Like its name, yesterday’s first-half trading update from 3i was somewhat abbreviated.

The statement was short on detail and provided few additional numbers on top of those given in July’s first-quarter update. The broad message was that the amount of cash that 3i has invested and realised over the first five months of its financial year continues to fall from last year’s highs, but that those two sums roughly balance out: £622 million and £560 million respectively. Elsewhere, portfolio income – largely from dividend payments – is expected to be ahead of this time last year.

The greater comfort was in what was left unsaid. That, unlike the banks and rival private equity investors, 3i has not had to take any hefty writedowns on its £6 billion portfolio. That is not to say the level of provisions cannot do anything but rise from last year’s historically low levels: analysts expect a £120 million hit in the first half. Writedowns might also increase steadily as the economy slows. Dresdner Kleinwort, for instance, thinks they should reach a peak over the next two years.

But 3i’s broader virtue is that it has, of late, been a bigger seller than buyer. That pattern of divestment has even extended into more difficult times. Yesterday’s numbers did not include the £162 million it should receive next month from the agreed sale of Brussels-based ABX Logistics to DSV, the Danish transport group. The range of 3i’s disposals in the first half – which included Giochi Preziosi, the Italian toy maker, and Novem, the German automotive supplier – are testimony to the diversity of its portfolio.

But although private equity remains an unforgiving game – there can be no other corner of the investment world in which a company has to raise its capital all over again every two years – 3i is considerably more defensive than at the time of the last downturn. As the above deals demonstrate, it has diversified outside of the UK into Europe and Asia: less than 40 per cent of its portfolio is domestic, against 80 per cent in the early 1990s. Similarly, the proportion of higher-risk venture investments has fallen from 40 per cent to 10 per cent over the same period. Rather, 3i is now focused on a narrow band of larger companies which should benefit from more professional management All the same, even at 812p, or a hefty 25 per cent discount to forecast net asset value, it is hard to see 3i escaping the downward pull of the wider asset management sector. No more than a hold.

M&C Saatchi

It is often said that an advertising agency is only ever three phone calls away from disaster.

The comfort for backers of M&C Saatchi – whose shares tumbled three years ago when it lost the account of British Airways, its biggest and oldest client – is that, on that measure, the prospect of disaster is more remote than at any point since its formation 13 years ago. Not only are revenues two-thirds higher than at the time of the BA setback, but its client base is now reassuringly diverse: its ten biggest accounts – which include RBS, GlaxoSmithKline and Optus, of Australia – make up little more than one third of sales.

Not that M&C can escape the effects of economic slowdown. Although yesterday’s first-half figures showed that pre-tax profits had doubled on like-for-like sales up 18.7 per cent, the company cautioned that trading would weaken in the second half. Next year’s full-year profits are likely to be flat on 2008, it said, against previous expectations of a 7 per cent advance.

Spain and the US remain tough, while a slower rate of new product launches is likely to hamper Clear Ideas, its UK brand consultancy.

A steady industry-wide shift to flat fees rather than commission-based payments has brought greater predictability to revenues and, unlike other agencies of its size, M&C has a sound balance sheet. With the shares down by a third on the year at 99½p, or less than seven times 2009 earnings, the gloom might appear to have been fully priced in. However, M&C’s dimunitive stock market value (some £60 million) and fears of further downgrades are likely to work against it for now. Avoid.

NBT

It is odd that a company that protects the internet domain names of some of the nation’s biggest brands – from British Airways to Vodafone – should have such a mundane moniker itself.

But the AIM-listed Group NBT is probably better known to private investors as NetBenefit, the dot-com darling that lost 99 per cent of its value when the technology bubble burst. As yesterday’s full-year figures attest, NBT’s subsequent progress has done much to erase those memories. The shares have risen 21-fold from their 2001 low, helped by the company’s habit of consistently beating profit forecasts. Earnings per share for the 12 months to June 30 were up 30 per cent on underlying revenues ahead 19 per cent, prompting upgrades to current-year numbers. NBT has also paid down debt such that it sits on modest net cash.

The beauty of NBT is that, in registering and renewing domain names and hosting related web services, it is providing a critical service to its clients at a price that is negligible relative to the potential cost of reclaiming a name that has been lost. Customer churn is slight and the vast majority of revenues are recurring. Meanwhile, the burgeoning array of internet suffixes and jurisdictions, the trend towards outsourcing and the scope for further geographic expansion outside the UK should provide steady growth. At 256p, or 14 times current-year forecasts, NBT is reasonably priced, given the prospect of double-digit earnings growth and its long-term attraction to a marketing services predator. Buy on weakness.

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