Stephen Bland trawls for the cheapest blue chips.
Here's an exercise I used to run occasionally and which I'm reviving. A purely mechanical value survey of the FTSE100, looking at the top ten by highest yield and lowest ten by P/E and price to book value.
It is intended only as a starting point for possible further investigation of big cap value that may be lurking in the index, not as basis alone for investing in any of these shares.
The idea is to look for multiple appearances in the tables and any share scoring three may be a potential value candidate with a score two possibly worth a look as well, maybe some of the single appearances too.
Note that I have drawn the selections from Digital Look with little checking on the veracity of the figures though I have amended some of the information where I was aware of inaccuracies. It must be borne in mind that databases like this do contain errors.
Top Ten Yields
Yields are based on dividend forecasts for the current accounting year of the share. National Grid is based on the existing pre rights forecast but this will be adjusted down in due course following Thursday's announcement of a rights issue where they euphemise this in directorspeak as the "bonus element" effect of it on dividends.
Ten Lowest P/E
Eps forecasts are based on the rolling next twelve months.
Ten Lowest Price to Book
Asset figures based on last annual balance sheet though that may be out of date in some case. Note that this is Price/Book, not Price/Tangible Book, which unfortunately wasn't available. The results will therefore include intangible assets and anyone interested may wish to strip that out in order to filter out those shares with low P/TB.
Results
So what sticks out here? Well, the preponderance of insurance companies for a start. The tables are positively laced with them which tells you something about the state of this industry or more accurately, the state in which the market regards this industry which is not the same thing at all.
In fact one of them is the sole triple scoring share here and also a value pick of mine, Aviva. I thought it was dreck cheap at about 400p and here we are at more like 300p. But have the fundies changed? Not as far as I know, so it's fear and negative sentiment that seems to have done for it. Just shows that there are no depths too deep to plumb, even for a blue chip like this.
Not only does the hapless palindrome feature in all three, it is actually top of both the high yield and lowest P/E tables and second in the lowest P/TB. It's only a whisker away from being top of that too, so near as makes no difference it's virtually a clean sweep for this share. Speaking only from memory, it is a long time, if ever, since I dreamt up these tables years ago that a share has featured as strongly as this. Draw your own conclusions but it still looks good to me.
Elsewhere Shell and BP appear twice though not in the same two tables. Shell makes the yield and P/B lists whilst BP features in the yield and P/E tables. So these big oils look pretty cheap right now.
BP has been hit by the spill news but despite that and it's resultant possible crisis play situation, it aint really a whole lot cheaper than rival Shell. Another insurer, Old Mutual is in both the P/E and P/B tables, topping the latter by an irrelevant whisker over Aviva.
In the yield table we get the usual crop of utilities, four this time, which always feature here. The traditional explanation is that their high yields are a trade-off to investors for the lack of potential growth caused by regulation. Most HYP investors will have a few utes in their portfolios.
Several good starting points here then for value players considering big caps. My view on value plays has always been that other things being equal, which they rarely are, the bigger the cap the better.
More from Stephen Bland:
> Of the shares shown, Stephen owns Aviva, BAE Systems, BP, BT, National Grid, Scottish & Southern, United Utilities.
