Neil Woodford’s Biggest Blue-Chip Winners Of The Past 12 Months: BT Group plc, BAE Systems PLC And Rolls-Royce Holding PLC

Are BT Group plc (LON:BT.A), BAE Systems PLC (LON:BA) and Rolls-Royce Holding PLC (LON:RR) still good value today?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Ace investor Neil Woodford has trounced the market for more than a quarter of a century. The City wizard chooses stocks sparingly; in fact, fewer than one in five FTSE 100 companies are deemed worthy of a place in his funds.

Such selectivity means it’s always interesting to look at Woodford’s picks. BT Group (LSE: BT-A) (NYSE: BT.US), BAE Systems (LSE: BA) (NASDAQOTH: BAESY.US) and Rolls-Royce (LSE: RR) are his blue-chip bets that have delivered the biggest returns over the past 12 months — all well ahead of the Footsie’s rise of 12%. Are Woodford’s winners still good value today?

BT Group

The UK’s fixed-line telecoms giant has expanded into broadband and television to provide the ‘bundled’ services that have become popular with consumers these days. BT’s shares are up 47% over the past 12 months. On top of that, Woodford and other shareholders have seen their dividend income swell by 14% during the period.

Last month, BT reported earnings-per-share (EPS) growth of 5% for this year’s first quarter. Despite the Q1 increase, analysts are forecasting flat earnings for the full year — but then double-digit growth for the year after. Meanwhile, dividend growth is expected to continue bombing along at 14% a year.

Despite the big rise in the shares to their current level of 326p, BT’s forward price-to-earnings (P/E) ratio of 12.8 remains on the value side of the market average of 16, while the prospective dividend yield of 3.4% is modestly higher than the market’s 3.1%.

BAE Systems

The defence and aerospace company continues to suffer from reductions in US defence budgets. Nevertheless, the market seems to think the worst is over and to have been encouraged by prospects beyond the US and UK. The shares have risen 40% over the past 12 months.

BAE announced its half-year results last week, reporting a first-half EPS decline of 4%. However, this was due to deferred recognition of sales and profit relating to the formalisation of price escalation on a major programme. BAE upped its guidance for the full year to “double-digit growth” in EPS, assuming a satisfactory conclusion to negotiations on the price escalation during the second half.

Despite the big rise in the shares to their current level of 439p, BAE’s forward P/E of 10.3 remains firmly in value territory relative to the wider market, while the prospective dividend yield of 4.5% is well above the market average.

Rolls-Royce

A bit of a theme, then, among Woodford’s big winners, with BAE’s defence and aerospace peer, Rolls-Royce, also posting an outsize 12-month return: 39%. Rolls-Royce recently announced impressive half-year results, showing sales and EPS increasing 27% and the order book up 15%.

However, in contrast to BAE (and BT), Rolls-Royce is currently expensively-rated relative to the market on P/E and yield. At a share price of 1,185p, Rolls-Royce’s P/E is 17.7, while the income on offer is a measly 1.8%.

Finally, I can tell you that two of these big winners are analysed in the Motley Fool’s newly-updated Neil Woodford report. In fact, eight of the maestro’s current favourite blue chips are discussed, as well as his successful approach to investing.

This exclusive report is free and comes with no further obligation — simply click here and it’s yours with our compliments.

> G A Chester does not own any shares mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

More on Investing Articles

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

1 dividend stock with a juicy yield to boost returns!

This Fool likes the look of this dividend stock to boost his passive income stream and explains why he would…

Read more »

Happy male couple looking at a laptop screen together
Investing Articles

Here’s 1 growth stock primed for long-term growth and returns!

Jabran Khan is hunting for a growth stock to boost his holdings. Could this financial advisory business be the right…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

3 FTSE 250 shares I bought for extra dividends

I plundered the FTSE 250 index to find these three cheap stocks with ailing share prices. All three firms pay…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m buying cheap FTSE 100 stocks to boost my passive income!

Buying dividend stocks today could considerably improve the amount of passive income I make. Here are some FTSE 100 stocks…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Am I crazy for buying Royal Mail shares?

Royal Mail shares have collapsed by almost half in 2022. And with group profits falling and strike action under way,…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

2 recession-resistant stocks to buy right now

After the pandemic slump, we're now facing a UK recession. Many are looking for recession-resistant stocks to protect their money.

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

This FTSE 100 stock continues to fall! Should I buy shares?

This Fool takes a closer look at a FTSE 100 quality assurance stock. As the shares continue to fall, is…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Is the Rolls-Royce share price about to surge?

The Rolls-Royce share price continues to fall as market patience wears thin. But could it be on the brink of…

Read more »