Share tips for 2014 by Telegraph reporters

As the economy bounces back, our business experts pick the top 10 shares to take advantage of the improving climate

 Kamal Ahmed, Sunday Telegraph Business Editor
BARRATT DEVELOPMENTS

Although exposed to the vagaries of government policy (which as we know can be something of a capricious beast), of all the housebuilders Barratts is leading the pack.

In a market where 40pc of sales are practically underwritten by the Treasury via Help to Buy, the whole sector is well positioned to take advantage of returning consumer confidence and general economic growth.

There may be concerns about a housing bubble but it seems there is at least a year to go before any interest rate rise, and even that, when it comes, will be modest.

Also, even though the Bank of England’s Funding for Lending support has been withdrawn for mortgages, that is unlikely to have much of an effect on the demand and supply relationship – where the former far outstrips the latter.

Barratts’ cautious approach to buying up land, positions it well for the next year. Volumes are set to increase by 8pc with margins improving to 12.5pc and net debt reducing. In 2013, Barratts’ share price rose 64pc and it is the top equity pick in its sector for Barclays.

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 Louise Armitstead, Chief Business Correspondent
MONITISE

If mobile phones really are going to be the device of life, then Monitise is a sure buy. The company provides the technology for mobile banking to 350 financial institutions worldwide, including NatWest, HSBC and Lloyds. It’s used by 25m people and handles transactions worth $50bn (£30bn) every year.

The apps, which are all bank branded, let customers check balances, transfer payments and even withdraw cash. In 2014 Monitise will launch the next stage of its technology, which will enable customers to shop online for clothes, food, tickets and holidays, all via the security of the banking app.

Alastair Lukies, chief executive, said it was just the beginning. An amazing 92pc of data ever collected has been collected in the past two-and-a-half years because of the use of technology.

Monitise believes it is ideally positioned for the revolution in mobile banking, spending and data mining. There is a risk: Monitise still hasn’t made a profit and its shares have already risen sharply this year. But they’re still worth buying.

 John Ficenec, Questor Editor
ASTRAZENECA

Astrazeneca, the FTSE 100-listed pharmaceutical giant, has reorganised its research efforts to target breathing problems, heart disease and cancer – all health issues associated with an ageing population and a rapidly expanding market.

The group has 15 drugs in the final stage of clinical trials and recently paid $4.1bn (£2.5bn) to buy US company Bristol-Myers Squibb out of their diabetes drug alliance. Astra is already converting that pipeline after clinical trials convinced US regulators to recommend that its type 2 diabetes drug be approved in the US – that alone could add $440m in annual sales.

Analysts at Liberum Capital estimate new drug discoveries could replace $4bn, or 17pc, of current total group revenue by 2019. There is risk here, but it looks priced in.

The shares are also cheap relative to peers, trading on 11 times forecast earnings, rising to 12 times next year – more than a 20pc discount to GlaxoSmithKline and Shire. Recovery won’t be quick but the inflation-busting dividend, on a 5pc forecast yield, makes the shares attractive.

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 Emily Gosden, Energy Editor
DRAX

Investing in UK energy utilities has become something of a minefield ever since Ed Miliband pledged to freeze retail prices if Labour were to win the 2015 election.

There are few safe bets in the sector any more, but vertically integrated stocks such as Centrica and SSE, with retail-facing businesses, have become riskier than most as energy becomes the political football of choice.

Drax – Britain’s biggest coal-fired power station which has begun converting to burn biomass instead – doesn’t sell directly to household consumers, so should be less exposed to this risk.

More importantly, its biomass conversion appears to be a favoured child among projects competing for renewable subsidies.

The potential for power capacity to run low could push up power prices, boosting returns from the one Drax unit that has already been converted under the existing subsidy regime. Drax has already risen strongly this year, but providing the conversion remains on track there should be further to go.

 Ben Martin, Markets Reporter
CHEMRING

Shares in Chemring, the defence equipment maker that produces flares and other ordnance, changed hands for more than 730p in 2011, but it has been all downhill since.

Profit warnings, a failed private equity bid and government spending cuts in the US all conspired to send Chemring sharply lower and, in November, the shares touched 187p – the worst level since January 2006. But prospects for the group are now beginning to brighten.

Mark Papworth took the helm in late 2012 and has been tasked with turning the company around. Investors already appear to approve of his plans. When the group announced last month it had identified businesses that it would look to sell, Chemring shares rose strongly.

The next catalyst for the stock will come in January, with full-year results, giving Mr Papworth an opportunity to outline his long-term strategy further. Any successful disposals should also push Chemring higher.

The outlook for the US – its biggest market – is also more encouraging, and there is always a chance the FTSE 250 company again attracts the attention of a suitor.

 Graham Ruddick, Retail Correspondent
HOME RETAIL GROUP

Home Retail Group, the owner of Argos and Homebase, has enjoyed an approximate 50pc increase in its share price this year after benefiting from a recovery for retail stocks generally, an unwinding of short positions and confidence in its turnaround strategy for Argos.

However, there could be more to come. The company’s annual profits have fallen from £426m in 2008 to just over £100m in the past year, but it recorded a sharp recovery in like-for-like sales in its most recent half-year results.

Argos looks to be crawling out of the retail hospital ward by sensibly focusing its strategy on using its stores as collection points for online orders, while Homebase is perfectly positioned to benefit from an improvement in the UK housing market.

The major uncertainty is that the chief executive, Terry Duddy, will step aside this year. However, with a five-year plan for Argos already laid out and shorters starting to leave the company alone, Home Retail still looks a sound bet to profit from a recovering UK economy.

 James Quinn, Financial Editor
RSA GROUP

To say RSA Group hasn’t had the best of finishes to the year would be an understatement.

In the past month, the FTSE 100 insurer has issued its third profit warning in quick succession, parted company with its chief executive and seen its credit rating downgraded by S&P.

On top of that it has faced calls from investors to put itself up for sale, while the executive chairman, Martin Scicluna, works out which parts of the businesses to sell in order to generate in the region of £500m of capital.

So why then are the shares worth looking at? Well, it’s a risk, perhaps a big risk, but if Scicluna does what he says he will do, and makes capital his number one priority, by the end of 2014, RSA will begin to look very different.

Leaner, more agile, and with a more manageable cost structure, investors should begin to fall in love with it again. Clearly, it will take some time – if ever – before RSA goes back to being the dividend heavyweight it once was, but for investors looking for share price growth, RSA could be a risky, but potentially lucrative, choice.

 Nathalie Thomas, Transport & Leisure Correspondent
FIRSTGROUP

FirstGroup had a pretty rough 2012, when it was denied a multi-billion-pound contract to run rail services on the West Coast Main Line.

Unfortunately for the transport group’s shareholders, 2013 turned out to be little better. In May, it announced a deeply discounted £615m rights issue. Then earlier this month, US activist investor Sandell Asset Management wrote to the board calling for a break-up of the group.

Sandell claims support from other shareholders, but analysts have largely dismissed the hedge fund’s transformation plan, pointing out management extensively reviewed other options before announcing the rights issue.

But Sandell’s presence on the shareholder register could be a catalyst for management to accelerate its turnaround. FirstGroup is investing £1.6bn over four years. It has named a new chairman, John McFarlane of Aviva, which was well received by the markets.

Clearly there are risks and miracles won’t happen overnight, but it might finally be time to climb back on board the FirstGroup bus.

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 Christopher Williams, Technology, Media and Telecoms Editor
IMAGINATION TECHNOLOGIES

Being an Imagination Technologies shareholder has not been for the faint-hearted in a rollercoaster year. But those with the guts to stick with one of Britain’s few global hi-tech forces and see past the ups and downs of quarterly results should enjoy big rewards.

Its fortunes are linked to the growth in smartphones and tablet computing thanks to its leading position designing graphics microchips. The mobile revolution still has a long way to go as it penetrates all aspects of our social and business lives; the number of smartphones worldwide is expected to overtake the number of computers in the first quarter of next year.

Despite competitive pressures and a fast-changing market, it will be hard for it not to increase revenues rapidly in 2014 and beyond.

The price will start from a low base in the new year, below 200p. At its peak in 2012 it was above 700p. The shares are cheap and represent a big opportunity for patient and courageous investors who understand that the type of innovation the company feeds off can’t be usefully measured every three months.

 Harry Wilson, Banking Editor
BARCLAYS

It has been a rough 18 months for Barclays, but there are several reasons to think the bald eagle of banking could be ready to soar.

First there is the obvious point that after its rollercoaster ride over the last year and a half, pretty much all the bad news has either already been provisioned and paid for, or is out in the open and priced into the shares.

Second, Barclays has a new management team and has recently pulled off a major capital raising, meaning there should be relative stability in terms of leadership and the capital position. Third, in an industry that is becoming increasingly driven by technology and investment in the latest IT, Barclays is beginning to open up a lead on its rivals. Recent computer glitches show how far behind some have fallen and how much they will need to spend just to draw level.

Finally, Barclays has retained, despite constant pressure to downsize, by far the best investment banking franchise of any UK bank.

While it may not be in favour at the moment, if the bank holds its nerve it could emerge as one of winners from the continuing industry shake-out.