VALUE INVESTING
Ten Shares To Look At

By Stephen Bland (TMFPyad)
January 4, 2002

Here are a few suggestions for the New Year. All of these are mechanically selected pyad shares being the top ten market capitalisations (cap) in decreasing order that satisfy the following fundamental criteria:

- P/E < 12
- Yield > 4.2%
- P/TBV < 1 but > 0
- Debt < 0

The original list included several venture capital trusts but I have excluded these so as to arrive at a list of purely trading companies.

Note that I have not applied any cap filter nor have I for the purposes of this article considered any other features of these companies such as the presence of rising eps forecasts, quality of the directorspeak or any other factors that value investors commonly take into account when looking at the merits of a share. That is something I would prefer readers to decide upon for themselves. For these reasons I am making no comment as to whether they may be desirable or otherwise and they are definitely not any kind of tip. Just ostensibly cheap shares that may merit some further research.

UK Coal (LSE: UKC)
Low & Bonar (LSE: LOW)
Hardys & Hansons (LSE: HDYS)
600 Group (LSE: SIXH)
Northamber (LSE: NAR)
Mallett (LSE: MAE)
Churchill China (LSE: CHH)
FW Thorpe (LSE: TFW)
James Latham (LSE: LTHM)
Black Arrow Group (LSE: BLKA)

The caps range from UK Coal at £127m down to Black Arrow at £11m.

The balance sheet data for debt and book value is based on the last published annual accounts and might therefore be somewhat out of date. The P/E is based on a rolling twelve months ahead forecast of eps and the yield is based also on forecast dividends.

Several of these shares have been discussed on the value board in the past and I have written articles on some of them, notably UK Coal, Hardys & Hansons, 600 Group and Churchill China. In fact I held shares in UK Coal recently for a short time but decided against remaining in them, on balance, but it was a close call.

A widely diversified collection of businesses. It even includes an antique dealer – Mallett. I guess there can't be too many quoted shares operating in that field. In fact as far as I can see there are no two companies on the list operating in the same business sector. This latter point is somewhat surprising. You often find that trawls on a particular fundamental, low P/E for example, will throw up a number of shares in the same sector. Construction for example has in recent times been a major source of low P/E shares. But the combination of fundies I have used here, the actual ones that I would use in a search for likely investments for myself though I use in addition a minimum cap, have together produced this eclectic selection.

Nearly all of these are too small for me personally to have an interest these days. I normally start looking at a cap of about £100m but might go below that for a good one. Only the top three, from a cap viewpoint, would really get me looking further which takes me down to Hardys & Hansons whose present cap is about £65m. It's done reasonably well since I first wrote about it some time ago now. But I know that many value players do not bother with a lower cap limit and indeed I did not do so myself until a few years ago.

One final point. Although I have put these shares up for further inspection at the beginning of the new year, in fact I don't believe that calendar years should have anything to do with value investing really. There is no more reason to invest now than in the middle of the year. All that is important is that you discover what you believe to be a value share that will win for you. Forget about when you do it or measuring how it has done over the year. Buy on value and sell when sufficient of the value has evaporated regardless of the time of year or how long you have held it.