The cheapest mid-caps based on earnings, dividends and assets.
Following on from last week's mechanical trawl of the FTSE100 for value, I'm repeating the exercise this week on the 250 index. Same idea exactly but on the market's mid caps.
As before, similar warnings apply about the potential errors of the database I use and that Price/Book (P/B) includes all assets and not just the value player's far more desirable, and more conservative, tangible asset version. My natural indolence precludes my working out P/TB so readers must do this for themselves with any share considered worthy of further investigation.
As usual, yields and P/Es are forecasts, while P/Bs are based on the last annual accounts, not updated for interims or news.
Note that a number of company P/Es in the database were shown as not available, presumably because the compilers lacked information on earnings forecasts. I have ignored these in my P/E table, which starts with those having a positive figure. Several shares in other tables, namely Daejan, Amlin, Catlin and 3i, did not have forecast P/Es.
Top Ten Yields
Ten Lowest P/E
Ten Lowest P/B
| | Price (p) | P/B |
|---|
| Premier Foods | 4 | 0.10 |
| Thomas Cook | 43 | 0.21 |
| Home Retail | 86 | 0.26 |
| Barratt Developments (LSE: BDEV) | 88 | 0.29 |
| C&W Worldwide | 30 | 0.51 |
| Daejan (LSE: DJAN) | 2,680 | 0.54 |
| 3i (LSE: III) | 202 | 0.58 |
| Millennium & Copthorne Hotels (LSE: MLC) | 401 | 0.60 |
| Big Yellow (LSE: BYG) | 267 | 0.63 |
| Logica | 79 | 0.64 |
The search for triples here scores twice: telecom business Cable & Wireless Worldwide and holiday company Thomas Cook. Both are well-known bombed-out shares and C&WW is in my value portfolio, though only as a tiny holding, which having fallen dramatically makes it even tinier.
There are a number of double shows. Argos-owner Home Retail, for instance, is a yield and P/B play. I dislike Argos as a shop, though I don't let my personal feelings about a company's business get in the way of a good value play. In fact, Home would have been eleventh in the P/E table if I did the top eleven rather than the top ten, so pretty close to a triple.
Finance business Intermediate Capital and that other big holiday firm, TUI Travel, are yield and P/E listers, and both are also not far off the P/Bs either with ratios below 1.
Trashed share Premier Foods tops both the P/E and P/B rankings, and Logica is in both of these as well.
What of sectors? These tables often give useful clues about whole sectors that are currently disliked for some reason, as indicated by the ubiquity here of shares from them. So even if none of those present appeal, there may be others in the sector dragged down by poor sentiment that could in consequence possess value.
In fact, unreasonably poor sentiment is the reason for the creation of value in a share. Easy to say but not necessarily so easy to spot that crucial difference between unreasonable and deserved. You won't get it right every time.
One clearly beaten-up sector is holiday companies. It's not a big grouping with Cook and TUI as the only sizeable listed businesses in this field and both are represented strongly here as I mention above.
One interesting point about TUI is that a majority of the shares are held by its German parent. Some commentators have suggested that there could in time be a bid from the parent for the minority float, but I would advise against buying TUI with that as the principal reason. Judge it on the usual value merits and ignore bid hopes.
Other than that, there are no really strong sector themes here, unlike last week's FTSE100 job where miners dominated the P/E list with six out of ten. But a lot of the explanation for lower sector representation here is that the 250 has a much greater variety of businesses in it and therefore a lot less sector concentration than the 100 index.
There's a vague property connection in the P/Bs, with house builder Barratt, real-estate share Daejan, hotel operator Millennium and Copthorne and storage business Big Yellow Group. Different businesses but all having a property element, which the market would take into account in their valuations. Property-based shares would be expected to make a showing in an asset table such as this.
Also there's a slight retail theme with Dixons, Home Retail and Kesa all figuring. Dixons and Kesa are close competitors and the latter has just announced that it is given away for nothing its UK arm, the Comet electrical store chain, which leaves it with just its European outlets.
As always with value, watch the debt situation. Net cash is the ideal but if you do accept some net debt, make sure it is acceptably low.
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