Think like a fund manger.

When you have a portfolio of shares or if you are on the look out for investment ideas then it is advisable to stay on top of the news. Firstly to see if there is anything out that might have an impact on your portfolio. Secondly to think about Companies that might benefit from announcements either directly of indirectly. Also whenever you see a good product or service you should be thinking I wonder who makes that etc. 

For example today we have the CBI conference and the BBC is reporting that:

 "The Prime Minister is expected to announce a £15bn five year road building scheme at the CBI annual conference later today. Most of the money will go towards road improvements with additional lanes added to congestion hotspots. Further details are expected in next month's Autumn Statement.

So what you might think, especially as this may just be one of those political announcements which gets trotted out several times, but nevertheless as a fund manager you would be thinking who is likely to benefit from that? Well today we have already had two RNS announcements from Carillion (CLLN)  and Costain (COST) talking about contracts they have won on the Highways Agency's five-year £5.0 billion Collaborative Delivery Framework, the largest ever framework for the improvement of England's motorways and major A roads. So the construction companies are obvious and immediate beneficiaries. Of these Carillion offers the highest yield of around 5.3% and they have increased their dividend consistently over the years, although this growth has slowed to 1 or 2% per annum in recent years as the construction industry has struggled.

Now some investors are not keen on construction stocks and contractors given their low margins and lumpy contracts. So is there a better way to play this particular news story today? One slightly higher quality alternative I would suggest is a £435 million market cap company, the dull sounding Hill & Smith (HILS). The business is described on Google finance as follows

"Hill & Smith Holdings PLC is a holding company. It is engaged in the manufacture and supply of infrastructure products and galvanizing services. The Company operates in four segments: Infrastructure Product - Roads, Infrastructure Products- Utilities, Galvanizing Services and Building and Construction Products. Infrastructure Products is engaged in supplying products and services such as permanent and temporary road safety barriers, fencing, overhead sign gantries, street lighting columns, bridge parapets and glass reinforced plastic railway platforms, variable road messaging solutions, traffic data collection systems, plastic drainage pipes and pipe supports for the power and liquefied natural gas markets, energy grid components and security fencing. In August 2014, Hill & Smith Holdings PLC Completes sale of its wholly owned subsidiary Bromford Iron & Steel Company Limited and business and assets of JA Envirotanks, a trading division of Joseph Ash Ltd."

Having read that you probably think they are dull, but just from knowing what they do you can see that they should be a beneficiary of this proposed programme. I also note that they do quite a large proportion of their business overseas and they flagged the negative effects of strong Sterling earlier in the year. Since then Sterling has come back so those pressures should have eased so we have seen some upgrades recently. The shares look reasonable value on around 12 to 13x with a 3% yield and they have been growing the dividend at around 9% per annum in recent years, although this has been on the back of declining cover. I also note that it is a top decile stock on Stockopeadia's stock ranking system which focusses on combined Value, Quality and Momentum factors. Click the link above or the graph below for more details of their services.

Technically they are trading close to their highs and therefore have reasonable momentum and I suspect this news and subsequent results could well lead to a break out down the line assuming the market overall remains benign and supported by central bank liquidity. However if this is too dull for you and you were born to be wild then enjoy the video at the end instead and get your motor running, head out on the highway...rock on.