Goodbody Stockbrokers has strongly recommended five well-established stocks to investors for 2006 based on their exposure to the Irish economy.

Joe Gill, head of research with the brokerage, said its core portfolio was made up of AIB, Bank of Ireland, CRH, Grafton and McInerney. He said another three companies - Anglo, Kingspan and Ryanair - were also strongly recommended by Goodbody because of their strong business models.

Mr Gill said despite some international commentary, the fundamentals of the Irish economy remained very sound. The Republic had the highest population since 1861, residential building was being sustained and retail sales volumes continued to impress.

He was speaking after releasing the company's Irish equity outlook for 2006. This publication explains that the economy's strengths are what should attract investors.

"Our filters have narrowed down the stock options to companies with a significant percentage of EBIT [ earnings before interest and tax] flowing from Ireland. We primarily focus on businesses where the operational exposure is to revenue generation on the island".

Mr Gill said some of the companies recommended were undervalued, not because of any inherent weaknesses, but because their sectors had been downgraded internationally.

AIB says the index probably represents the best Irish play "on both the resurging Irish consumer and the buoyant commercial sector, particularly commercial property lending". It says that Bank of Ireland should be trading at a premium to the UK banking sector.

In relation to CRH the index says its current valuation is undemanding relative to the company's historical trading range.

In relation to Grafton it says the company is expected to grow by 13 per cent in the financial year 2006 and this compares favourably with 9 per cent among its UK merchanting/DIY peer group. Of the five main stocks it lends its support to, Goodbody says the largest upside is likely with Grafton, which could increase its value by 22.5 per cent.