VALUE INVESTING
Value Amongst The Mid Caps

By Stephen Bland (TMFPyad)
August 12, 2005

Selections for my Value Investor newsletter start from a mechanical database trawl followed by an examination of company accounts and news etc. of potential candidates. That second stage then weeds out a lot of the initial short list which prove to be unacceptable for various reasons.

I used to do a feature here every so often on value that may be lurking mechanically in the FTSE100 by listing the cheapest shares on P/E, yield and P/TBV. For a change I thought I'd carry out a similar exercise but on the FTSE250 instead of the 100 index. For those unaware, the 250 index consists of the next 250 shares ranked by capitalisation below the 100 index.

I'm doing only the first stage though, the database trawl. For the second stage, readers wanting to look further must check back to the accounts and news. Note that my database uses only the latest annual accounts figures for assets with no update for interims or news. Consequently some of the information may be out of date. Yields and eps are consensus forecasts. Note too that databases sometimes have errors in them.

FTSE250 Ten Lowest P/E	Price	P/E
Wimpey (LSE: WMPY)	403p	5.4
Westbury (LSE: WBY)	446p	5.8
Wilson Bowden (LSE: WLB)	1,100p	6.1
Venture Production (LSE: VPC)	474p	6.1
McCarthy & Stone (LSE: MCTY)	530p	6.1
Barratt Developments (LSE: BDEV)	703p	6.2
Bellway (LSE: BWY)	844p	6.2
Corus (LSE: CS.)	46p	6.3
Redrow LSE: RDW)	396p	6.3
Persimmon (LSE: PSN)	806p	6.6

FTSE250 Ten Highest Yields	Price	Yield (%)
Brit Insurance (LSE: BRE)	88p	7.4
Electrocomponents (LSE: ECM)	253p	7.3
GCap Media (LSE: GCAP)	304p	6.2
Northern Foods (LSE: NFDS)	152p	6.1
Rank Group (LSE: RNK)	273p	5.8
Provident Financial (LSE: PFG)	633p	5.7
Bradford & Bingley (LSE: BB.)	330p	5.6
Cattles (LSE: CTT)	297p	5.6
F&C Asset Mgmt (LSE: FCAM)	200p	5.5
Yule Catto (LSE: YULC)	244p	5.5

FTSE250 Ten Lowest P/TBV	Price	P/TBV
Corus (LSE: CS.)	46p	0.68
Beazley (LSE: BEZ)	88p	0.75
Minerva (LSE: MNR)	290p	0.76
Millennium & Cop. (LSE: MLC)	370p	0.83
UNITE (LSE: UTG)	309p	0.94
CLS (LSE: CLI)	478p	0.96
Slough Estates (LSE: SLOU)	550p	1.00
London Merchant Secs. (LSE: LMSO)	224p	1.01
Brixton (LSE: BXTN)	366p	1.03
Gt. Portland Estates (LSE: GPOR)	358p	1.07

A couple of these shares have been selected previously by me for Value Investor readers. High yielder Northern Foods, for example, was a selection for my first high yield portfolio, which was completed a couple of months ago.

This simple analysis throws up some interesting facts. The most obvious perhaps is that eight of the low P/E list are housebuilders, something that those who don't follow the market too much might find surprising. These cyclical companies are being given extremely low valuations because the market expects them to be hit hard by the slowdown in the housing market.

Not surprising at all is that eight of the low P/TBV list are property shares, if you include Millennium which is a hotel business but is valued on assets like a property share. Property shares traditionally trade at a discount so their appearance here is to be expected. If you knew that, then you might raise an eyebrow at the fact that some of them trade at a premium or only very slight discounts. The reason is that property shares are also cyclical and at present are in a strong phase of their cycle, thus reducing discounts and even creating premiums on occasion.

Whilst both the P/E and P/TBV tables indicate very strong biases to the above industries, the yield table has no similar overpowering slant, revealing a variety of businesses. There are a couple of moneylenders in there, Provident and Cattles plus mortgage bank B&B which form a small grouping but other than that the shares are drawn from all over.

Multiple appearances indicate potentially stronger value possibilities than a single showing in one of these tables. No share appears in all three and only one appears in two tables, steelmaker Corus. It's the lowest of the P/TBVs and a low P/E share too. Not perhaps unexpected in view of its very erratic history.

So there you go, hope some find this useful. Remember that I'm giving no advice on any shares here, it's a just a mechanical trawl that could be a starting point for further investigation. If you want recommendations for value shares, then sign up here for a free 30-day trial to Value Investor.

Stephen owns shares in Rank Group.