How have six defensive shares performed during volatile times?
Banks downgraded, Germany tough on Greece, Spanish debt worries with Italian stresses waiting in the wings, commodities with leaden prices … it's time to have a look at a 'batten-down-the-hatches' portfolio again.
It was on this basis -- and with largely the same fears in place -- that I took a look at six baked bean and shotgun shares in November; companies that should weather a storm pretty well come what may.
Since then, the FTSE 100 (UKX) has put on 7.5%. The six ultra-defensive shares, meanwhile, are up over 17.4% on average, including dividends paid or owed. Admittedly, the results are flattered by the takeover of Robert Wiseman Dairies. Nevertheless, the results stand. When I looked at the six shares again in April, I decided to bring in international tea grower, engineer and other activities, Camellia (LSE: CAM) at 9,740p, to supply our tea.
Camellia is probably the best value share I know of, but you really will need to be patient with this one.
I've also decided to boot out Lees Foods (LSE: LEE) at a decent profit due to a cheeky management buy-out at a knock-down price. The potential takeover was explored in detailed in a Foolish discussion. The bid approach comes from a company formed specifically for the acquisition, which includes the Lees directors.
Instead, I'm bringing in AIM-listed confectionery and snack foods group Zetar (LSE: ZTR) for something sweet to go with the tea.
So the six baked beans and shotgun shares now look like this:
J Sainsbury
J Sainsbury (LSE: SBRY) remains the best value of the big three UK-listed groups for me to buy the beans from -- and it's the highest-yielding at close to 5.8% at 293p. Its credentials as a value candidate were explored in depth by Stephen Bland recently. He concluded: "Sainsbury looks an attractive big-cap value play to me … particularly with the very low P/TB figure, aided by a decent yield to sweeten the wait."
Meanwhile, Wm Morrison (LSE: MRW) is also looking tempting to me again at 269p, and I've bought back in.
BP
Shares in BP (LSE: BP) have been suffering of late in line with the drop in the price of oil. I see no reason to panic here, quite the opposite in fact, and expect the company to do well over time.
We may soon all be driving to the supermarkets for our baked beans in electric cars, but it will take a while for the world's demand for oil to recede. Meanwhile, BP's valuation of less than six times next year's expected earnings at the current price of 405p, its near 6% anticipated yield, and a balance sheet that looks able to withstand the final settlement figure with the US government still make it a solid buy-and-hold for me.
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Camellia
Tea grower Camellia (LSE: CAM) can supply our tea. At 9,500p, this old-fashioned conglomerate is valued at £264m. But the group has no net debt, net cash of over £72m, net current assets of £121.7m, over £361m in net assets and £354m in net tangible assets.
It's also growing steadily, but sadly pays a paltry dividend of around 1.1%, covered many times over by cash-flow and earnings; otherwise, it would have the lot.
BPI
I still see no reason to sell British Polythene Industries (LSE: BPI), whose products are essentials for everyday life. Now 326p, the company is valued around six times next year's expected earnings with a respectable c.4% yield.
Carr's Milling Industries
Carr's Milling Industries (LSE: CRM) was a share that had everything back in July 2009 at 425p. Today, at 857p, the shares are on a price-to-earnings (P/E) ratio of around 9.5, with NTAV per share of 674p and a 3.2% yield; not bad for such a defensive business. One to leave in the defensive portfolio for now.
Zetar
AIM-listed confectionery and snack foods group Zetar (LSE: ZTR) looks good value to me at 195.5p. I don't expect fireworks, which is almost always the way with defensives. But I am hoping for steady growth from a company on a prospective P/E of just 4.7 for no good reason that I can see.
Finally, let me finish by adding that more share ideas can be found within this Motley Fool report: "8 Shares Held By Britain's Super Investor". The guide reviews the investing approach and portfolio of City dividend legend Neil Woodford and is free to download today.
Further investment opportunities:
> David owns shares in Sainsbury, BP, Morrison and Zetar. He doesn't own shares in any of the other companies mentioned.
