A signature dish of ours that has undergone significant change since entering the Portfolio is Scottish Power (SPW). The disposal of PacifiCorp in America announced in 2005 and the appointment of a new Chief Executive experienced in mergers lent credibility to the idea that a further shake-up in the form of a takeover was probable in the fast moving European utility sector.

In November, Spain's Iberdrola came forward with a cash and share offer valuing Scottish Power at 777p. The new company would be the third largest utility in Europe. Although we remain extremely upbeat on the utilities standalone prospects, we were also wary of the bid potentially coming to nought. As such we were more than happy to book substantial gains on a half sale recommendation whilst remaining partially invested in for exposure to long-term performance or a higher bid eventuating.

Back in December 2004 when we originally recommended specialty chemicals and paints group Imperial Chemical Industries (ICI) rising raw material inputs and a creaking balance sheet weighed on sentiment. However, we saw things differently. Restructuring programmes targeting millions in cost savings were a welcome step in bolstering margins. Combined with the ability to pass on higher costs to customers, we believed ICI was in a good position to buck market sentiment. This has proven to be the case. As a result, core turnover and earnings continue to grow steadily.

Further restructuring ensued as non-core business units were disposed of. This process gained momentum as 2006 drew to a close with the sale of the 'Uniqema' and 'Quest' divisions for £1.6 billion. Free of debt, we became concerned that a large acquisition would tempt management despite their contention that smaller strategic bolt-on acquisitions would be the focus. On the other hand, a much nimbler ICI could become an acquisition target itself. Given the relative uncertainty about ICI's future direction and with the prospect of a major acquisition certainly one option we believed it was time to lock in some healthy profits. As such, we advised Members to sell half their holdings around 416p, whilst maintaining some exposure for longer-term gains.

The retail sector is one that we have generally avoided except in cases where we believed turnaround potential offered the promise of a re-rating. As value investors this is a characteristic we are always on the look out for. In such cases, patience is often rewarded as the broader market is attracted to the ensuing recovery.

One should never get too emotional with investing but if we had to pick our sentimental favourite amongst our defensive recommendations, supermarket retailer would be up there. Why? Well mainly because the stock had been fully intact in the Fat Prophets Portfolio for over three years.

There have been many twists and turns in the J Sainsbury (SBRY). Investor disenchantment had persisted for several years as the shares languished. However, a glimmer of greater things to come appeared in 2005, helped along of course by fresh-faced CEO Justin King. A sales led recovery plan was announced in March of that year targeting £2.5 billion in additional sales in three years. Encouragingly by the halfway stage incremental turnover was up £1.3 billion.

Other improvements added to the improving picture as well, such as a successful cost saving programme to compliment seven consecutive quarters of sales and market share growth. In fact the previously much maligned retailer took the mantle of 'Supermarket of the Year' at the Retail Industry Awards in September. The market has reacted in turn positively. So much so the prospective price earnings multiple rose to around 30 times. While the premium in Sainsbury's case reflects both the anticipation of a possible takeover and the group's undervalued property portfolio, as value investors we believed it prudent to lock in some profits. We recommended Members take the opportunity to sell half of their holdings in Sainsbury. At the same time we maintained some exposure to further long-term gains on the back of either a bid or break up of the property portfolio.

In our view the key attractions of Pittsburgh based Duquesne Light Holdings (NYSE, DQE) were management's resolute commitment to the core electricity business and the utility's solid financial foundations. We believed a 'Back to Basics' business strategy would provide the foundation for enhanced earnings growth for years to come. In addition, within the consolidating US electricity industry, Duquesne was an attractive takeover target. Such was proven the case. In July 2006 a consortium led by Macquarie, an Australian securities firm, agreed to buy the company. With rival bids unlikely and the share price 'capped', we judged it prudent to take profits and invest the funds elsewhere.

Operationally and earnings wise Wellington Underwriting (WUN) has been a solid performer. However another factor, industry consolidation, in our original recommendation had been slow to fire. However, that looks to have changed in October when the company announced that it was in discussions with fellow Lloyd's insurer Caitlin. The revelation was greeted warmly by investors, with Wellington's shares climbing to a five year high. The combination certainly looks like a solid proposition. Wellington and Catlin will create an insurance company with a combined market cap of over £1.3 billion and the largest underwriting capacity of any Lloyd's syndicate.

A concern though is the softening impact that greenback weakness is having on earnings. As such and given that nothing is certain when it comes to takeovers, we took the opportunity to crystallise some profits by issuing a sell half recommendation in October. We maintain a longer term position in what will in all likelihood be an enlarged group.