Investors pump up the volume on Weir Group shares

Pump and valves manufacturer Weir Group is in the spotlight following its promotion into the FTSE 100. Smart investors believe it is a company that will rise further.

So what is Weir Group?

Weir Group established its reputation by selling pumps and valves to a rapidly globalising world.

Before chief executive Mark Selway joined the group in 2001, it tended to be undiscriminating who it sold to and did not keep tight control of its costs.

The process of modernising and refocusing the group began in earnest with the arrival of Australian Selway. He turned the Glasgow-based business into a serious competitor on the global stage, looking to reorientate the group's sales more towards emerging markets. Weir was steadily realigned and became a more efficient operation, making a number of strategic acquisitions.

The £328 million acquisition of US-based SPM Flow Control in 2007 was one such wise piece of business, with the firm contributing some £160 million of revenues in its first year.

More recently, the firm has tied up a deal with with Indian engineer BDK which it expects to double its sales in that country.

Selway's departure in 2009 could have been seen as a worrying development for Weir but with finance director Keith Cochrane taking the top job the market was reassured. Formerly chief executive at Stagecoach, Cochrane was also well known to the the City, and had  overseen two of Weir's biggest 2007 acquisitions, SPM Flow Control and South African firm CH Warman.

What went wrong?

Despite its various improvements, as a cyclical stock, Weir was hit hard as investors rushed to exit stocks exposed to the global slowdown. Resource stocks and those exposed to that industry were amongst the biggest fallers as emerging market stock markets fell and demand for commodities with it.

In October 2008, Weir had fallen to 280p but the fact it had already rationalised its cost base and had become a more diversified group with a more focused offering meant it was able to recover faster than many of its rivals.

What is happening now?

Weir has enjoyed four analyst upgrades this year and its stock has passed a number of target prices. It is currently trading at £14.10, well off its 52-week low of 643p last October, but down on its year high of £14.50.

While the firm’s entry to the FTSE 100 two weeks ago has meant a short-term boost from index-tracking funds buying the stock, fund managers and analysts are confident that the streamlined and globally diversified business's share price has further to run on at least a 12 month view.