But why is it so popular? A recent survey by opinion pollster YouGov showed that Moneysupermarket is the most trusted brand for money products. Its image is clean, serious and to the point. Contrast that with Gio Compario and Aleksandr the meerkat, the characters that front, respectively, those two rivals. They just don’t compare in price comparison land.

The site’s popularity means that when someone wants to buy insurance or look for a mortgage, it ends up being the first name that comes into their head and many people type it directly into their web browser or Google.

Within Google it naturally comes top for most money-related search terms without the company having to spend extra on advertising.

This means that the business is profitable relative to its rivals, which keep spending money on advertising and Google keywords to maintain their popularity.

Through an excellent new voucher code website, Moneysupermarket also aims to retain users for longer – something not tried by the others.

In recession-hit 2009, the business made profits of £36m on sales of just £137m. The site’s money segment (loans, mortgages, credit cards) was the weak area, but it is slowly recovering.

The shares trade at a reasonable prospective price-to-earnings ratio of 13 times, or just 12 if the £25m cash on the balance sheet is ignored. Alongside this is the prospect of improvements in the money segment as the economy recovers, which could present interesting prospects, and also a dividend yield of 5%. The company also pays special dividends – two in the past year, totalling £50m.

There is also significant growth potential in the money segment from more people using the web. For example, according to another YouGov survey, 65% of people use the web to get an insurance quote, yet only 30% use it to look for a new loan or credit card. As web penetration levels go up in non-insurance and more people use the web to compare financial products, the company is well placed to grow.

While not a low-risk investment, Moneysupermarket is a great way of playing a recovery in the UK and increased internet penetration at the same time – and you don’t have to look at a meerkat when you use it.

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Since the Election it seems to have been impossible to escape from the news about the deficit hell we all face. The spectre of spending cuts and tax rises hangs over the market like the sword of Damocles.

So how has the market reacted? Well for those people who have contacted me about companies I have written about that have a direct relationship with consumers – particularly in the retail and pub sector – we have seen the market shoot the stocks down in price now and it will ask questions later, after the June 22 Budget.

The rationale is that after all the tax increases and spending cuts are announced, people will not only have no money to go shopping with but they will not even be able to cry into a beer. So what do I think is really happening?

Earlier this year I spoke to Dave Hartnett from Her Majesty’s Revenue and Customs. His job is to collect tax. When I asked him about future revenue projections, he appeared relaxed. Since then I have kept a close eye on what is happening to tax revenues and they have been increasing every month for the past three months.

Last year the Government deficit for the 2009/10 tax year was expected to come out at £185bn. It actually came out at £145bn. You may have missed that in all the gloom.

Michael Saunders, chief economist at investment bank Citigroup, popped round for a tea this week to talk me through his forecasts for the deficit over the next three years. Now the consensus among stockbrokers for the years 2010/11 and 2011/12 is for the deficit to be £160bn falling to £140bn. This compares with Citigroup’s forecasts of £132bn and £89bn respectively.

So is Citigroup forecasting much higher tax increases and spending cuts? Saunders expects tax hikes of £5bn in 2010/11 and £10bn in 2011/12. And he is forecasting spending cuts of £6bn and £9bn.

When I first saw these numbers I was amazed as they seemed to bear no relation to what the Dave and George show are saying. The big difference is in the improving tax revenue, from VAT, income and corporation tax.

Saunders thought that his deficit numbers could still be too high and he is £50bn below consensus, so what does it mean?

Well it is likely that sterling will strengthen, interest rates will stay low and oversold consumer stocks will come back into fashion. While it is likely that unemployment will pick up due to spending cuts, the private sector is showing a few signs of life.

I know stocks such as HMV have been poor performers, but I think the market is pricing for an Armageddon in consumer stocks that is not going to happen.

When I wrote about BP at the start of November, I concluded it was the sort of share I’d recommend to my mum when I popped round for Sunday tea.

As the oil slick spread and the share price collapsed, she phoned me to talk about the declining inheritance and what she should do now.

From the start of the crisis to today, BP has lost about £50bn from its market capitalisation – that is nearly 40% of its value.

This is the sort of move you expect of a dodgy Kazakhstan exploration company, not one of the biggest names on the London Stock Market.

BP says it has spent £700m trying to stem the flow of oil, but this is dwarfed by the fall in market value.

The market is obviously expecting some very bad news to come. So let’s assume this oil spill goes on for 120 days, with costs running at £40m a day. That would come to about £5bn.

BP is the company with its name in the frame but two other partners are involved. Under the 1990 Oil Pollution Act, any costs should be shared and BP’s share of this well is 65%. This means that it is far below what the market has wiped off the valuation of BP.

BP’s dividend comes to £1 of every £7 that is paid in dividends by all the companies in the London market.

As a result it is important to shareholders. At the price of 433.33p the shares are yielding 9% or 18 times what you can get on deposit with your bank.

Will the dividend be cut? Gearing levels – the level of a company’s debt as a percentage of its market capitalisation – at BP are currently 20%.

Even if it has to pay a £15bn clean-up bill and fines, that will still leave gearing at less than 30%. So BP can still afford to keep shareholders in the luxury they are accustomed to.

In a conference call this week, JPMorgan Cazenove estimated that the shares are trading at 1.1 times book value – that is the balance sheet price of the company – whereas BP’s long-run average is to trade at two times book value.

Whichever way you look at it, the stock seems cheap. It is impossible to estimate litigation costs but the US needs BP’s expertise to feed its growing demand for energy.

Volatility will stay until things are resolved. The tragedy is we can’t get Mr Tracy to send Thunderbird 4 down to sort it out. But I think that on a risk-reward basis the shares are a buy at 433.33p. Let’s hope for better luck this time mum.

In the post this week was a letter and some DVDs sent by Charles Wigoder, the chief executive and largest shareholder in Telecom Plus, the integrated utility company.

The DVDs showed scenes from the recent conference of its agents or ‘distributors’ in Birmingham, which a record 5,500 people attended. Charles wanted to show me that enthusiasm for his company’s products is high and that excellent growth opportunities remain.

Telecom Plus supplies residential and business customers with services such as gas, electricity and broadband internet. It has come through a difficult period where growing pains have become apparent, but it appears ready to start moving forward again from a more solid base.

The company, under the Utility Warehouse brand, offers deals on utility and phone bills and claims to save customers money compared with other providers. It uses distributors to sign up new clients, getting a payment for each one and for every service a customer takes.

As long as customers feel they are saving money, then everyone feels like they are leaving the party with a balloon. Problems emerged because distributors were signing up whole blocks of flats that were being rented by short-term tenants. This meant customers were changing regularly and bad debts were rising, resulting in slower-than-expected growth.

The company is now back on the front foot, having shown good growth in the number of services each customer takes. The number of distributors – all trained at their own expense – has also risen.

The fact that more people are joining is a positive sign for growth, as the more distributors there are, the more customers can be signed up. In these economic times, a second income from being a distributor can be attractive.

The masterstroke that Telecom Plus has pulled is to introduce a cashback card. This is issued virtually free to customers and is accepted by a number of leading retailers, including Sainsbury’s, Argos and B&Q. The card does not make money for Telecom Plus, but helps customers by giving them discounts on their shopping and utilities bills. Saving money by spending money looks like everyone’s dream to me. The card itself acts as a powerful marketing tool for the company.

Telecom Plus looks like it is going to emerge from the year that ended in March in good shape and I would expect the company to return to good levels of growth over the next few years.

Investments editor Joanne Hart wrote about this company a while ago and I agree with her recommendation to buy the shares.

Traded on: Main market
Ticker: TEP
Contact: utilitywarehouse.co.uk or 0800 131 3000

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Traded on: Aim     Ticker: OCL

When you consider buying into a company, you should have some idea of what you are looking for that investment to achieve. Of course, the view of the investor buying the shares will differ from that of the seller. That’s what makes a market.

An area of the market that has been interesting me recently is specialist investment trusts, where some are trading at a big discount to their net asset values.

In the past couple of weeks Candover Investment

Trust has received a bid approach. The shares had been trading at 500p against an asset value of 1038p.

So what other interesting specialist trusts are out there? One is Oakley Capital, which is run by the perma-tanned Peter Dubens.

Dubens has skills few people share. Not only can he buy a business by having the vision to recognise a cheap asset, but he also has that rare ability to sell a business. A man after my own heart, he appears to take the view that shares and businesses are for buying and selling, not collecting.

Too many of those in management just like to buy businesses and then ask to be paid huge salaries and bonuses to run the bigger company. People such as Dubens invest large amounts of their own money – so if they make a profit so do the shareholders. We are all in it together.

Oakley specialises in buying cheap companies in interesting areas. The main investment is in Host Europe, which is involved in the fast-growing web hosting and domain registration business. Increasing internet traffic should see continued growth in this area and it is likely that the company would be attractive to an industry consolidator.

Other investments include Daisy Group, a business telecoms provider, which is embarking on acquiring companies and cutting costs. The most recent acquisition has been comparison website Verivox, which has already seen an improvement in profitability.

The trust is heavily skewed towards technology and telecoms companies, which account for 83% of the assets.

Results at the end of April showed that the Oakley fund had a net asset value of 141p against a current share price of 109p.

By the end of the year, on my back-of-the-fag-packet calculator, I reckon that the asset value of this company could be 170p or even higher if Dubens does what he’s good at and sells something.

Given the uncertainty in the markets, buying shares such as Oakley provides a high degree of downside protection, given the large discount between the asset value and the share price – plus you get a manager who has as much interest as you to get the share price to go up.

Contact: 020 7766 6900 or oakleycapital.com

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Traded on: AIM       Ticker: COV

I first started buying shares when I was 20 with the money I earned as a milkman one summer. The stockbroker I used, who was a friend of my dad, was a great user of classic City phrases.

He talked to a vast number of clients and would follow those who had the knack of making money. ‘Let’s follow the men in form,’ he used to say – and it’s a phrase that has stuck with me.

Now following the man or woman in form is not always the way forward, but it probably works better in the oil exploration and production sector than any other. Those companies that get lucky with the drill bit tend to stay lucky with it.

When we saw Cove Energy at the latest fundraising round, my top oil analyst, John, reckoned it looked interesting because the company was involved in areas off the coast of Mozambique with the American oil explorer Anadarko.

This company, he said, was very much ‘the man in form’ and had experienced an unbelievable run of success with drilling new prospects.

Now this could be luck or it could be interpretation of detailed 3D seismic studies to identify the best prospects. As golfer Gary Player once said when he was asked about his success: ‘The harder I work, the luckier I get.’

Africa has been great for companies such as Tullow that have found oil on the west coast. The targets identified on the east coast are attempting to identify a whole new oil and gas area.

The first well drilled by Anadarko, in which Cove has a ten per cent interest, was the Windjammer target. This initially found gas and by all accounts quite a lot of it.

The announcement last week about the same well said that drilling operations had encountered such high pressure that a specialist rig would be required to continue.

The bad news is that they have had to plug the well and return to it at a later date. But there is no doubt that hydrocarbons are present. This rig will now move on to other prospects with similar structures.

Cove operates as an exploration company that identifies interesting areas, buys the acreage and then farms it out to larger companies that pay the majority of the costs.

Investors must remember that oil exploration companies are high-risk investments as you never know what is thousands of feet under the ground.

I participated in the placing and expect the news flow to be positive given that Cove is the man in form by being involved with Anadarko.

But remember, as with any other equity, these shares are for buying and selling and I would look to get involved at below 50p.

Christmas? I wouldn’t mind some stem cells, please

Name Cryo-Save Ticker: CRYO Traded on: Aim market

One of the great things about being a fund manager is that you get to meet new companies with new products that are operating in new areas.

These sorts of companies offer high levels of growth, but there is always the risk of not knowing how a new market will develop.

I first met Cryo-Save group, which is involved in the storage of stem cells, when it floated in 2007.

Expectant parents are offered the opportunity, for about £1,500, to store the stem cells from blood in the umbilical cord when their child is born.

The idea is that if a child gets a terrible disease in later life then hopefully, with both the advance in medical science and the fact that its own stem cells are stored, it should have more chance of being cured.

This offering is proving popular with parents. The company is represented in 38 countries and at the end of last year it had slightly more than 120,000 samples in storage.

With new competition joining the market, Cryo-Save has developed new products. In the last four months of 2009, after a long period of development, it rolled out a new combined service storing cord blood and the umbilical cord itself. Initial results show that the take-up is ahead of expectations.

But what if you are old like me and your parents never had the opportunity to put your stem cells into storage? Fear not, Cryo-Save is planning to launch the Cryo-Lip Service.

This involves the collection and storage of fat tissue containing mesenchymal stem cells obtained via liposuction from adults. Their potential use is similar to stem cells, though as yet the technology is less advanced.

The company tested the product in 2009 and first contacts with Europe’s premium cosmetic and plastic surgery clinics were made.

Those clinics will be the primary point of contact and sale for this innovative offering. So when the wife asks you what you want for Christmas, you now have a new option.

Cryo-Save looks like it has a solid core business and management has used the strong cash flow to develop its activities. There is only one real problem: the company, which is listed on two markets, Aim and the Euronext Amsterdam Stock Exchange, has said it is going to give up on Aim.

While I am really disappointed by this – and believe me, I have told the management – you will still be able to deal in the shares on Euronext. The disadvantage is that they will be priced in euros.

Based on this year’s prospects, they are trading on a price-to-earnings ratio of 12, which looks good value given that earnings per share are growing at 20% or more. Cryo-Save’s new product has excellent growth prospects. And if you make some money on the shares then you can always buy the product for your kids, grandkids or even yourself.

We report on the ups and downs to our clients every three months.

I am just coming up to the end of my 89th quarter of managing money for Schroders and during that time I have seen crazy share price moves as extreme as any theme park ride as despair has been replaced by hope only for despair to return.

A share that best illustrates this is Photo-Me. This is famous for operating the photo booths that travellers rush to for last-minute passport mugshots.

It also provides self-service digital photo printing kiosks and photographic mini-labs.

We built up a stake of 20% before the technology boom in 1998/99.

The shares soared from 30p to 400p as the company said internet connections would enable us to surf the web from the comfort of local photo booths. What crazy things we believed.

Needless to say, the shares crashed, but we managed to sell most at between 400p and 120p.

The firm’s architect, Serge Crasnianski, rode off into the sunset with the proceeds of the seven million shares he had sold at 400p apiece. New bosses took over and battled with rivals, debt and advancing technology as the shares slid to 11p.

Serge reappeared on the board last spring. We took this as a positive sign and bought 12% of the company.

The transformation since has been amazing. Debt has been virtually eliminated and the firm has started growing again, helped by a lot of sales overseas.

New products have been introduced, such as the photo book, where an in-store machine can create a photo book from a camera memory card. Serge thinks this has big potential.

He invents the products and runs the company – a rare skill. In his mid-60s, he appears to thrive on the challenge. As a shareholder he has the same interest as our clients in making money.

The cost base has been cut so the benefits of higher sales are feeding into profits and this week the company put out a trading statement saying that profits would be ahead of expectations.

It has been a hell of a ride at Photo-Me, but this time I think the shares, which are now 37p, might head up for a while. Hopefully we will sell only when Serge retires.

Traded on: Main market Ticker: PHTM