The FTSE 100 has made a strong recovery since the Brexit vote, but there are still some bargains to be had. If you’re looking for undervalued blue chips, the lowest P/E picks of master investor Neil Woodford could be a good place to start.

The three Woodford favourites I’m looking at today are all trading on 12-month forward P/Es below the Footsie long-term average of 14.

Shareholder value culture

Woodford bought into retailer Next (LSE: NXT) when he left Invesco Perpetual and launched his CF Woodford Equity Income fund in 2014. It’s a company he had long admired as having “exactly the right shareholder value culture.”

The shares were trading well above 6,000p at the time and he made further purchases during the first half of 2015 when the shares were above 7,000p. However, a marked decline followed a disappointing Q4 2015 trading performance (due to unseasonably warm weather) and a cautious outlook statement with the full-year results in March.

Woodford bought more shares on the basis that “we continue to believe that Next will deliver a very attractive long-term total return through a combination of its current dividend yield and continued growth in its free cash flow generation”.

I’ve seen no comment from Woodford on Next since the Brexit vote, but at a share price of 5,535p the company has strong value credentials with a 12-month forward P/E of 12.7 and a prospective dividend yield of 4.9%.

Sustainable long-term growth

We do know Woodford’s post-Brexit views on engineering outsourcing business Babcock International (LSE: BAB). He added to his holding in the immediate aftermath of the referendum and again in early July “with the market still befuddled by Brexit.”

Woodford first bought Babcock back in October 2014 when the shares were trading at a bit above 1,000p. He and his team cited the attractions of Babcock’s substantial forward order book and good earnings visibility through long-term contracts, and reckoned the company was “well positioned to deliver sustainable long-term growth in shareholder returns.”

The shares are currently trading at 1,030p — so, around the same level as when Woodford first bought — and with a 12-month forward P/E of 12.3 and a useful, if not overly-generous, dividend yield of 2.9%, this is another attractively rated stock.

Value pick of the crop

When it comes to value credentials, insurer Legal & General (LSE: LGEN) not only stands head-and-shoulders above Woodford’s other blue-chip holdings, but also is one of the cheapest stocks in the entire FTSE 100. At a share price of 207p, L&G trades on a 12-month forward P/E of just 9.8 with a market-trashing prospective dividend yield of 7.2%.

This is another stock Woodford has paid higher prices for in the past, and added to greedily after the “indiscriminate” sell-off of financials and UK-facing businesses following the Brexit result.

Woodford and his team spoke to L&G post-referendum, and concluded that the company remains well-placed “to deliver very attractive rates of sustainable dividend growth in the years ahead.” It’s almost inevitable that if such growth is delivered, there will be a huge uplift in the shares, as they rerate higher from the current single-digit P/E.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.