If you have an iPod or a TomTom satellite navigation system or a Sony PlayStation Portable, you are enjoying the benefits of a microchip designed and supplied by Wolfson Microelectronics, a profitable Edinburgh company quoted in London with a market value of £265m.

Its technology converts digital signals into analogue, enabling decent quality sound on consumer electronics devices. The company floated in 2003 just as MP3 players were really taking off.

The portable device manufacturers reckon on continued strong demand, and so have been ordering extra shipments from Wolfson, more than offsetting lacklustre trading in the company's older business supplying chips for DVD players. Yesterday, it said its latest six-month revenues would be $90m (£51m), rather than the $79m expected by the market, with no decline in profit margins. The shares have moved back decisively above their float price of 210p, and were up 22p to 238p as brokers raised forecasts for this year and next.

Wolfson shares have been all over the place since the float. Financial results have been erratic. A patent infringement case emerged but was won. We're sticking by our float-day tip of the shares as a long-term gem. Buy.

Last week was the worst for the UK stock market since the end of the last bear market in 2003, and the sea of red carried ITV, one of the most volatile FTSE 100 shares, below the stop-loss limit that triggers its ejection from The Independent's portfolio of tips for 2005. It had fallen 18 per cent since our tip in April, 20 per cent from its peak.

A cull of senior managers, the patchy advertising market and the decline in ITV1's audience have unsettled investors, obscuring real progress in developing a multi-channel strategy, cutting costs and sprucing itself up in anticipation of a bid. We don't advise long-term holders to sell, but for our portfolio, rules is rules.

We have alighted on Xansa as a replacement, a punt on the phenomenon of "offshoring". It has long been a pioneer in the business of outsourcing, where companies hand over mundane administrative tasks to specialists who can do them more cheaply. These days, these functions might as well be done in Uttar Pradesh as in Reading, so Xansa now has as many staff in India as it does in the UK. It will move still more of its business east and the rise in profit margins ought to be the story of the next couple of years.

It is also pursuing work in the public sector and has a nascent joint venture with the National Health Service running payroll and finance functions.

Until now, Xansa has not looked cheap enough on the short-term horizon of the annual portfolio, but the stock has drifted lower. Buy.

This is cache, read story here