The Growth Company Investor team select the shares they believe will thrive in the year ahead

blinkx
Built around the demerged consumer business of web search pioneer Autonomy, blinkx’s shares have fallen from a 65p high to 14.5p amid market meltdown.

Yet the Cambridge/San Francisco-based company is a big beneficiary of the swift migration of advertising budgets to online video, being the world’s largest and most comprehensive video search engine.

It has indexed more than 32 million hours of audio, video, ‘viral’ and TV content, making it searchable and available as and when consumers want it, and is racking up content and media partners ranging from Microsoft to Getty Images and Time Inc.

‘We have access to the Autonomy connection, so we stand on the shoulders
of giants,’ enthuses CEO Suranga Chandratillake, who reports huge demand from advertisers based on blinkx’s technological ability to deliver ‘targeted, action-oriented advertising within a video context’.

Recently unveiled record interims revealed 106 per cent growth in gross profit to $4.5 million (£3 million) on sales up 115 per cent to $6.4 million, while half-time cash was $32.4 million, or £21.6 million, covering more than half the entire market cap. Approaching break-even, blinkx is a buy on a long-term view, with a recent bid for US advertising agency MIVA adding interest.

Beazley
Negative investment returns and drastic profit falls do not usually prompt an investment recommendation. But, in the case of insurer Beazley Group, recent difficulties could well help trigger a robust recovery.

Within the non-life insurance industry, the long, inexorable downward trend in insurance premium rates looks like being reversed as a result of hefty losses on US hurricanes and financial policies. The resultant plight of many major insurance providers, also hit by falling investment returns, implies a significant shrinking of underwriting capacity in the market and a swing in bargaining power back to those insurers still in business.

Beazley saw pre-tax profits fall 24 per cent to £46 million in the first half-year and analysts fear a much more severe full-year drop. Nine-month premiums were a mere one per cent ahead at £595.4 million, while overall premium rates were seven per cent lower.

The company expects a £20 million combined hit from US hurricanes Ike and Gustav, but says it is ‘satisfied’ with its reserving for sub-prime loan loss cover, though it was exposed to the Lehman Brothers collapse. Beazley plans to cut its overall underwriting next year from £814 million to £750 million, but should benefit from premium rate increases in sectors of large insurance industry losses, such as offshore energy and US professional indemnity. As such, the shares could offer some counter-cyclical resilience.

McBride
Household cleaning and personal care products group McBride is one of those companies that most investors have never heard of, although they will almost certainly have used its products.

Producing everything from washing powder and toilet cleaning products to deodorants and mouthwash, its focus is on ‘private labelling and contract manufacturing’, producing ‘own-label’ products for major retailers, an area of the market that should see increasing demand as credit crunched consumers count the pennies.

Increasing raw material costs put pressure on the company’s margins in the first half
of 2008, causing it to raise prices and cut costs through restructuring. However, the recent fall in commodity prices, particularly oil, has released much of that pressure and
a number of fund managers have been attracted to the stock in recent weeks by its combination of falling input costs, rising prices, a European-wide focus and forecast sales volume growth.

Shares in McBride have already demonstrated considerable resilience. While the market generally has been plunging since the summer, its shares have rallied. At the same time, the dividend-paying company has reduced its debt (from £103 million at the end of June to £90 million at the end of October) and grew its sales from £592 million to £700 million last year. Set to benefit from consumers’ impulse to ‘trade down’ in difficult times, McBride should be able to weather the anticipated recession of 2009.

Eagle-i
New chief executive Ian Walmsley has breathed new life into Eagle-i, formerly
a moribund telematics play, and sees profitability round the corner.

Walmsley’s invigorating new approach is based on the signing of partnerships with insurers and vehicle leasing companies. Insurers use telematics as a risk-control tool, while fleet owners use it to save money and, more recently, to drive environmental improvements.

Eagle-i’s edge in a competitive market comes from its ability to design and manufacture its own system, which allows it to put basic technology into partnerships at just a fraction of the cost of competitors. Once the technology is installed, Eagle-i can go direct to the end user and upsell all its additional services, thereby expanding its margins.

Having restructured last year, momentum is building, with partnerships agreed with insurance giant AXA and most recently with Hitachi Capital. Moreover, although not a ‘partnership’ per se, a £4.5 million four-year contract was won in October with emergency cover and repair company Homeserve, which should boost the top line.

Given the group’s loss-making history, reduced losses of £527,000 at the half-year – in spite of ongoing investment in realigning the product and implementing Walmsley’s new strategy – represented a key achievement. With the Homeserve contract coming through and the three-year Hitachi contract estimated to deliver £1 million of sales a year, profitability should be close.