"Before the credit crunch, many companies were seen as safe havens, but the list has dwindled to a handful of blue-chip stocks over the last year. One of the few remaning candidates is Balfour Beatty - Britain's largest building contractor, and one of the most respected brands in the construction industry.
A strong reputation is crucial for winning new contracts in Balfour's industry and this is reflected in the firm's £12.8 billion pound order book and £27.8 billion pound work pipeline. This provides excellent earnings visibility during tough times. What's more, over 80% of its revenues are derived from government infrastructure spending and regulated industries such as water treatment plants, with only 19% linked to the more cyclical private sector.
Balfour is also well placed to benefit from Britain's nuclear-power renaissance. It has teamed up with Rolls-Royce and Areva to build the next generation of nuclear reactors, the first of which could be commissioned in 2013. And it's not just a UK play: nearly a quarter of turnover is generated in North America, which should be boosted by the US government's public spending plans, while another 12% comes from Europe, Asia and the Middle East. In light of the pound's decline these international sales should continue to lift returns.
Balfour also owns stakes in a number of public-private partnerships that will be sold off to the highest bidder when the time is right.
What could derail the shares? The main wild cards for investors are those inherent in the construction industry: underpricing contracts, failure to complete work successfully, customer bankruptcies or a severe cut-back in infrastructure investment. For example, in March the firm flagged issues with large building projects where it is not recognising profits until the cash comes in (albeit this kind of thing seems par for the course). And the £261m pension deficit needs to be watched - although much of this shortfall should unwind in due course once the worst of the bear market is over.
In short, with a top notch brand, a sound balance sheet and a focus on public - sector contracts, Balfour is good value for money." Paul Hill, professional analyst, writes for the moneyweek magazine.