Pearson, it has turned out, has been one of the better media performers of the year. Yes, the shares are down 17 per cent since January, but that is almost exactly in line with the all-share index and most media stocks have been battered by worries about Google and the economy. Pearson, though, relies on advertising for only 5 per cent of its turnover and the global luxury market that the Financial Times hits is the sole part to prove resistant to downturn. While UK newspapers are reporting declines into the teens, advertising at the FT and related websites and magazines was ahead 2 per cent in the first half, with the second quarter better than the first.

What is significant is that the performance is markedly different from the last downturn, after 2001, when the FT plunged into loss. Now it is generating £30 million in the first half, compared with £23 million a year ago, and the promise made yesterday was that profits would increase over the full year even if advertising failed to grow. If it can maintain that kind of resilience into 2009 and 2010, pressure for a sale of the trophy title will disappear.

Instead, what worried analysts yesterday was the notion of “late cylicality” – that the weakening macroeconomic conditions would feed into budget cutbacks for the key education businesses. American education is about two fifths of a year’s turnover, and international education a further fifth again. With the key spending period at the beginning of the academic year (and so in Pearson’s second half), the £14 million interim profit figure means little.

However, the company is expecting a 10 per cent revenue increase in its global education activities for the full year. Executives repeatedly – and correctly – point out that education budgets will be the last to be cut where public finances are under pressure. Plus textbook adoptions by US states, the area that theoretically could be most affected, make up only 3 per cent of group sales.

The problem, however, is that Pearson’s durability could make it less compelling in an upturn. At yesterday’s 606p, the stock trades at 12 times 2008 earnings and yields 5.5 per cent. What is likely to drive a significant rerating is hope of a private equity takeover, which would need a freeing up of the debt markets to a degree not expected for months. Analysts trimmed their predictions for 2009, and so no growth is anticipated that year, and the recovery put off to 2010, when there are more adoptions to chase.

Pearson, in short, is not cheap. However, a secure yield of nearly 6 per cent is handy and an underwhelming 2009 is broadly in the price. With modest debts, Pearson also has room to do some smart deals. Concerns over US budgetary pressures may cause short-term volatility, but the shares remain a solid hold.

Compass

Food prices may be rising, but shares in Compass, the contract caterer, have been rising faster: up about 11 per cent since the start of the year, enabling the £6 billion company to outperform the FTSE all-share index by nearly 30 per cent in the process.

That they have owes something to the perceived defensiveness of feeding captive consumers at work, school or in hospital – not to mention prison – but more with the stock market’s belief that the self-help measures instituted by Richard Cousins, the chief executive, have farther to run.

Yesterday’s third-quarter trading update did little to sway that conviction. The pace of growth in sales and operating margins remains the same as that achieved in the first half of its financial year, which suggests that initiatives such as careful menu planning – substituting dearer ingredients with cheaper ones – are mitigating the effects of food-price inflation. Further, its North American business – which accounts for 40 per cent of sales – shows no sign of faltering. With total costs of £10 billion, Compass has scope for more good housekeeping.

Tougher times should also accelerate moves towards outsourcing, from which it will benefit. However, at 342¼p, or 14 times next year’s earnings, and with its British business flat and sales not wholly immune to economic slowdown – whether in fine dining or through lower employment – short-term investors may wish to book profits.

WSP Group

WSP Group, the consulting engineer, is more diverse now than at any time in its 21 years on the London stock market: its projects range from inspecting New York’s Verrazano-Narrows Bridge and boring a rail tunnel beneath central Stockholm to planning the first carbon-neutral city in Abu Dhabi. Yet it is WSP’s exposure to the property sector – which accounts for about half of its sales – that concerns investors and explains why its shares have fallen 40 per cent since last autumn. As conceded in yesterday’s first-half results, commercial real estate activity in Britain and America has slackened.

Not enough, however, to prevent a 19 per cent rise in like-for-like revenues and a 30 per cent increase in operating profits. Further, booming infrastructure spending in the Middle East and contract wins in the UK – WSP has picked up sizeable road projects from the Highways Agency and Northamptonshire County Council – have swollen its order book to a record £1.2 billion. That means that 60 per cent of next year’s sales are already secured.

At 503p, WSP trades at nine times 2008 earnings, a discount to its peers. Given forecast growth this year of 19 per cent and modest net debt, that seems too low for a sector susceptible to consolidation. Yet with other property-related stocks cheaper still, WSP is no more than a hold.

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