Five Value Shares

Stephen Bland reviews the perfomance of his recent value picks.

I thought it might be useful for readers to see how I'm doing with my value selections following my disinterment a few months ago, giving my opinion on whether these should be held or sold. Note that there is no specific time period with value plays in which the investor can expect a share to do the business. Could be days, could be years though clearly the shorter the better.

Holding forever?

There is a view put forward by some recently on the Value Shares board that it might pay more to hold all value shares indefinitely rather than the traditional approach of selling when the value is outed and recycling the cash realised into new selections. Holding all one's value shares past their ex value stage is not though an approach which appeals much to me.

However in some cases, particularly perhaps with the larger caps I've been reviewing since my reappearance, certain selective shares could migrate from value to a more High Yield Portfolio style long-term income holding for those value players who also run HYPs, which I do myself. That's not the same though as the more radical idea of holding all value shares, unselectively, for an indefinite period and seeking greater capital gains by doing so.

Progress to date

Here's the list of my selections and their performance to date. I'm too indolent to research it but there may well have been some dividends since I picked them, which can't hurt performance any.

I've used bid prices to give the most realistic situation. This is especially relevant with a company like MSI because as a very small cap with rarely traded shares, it suffers from a very large spread, around 9p at present.

Company by company

IG stands out as the best performer by some way and it is also the earliest choice in my list. I'm still in them myself and have published a couple of updates here since selection. However the period of rapid growth in the share price may well be over for the time being because the share is not particularly cheap from a value viewpoint any longer. Dumpable probably if you are in for a pure value trade. The next guy is now in charge though it might be a decent income share which is why I haven't dumped yet, becoming my own next guy.

MS is the worst and the only loser so far. A trading update released in July after my original review doesn't tell us much that wasn't already known. It reiterates one of my original reasons for selection, namely that the net cash is still there. Their defence business continues to prosper and the industrial engineering division, a strange mix of fork lift forks and petrol station canopies, may have stabilised, though at depressed levels. Still looks okay to me though the extremely thin trading of the shares means this one especially requires patience.

Mucklow seems to be doing the business and I continue to see them as a relatively low-risk play on the commercial property market compared with many other shares in the sector, due to their modest debt and aided by the good yield while you wait. A lot more to go here in my view provided that the opinion heard often from property companies is realistic, about the slump having bottomed out. My guess is that this view is more likely to be accurate than not.

De La Rue hasn't done much since I picked it last month. I continue to see it as too cheap, and I hold the share too, essentially for an attractive yield. A trading update issued today regarding the period since 31 March shows a mixed picture from its various divisions but confirms that expectations for the results to the current financial year remain unchanged overall. If I'm right about it being too cheap, that means a positive correction is likely at some stage. With a forecast dividend of 44.5p, the expected yield at 906p is 4.9% which still aint bad and for what it's worth is forecast to rise further for the year ending March 2011.

Mining investor Anglo Pacific is too recent a choice to expect much but nevertheless it has shown a worthwhile rise already over the last couple of weeks, not hurt by the announcement of an initial coal resource estimate at a Canadian location and helping to broaden its principally Australian interests. Still attractive at this price.

Conclusions

A lot of this is somewhat premature given the very short time elapsed with the above shares but nevertheless I felt readers might appreciate an update because there have been developments. In particular, IG has probably shot its bolt on value grounds but all the others are all still in play in my view, meaning they are worth buying or holding if you are already in.

More from Stephen Bland:

• A Couple Of Results
• Mine Again
• Big Talk

Stephen holds IG Group and De La Rue.