For investors interested in UK motor-related stocks, the choice has shrunk since our last survey. And, as Arthur Way notes, "apart from isolated pockets of cheer, it is abundantly clear that investors are distinctly unimpressed with vehicle distribution".

Anyone preparing a thesis on the irrational behaviour of crowds would have plenty of material to sift through by examining recent developments in world stockmarkets. The second half of last year and the opening months of the present one saw investors pile huge sums into "new economy" stocks -including technology start-ups and unproven dotcoms with minimal turnover and scant prospects of short to medium term profitability -while shunning rock solid companies in the "old economy" with established brandnames and an impressive profits stream from which to pay dividends.

A good example is provided by comparing Lastminute.com -perhaps the purest representative of the "new economy" -with Scottish & Newcastle, undoubtedly one of the strongest bastions of the "old economy".

The former was floated on to the stockmarket amid considerable hype and at a price of 380p a share, which gave an initial market capitalisation of almost £570m. Subsequent trading saw the price reach a high of 550p, valuing the company at more than £800m, despite a turnover barely into six figures and the prospect of high losses for several years.

In contrast, Scottish & Newcastle - the UK's biggest brewer and now poised to become a significant player in continental Europe following the takeover of Kronenbourg -has experienced a considerable weakening in its share price during the past year to the extent that the company temporarily lost its place in the prestigious FTSE 100. This occurred notwithstanding a consistently high level of profitability and a progressive dividends policy. More recently, though, there has been clear signs that the investing community has been reassessing its priorities with the result that there has been a substantial sell-off of technology stocks and a concomitant recovery in "old economy" stocks.

Another manifestation of the fever afflicting investor sentiment with regard to the stockmarket in general and individual companies in particular is evident from the exaggerated day-to-day movements in share quotations. Changes which previously took several weeks or months to work through the market now routinely occur in a single trading session while charting the share price movement of even quite staid companies can reveal a pronounced yo-yo pattern.

With regard to the performance of motor industry stocks during the past year, a review of Table 1 indicates that, as always, there have been winners and losers. The most important point to note, though, concerns the declining choice available to investors who wish to commit funds to the UK's automotive sector. This explains why the "Motors 60" which appeared in the May 1999 issue of Motor Industry Management has now shrunk to the "Motors 50" with no fewer than 11 companies dropping out.

The deletions have affected companies in a variety of motor industry sectors including component manufacturing, the aftermarket and vehicle distribution and have occurred for one of three reasons: takeover, divestment of motor industry interests or transfer to private company status.

The most common factor has been a takeover by another company, with seven members of the 1999 "Motors 60" losing their independence in this way. The most spectacular departure was that of Lucas Varity which was acquired by US-based TRW. This followed the well established trend whereby an automotive components industry is evolving comprised of increasingly large companies with global reach. Also in the components sector, Adwest was taken over -again by an American group.

Consolidation in vehicle distribution was responsible for three companies losing their quotations: Dagenham Motors, Evans Halshaw and Wyndham Group, acquired by the Ford/Jardine Motors joint venture, Pendragon and Ryland respectively.

Unipart's status as an increasingly significant force in the aftermarket was confirmed when it purchased Partco, while possibly the most surprising motor industry takeover of the past year featured Ford's acquisition of Kwik-Fit.

In terms of scale, the biggest development in the "Motors 60" rankings stems from the loss of BTR Siebe, which has changed its strategy to become"a global leader in the automation and controls industry" and, in the process, has divested its automotive interests. In similar fashion, albeit on a loosening its motor industry connections for some time and no longer qualifies for inclusion.

Meanwhile, two companies -Finelist and Tracker Network -no longer appear due to delisting and their transference to the private sector.

The net result is that Table 1 contains just 49 companies from the list which appeared in May 1999. This has been made up to a round 50 through the addition of Salvesen C, the consumer and industrial logistics operator which has a heavy involvement in the motor industry through Swift, although a rebranding exercise is taking place which will see Swift's familiar red-liveried trucks replaced progressively by the Salvesen brand.

Whether Salvesen retains its independence long enough to feature in the 2001 listing is uncertain because, no sooner had the company been included in the "Motors 50", news broke that it had received a takeover approach from its largest shareholder, such is the frenzy of activity which characterises the current stockmarket scene. Indeed, already it is possible to anticipate that at least four members of the present listing - Alexanders, Arriva, Britax International and Gowrings -may not be eligible for inclusion by this time next year due to a growing emphasis on their part on non-motor industry activities. Moreover, the chances that there will be no further takeovers in either the components or vehicle distribution sectors must be extremely slim.

Table 1 presents the "Motors 50" companies in descending order of percentage gain from their share price low of the past 52 weeks. The table demonstrates vividly that, even in the rather dull investment category which is represented by the motor industry, there are spectacular gains to be won if investors choose wisely and get their timing right.

Torotrak is the undisputed winner with an increase of 159% from the year's low. However, a review of the company's high and low shows that its share price has been highly volatile and that anyone unfortunate enough to have invested at the top would have been suffering a 34% capital loss by mid-June. Torotrak is developing an infinitely variable transmission system which may or may not become the industry standard and is interesting insofar as the company represents the new breed of stocks in which investors commit funds today to back advanced technology in the hope of achieving spectacular long term returns.

Torotrak's latest results were released on June 19 and indicate that a pre-tax loss of £8.5m was incurred in the year to end-March, substantially higher than the £4.8m loss of the previous financial year. Obviously there is no dividend and the consensus among industry analysts is that consensus among industry analysts is that losses will deepen in the current year and continue until 2004. However, if things go well the long term returns could be in the stratosphere and the company's broker, Kleinwort Benson, is predicting annual profits of £250m by 2013 on the assumption that Torotrak's technology becomes a winner.

Table 1
LEADERS AND LAGGARDS AMONG THE "MOTORS 50"
(Arranged in descending order of percentage gain from the low of the past 12
months, based on price quotations at the close of business on June 15, 2000)


Price in pence (June 15, 2000) Past year's % change from past year's
High Low High Low
Torotrak
378
570
146
-34
159
DC Cook
17
24
7
-29
143
Volex
1433
1440
607
-1
136
Alexanders
31
31
14
-
121
Johnson Matthey
892
902
518
-1
72
Hawtal Whiting
54
81
32
-33
69
McKechnie
377
536
223
-30
69
Sanderson Bramall
148
250
93
-41
59
Autologic
655
695
415
-6
58
Arriva
211
396
135
-47
56
Trafficmaster
547
1200
350
-54
56
Dixon Motors
162
220
105
-26
54
BBA
466
556
304
-16
53
Ricardo
458
536
302
-15
52
Pendragon
142
195
96
-27
48
Laird
238
344
162
-31
47
Lookers
85
105
58
-19
47
Pilkington
92
121
63
-24
46
TT Group
123
169
84
-27
46
Lex Service
418
629
288
-34
45
Automotive Precision
13
16
9
-19
44
European Motor
53
77
37
-31
43
Bostrom
205
240
144
-15
42
Caffyns
290
375
205
-23
41
Britax International
133
173
97
-23
37
TI Group
381
574
280
-34
36
Tomkins
202
308
149
-34
36
GKN
905
1159
676
-22
34
Quicks Group
51
103
38
-50
34
Renold
110
189
83
-42
33
Salvesen C
149
150
112
-1
33
HR Owen
110
168
85
-35
29
Reg Vardy
264
340
204
-22
29
British Vita
260
295
203
-12
28
First Technology
500
568
405
-12
23
ICI
515
826
425
-38
21
Ryland
46
91
38
-49
21
Corus
98
180
82
-46
20
Mayflower
165
289
137
-43
20
Avon Rubber
236
595
198
-60
19
Perry Group
93
156
78
-40
19
Wagon
174
300
147
-42
18
Henlys
393
605
335
-35
17
Senior
67
165
60
-59
12
Sytner
109
245
98
-56
11
Gowrings
105
155
96
-32
9
Manganese Bronze
205
270
190
-24
8
Airflow Streamlines
126
172
118
-27
7
Inchcape
252
963
238
-74
6
Jacks (Wm)
36
83
36
-57
-