19 shares for the future

Goodwin, BrainJuicer, ITE and Anpario shift the Decision Engine's needle.

To recap: The Decision Engine highlights good companies that are probably undervalued. It combines share valuation statistics with judgements about the resilience of the corresponding businesses to grade each share out of 20. Shares scoring 15 or more are probably good businesses at attractive prices.

These shares may not perform well over the next year or two, often the opportunity to buy shares in good companies at reasonable prices exists because traders are nervous about their immediate prospects and they fear the share price will decline. If enough sell, that fear becomes a self-fulfilling prophecy.

Businesses with enduring qualities will ultimately prosper though, probably because they do things differently in ways that customers value. The longer these shares are held, the more rewarding they are likely to be.

Although the performance of one share, or a small number of shares, is usually unpredictable, portfolios of shares in good companies bought at attractive valuations should do very well over many years.

Today, 19 shares make the grade out of a total of 56 tracked by the Decision Engine. Shares near the top of the table are ranked highest:

Goodwin

Goodwin's share price enjoyed a minor recovery after the company signalled its oil dependent businesses were stabilising, but even though the shares are a little more expensive than they were, Goodwin remains the Decision Engine's favourite.

While acknowledging that the engineer's revenue and profit is susceptible to future oil price movements, I think Goodwin will come through this period profitably and prosper due to its engineering expertise, spread of businesses and adaptability. These qualities are the result of good management over decades.

BrainJuicer

BrainJuicer is also riding high in the table. Cash-rich and highly profitable, the market research agency is, on paper, a substantially undervalued share. However its recent full-year results call into question the company's future prosperity.

From its quirky website to an exclusive focus on behavioural science, the company is distinctive. It says other market-researchers are playing catch-up, or adding a veneer of behavioural science to older techniques. With more than fifteen years of data from behavioural testing and several blockbuster TV advertisements behind it, BrainJuicer could, the company hopes, continue to lead the behavioural niche as it becomes more mainstream.

BrainJuicer says human intuition is much more powerful than reason. In computing terms: "the instinctive, fast-thinking System 1 would be a startling 11 million bits of processing power, whereas the cognitive, slow-thinking System 2 would be just 50 bits of power." Marketing that appeals to emotion, as opposed to reason, therefore, is likely to be more successful. This is after all the company that helped bring us phone network Three's dancing pony.

It's a seductive spiel, supported by BrainJuicer's rapid growth. But growth has slowed and having failed to win many mandates from large clients for large swathes of their business, BrainJuicer's switching focus to building relationships, and repeat business with clients of all sizes. It's launched an experimental virtual advertising agency, using freelancers to create advertisements that are selected and tested by BrainJuicer, and it's offering quantitative testing solutions online through third party platform Zappistore.

Strategic shimmies may indicate that BrainJuicer is susceptible to competition. Chief Juicer (chief executive) John Kearon says challenges are coming from multiple directions: self-service market research tools, software companies crunching big data for marketing insights, passive data (tools that collect data from smartphones and computers without much effort on the user's part), the mining of social media for insight, and interest in neuroscience. All these approaches vie with behavioural economics and psychology to be the next big thing in market research.

Advertisers may be spoilt for choice when it comes to novel market research techniques, but BrainJuicer may still have a big role to play in the development of the industry. Quantitative techniques, which bring in most of the revenue and profit, still grew 10% in revenue terms in a year in which profit was impacted by one-off costs relating to the relocation of the company's headquarters and an aborted acquisition.

I hope to find out more at the company's AGM in May.

ITE

Like Goodwin, investors are watching ITE to gauge the full impact of lower oil prices. Most of the trade show organiser's exhibitions are in Russia and the surrounding states, which are dependent on oil exports for their prosperity.

With economies in recession, and currencies depreciating, ITE and its international customers have been earning less money, which is worth less when converted back into their home currencies.

A trading update earlier this month revealed that like-for-like (excluding recent acquisitions), revenue projections for the year to September 2016 are 9% below the previous year, but at least the company has no more debt than it did at the end of the financial year in 2015.

Anpario

Anpario's move up the table is an exciting development. The company lost a capable chief executive in David Bullen last year and, in its full-year results published in March, the company revealed revenue had dipped 1%, without explaining why.

Anpario is highly profitable, though and the company has an intriguing story. Its additives promote animal health and consequently growth without the use of antibiotics, which are now banned from use as dietary supplements in many countries.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.