Tip of the month

My tip this month is Shire, the pharmaceutical company, which is firmly in the bid frame from AstraZeneca, which badly needs Shire's drug pipeline to buttress its own. A number of other big pharmas could also bid for Shire, such as GlaxoSmithKline and Swiss giant Novartis. Shire could go to a contested bid which could see the share price hit £15, providing a big windfall gain.

Based in Ireland for tax reasons, Shire surprised the market with an excellent 34 per cent increase in revenue for the latest half-year to $1.48bn (£794m). Latest pre-tax profits were $94.2m (£50.5m) against a $1.63bn (£874m) loss last time. It has upped its full-year revenue guidance to a 20 per cent increase on last year. Dealers were expecting a mid to high teens increase.

Buy Shire Pharmaceuticals at £9 with a trailing 20 per cent stop/loss to protect you against any major stockmarket fallbacks.