Shares digital

The market reacted badly to Marks & Spencer’s (MKS) trading update, but both chairman Lord Burns and CEO Sir Stuart Rose (recently knighted), reacted by investing £100,000 and £1 million in the stock respectively.

They were joined in this expression of confidence by three of the group’s senior executives – Kate Bostock, who is strongly fancied as a successor to Rose, and two recent recruits, Steve Esom, who is in charge of food and Carl Leaver, who is masterminding the group’s international expansion.

Historically, Rose has been a shrewd investor, buying stock just before Philip Green’s bid became public and then again in 2005, before the market realised the speed of the group’s recovery (Shares 22 Sep ’05 p36).

Rhys Williams of Arbuthnot believes he has been equally shrewd this time, and that the market’s reaction ‘looks overplayed’, and he thinks sentiment ‘will recover’.

Paul Mumford of Cavendish Asset Management feels M&S could ‘well prove another good turnround opportunity for buyers’. Similarly, Geoff Lowery of Dresdner Kleinwort has upgraded the shares to a buy, albeit with a price target of 510p, well below their 2007 high of 749p

Dresdner is forecasting earnings of 41.8p rising to 42.8p next year, placing the shares, at 399p, on a PE of just 9.5, falling to barely nine next year. The yield is an attractive 5.4%.

Shares says: Retailers are currently under a cloud but M&S’s rating is undemanding. SPECULATIVE BUY

The writer holds shares in this company