British shares flashed a strong buy signal last week as investors took advantage of the turmoil to snap up bargains.

The average dividend yield on the FTSE All Share — which shows dividend income as a portion of share prices — exceeded the yield on 10-year gilts for the first time since March 2003. The “yield crossover” then signalled a strong rally.

Anthony Bolton, one of Britain’s best-known stockpickers, also suggested the worst was almost over. “I feel we are entering the final phase of the bear market,” he told the financial website Citywire.

Other analysts cautioned that while we may be close to the bottom, shares could tread water for some time — despite the 400-point rally on Friday.

Graham Secker, strategist at the investment bank Morgan Stanley, said: “We believe stocks are probably close to bottoming, though the increasingly likely prospect of a contraction in economic and profit growth means the start of a new bull market is likely to be some time away.”

We suggest some buying opportunities.

1 INFRASTRUCTURE

Infrastructure funds, which invest in everything from roadbuilding projects to energy supply, have been among the best performers over the past 12 months. The HSBC Infrastructure investment trust is up 20% over the past year against a fall of about 16% in the FTSE 100, while 3I Infrastructure, also an investment trust, is up 10%.

It is by no means a one-way bet, though. Infrastructure company Macquarie has seen 38% wiped off its share price this year and Babcock an incredible 92% as investors have worried about their debt levels.

However, analysts said at least you were betting on firms with tangible assets. Stephen Barber from Selftrade said: “Around $20 trillion [£10.9trillion] will be spent on infrastructure worldwide in the next 10 years.”

Nick Raynor at broker The Share Centre recommends Balfour Beatty and Carillion. “These companies are more likely to win big governmental contracts,” he said.

2 INSURERS, NOT BANKS

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