At last year’s interim results in March, Wolseley became Britain’s first big industrial company to say that the American housing market, already reeling from oversupply, had yet to feel the full force of the sub-prime mortgage fallout. More housing stock would flood the market as repossessions rose, Chip Hornsby, its chief executive predicted, adding to the tracts of empty but unsold new builds left over from the end of 2006.

Unfortunately for the US economy - and for Wolseley’s shareholders, who have seen the value of their investment halve from last year’s peak – Mr Hornsby was proved right. So what should they make of the outlook in yesterday’s first-half trading update that “market conditions are likely to worsen”?

Certainly, the statement contained little ground for optimism. Stock, its US lumber division, has now fallen into loss – a $50 million (£26 million) pretax deficit for the five months to December 31, compared with an $85 million profit for the same period in 2006 – dragging trading profits from North America down 40 per cent.

Its Ferguson division has fared better – profits were down a modest 3 per cent – but that is of little comfort. The United States, which accounts for half of Wolseley’s sales, remains plagued by high levels of unsold inventory, housing starts are in danger of slipping below the one million level for the first time since the Second World War – they peaked at 2.6 million in 2006 – and the slide in US consumer confidence that affected spending on repairs and maintenance in the latter part of last year is likely to continue.

Yesterday, there was evidence that the same mix of tightened mortgage lending and consumer caution was starting to take hold in Europe. Trading profit across the Continent rose by only 1 per cent, with those from France down by 35 per cent.

Part of the latter’s decline was tied to presidential elections and accompanying uncertainty over tax incentives, which provided a brake on housing activity. However, with tax concerns now replaced by consumer uncertainty, the strength of any bounce back is uncertain.

Some of Wolseley’s problems have been self-inflicted, notably the implementation of a new IT system. For its part, the company is reining in planned capital expenditure and may have to cut jobs in Europe, as it has done in America. That Wolseley’s management now sounds so bearish – more than it did just three months ago – may be construed as a classic indicator that the bottom is within sight.

Yet the company’s debt load – about £2.5 billion – and the risk that Europe has considerable scope to get worse suggest that at 689½p, or 11 times next year’s earnings, the shares are still best avoided.

Corin Group

This £200 million developer of orthopaedic devices would appear to have difficulty in bettering 2007. Cormet, the metal hip implant that is Corin’s flagship product, won long-awaited approval from the US Food & Drug Administration; it signed Stryker, one of America’s biggest medical devices makers, as the distributor of the implant under an exclusive ten-year deal; and its shares surged 87 per cent to touch a record high.

But yesterday’s year-end trading update gave reason to believe that, while 2008 is unlikely to prove as eventful as its predecessor, it may be premature to take profits.

Overall sales were up an above-forecast 28 per cent to £36.5 million, but they were pedestrian in the UK and poor in Germany – they fell 3 per cent on price pressures and tougher competition. However, Corin’s European performance is expected to pick up this year after three product launches in the next six months: the busiest roll-out schedule in its six years as a public company.

Unsurprisingly, greater promise lies in America, which accounts for two thirds of the global orthopaedic market. US sales are forecast to quadruple this year on the back of the Stryker deal and yesterday’s update indicates that Cormet’s take-up among surgeons is proceeding to plan. Corin and Smith & Nephew are the only providers of metal hip implants in the United States and, with rivals years from a launch of similar products, there is plenty of scope for growth. At 490p, or 19 times 2008 forecasts, the shares are reasonably valued, given an expected fourfold rise in earnings over the next two years and the medium-term prospect of a bid from Stryker. Hold.

Filtronic

If cash is king - which to judge by yesterday’s stock market slide, it very much is – Filtronic should be considered small-cap royalty. The electronics group, once best known as the owner of a loss-making semiconductor plant in Tony Blair’s Co Durham constituency, is now conspicuous in straitened times for the strength of its balance sheet. After the sale of its wireless infrastucture division in 2006, and its disposal of surplus properties and its US defence operations, Filtronic boasts more than £117 million of cash, only a little less than its opening stock market value of £125 million. Even allowing for an expected £30 million injection into its pension fund, the additional £12.5 million sale of its compound semiconductor business means that it should be left with £100 million, most of which should find its way back to shareholders as a special dividend before the end of its financial year on May 31. In that context, the performance of Filtronic’s two remaining businesses – at £3.3 million, the first-half operating profits of the larger were the same as the interest Filtronic received on its cash – is a sideshow. Assuming that these are worth at least 50p a share on their own, Filtronic appears underpinned at 166¼p. Hold.

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