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In my view, the government’s stumbling approach to Brexit really isn’t inspiring much confidence, either here in the UK or with our (for now) European partners. But on the bright side, the resulting ‘flight to safety’ by institutional investors is, I think, depressing the valuations of some pretty good stocks — and that means it’s bargain time.

Investment profits

Earnings from the City of London Investment Group (LSE: CLIG) have been a little erratic over the past few years, but that’s to be expected from an investment manager specialising in emerging markets — and we’ve still seen a very tasty EPS rise of 48% between 2013’s 24.9p and the 36.9p reported for June 2017 (though admittedly, the most recent annual profit hike was boosted by exchange rates shifting against the pound).

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On top of that, we’ve seen dividend yields exceed 6% every year over that period, even getting to 8% in 2016. With the 425p shares on a forward P/E of 11.4 and with the City predicting a dividend yield of 6.2%, I reckon the shares are still looking like a bargain.

An update on Monday revealed that funds under management have risen from $4.7bn (£3.6bn) at June’s year-end to $5bn (3.7bn) by 30 September, and that pre-tax profit for the quarter is likely to come in at around £2.5m — up from £2.3m a year ago.

The 2017 dividend of 25p per share was confirmed, and it will be dropping into shareholders’ piggy banks on 31 October.

City of London has been a cash cow so far, and I can only see that continuing. And it’s backed by cash — at June this year the firm was sitting on £13.9m in net cash, up from £10.1m a year previously.

I see the shares continuing to rise.

Solid as bricks

Speaking of cash cows, Bovis Homes Group (LSE: BVS) is a big favourite of mine (along with the rest of the housebuilding sector).

Punished wholly irrationally in the immediate aftermath of the Brexit referendum, the shares have put in quite a spectacular recovery — from a closing low of 627p in July 2016, they’ve soared by 84% to today’s 1,151p levels.

Even after that, we’re still looking at forward P/E multiples around the 13-15 range, which is pretty much bang on the long-term FTSE 100 average. For a company paying modest dividends, that would be about right, I think. But with a predicted dividend yield this year of 5.5%, it’s surely cheap.

What’s more, Bovis is so good at generating cash, it intends to pay special dividends too. At the interim stage this year the firm told us it expects to hand out a total of £180m over the next three years, which is approximately 134p per share and would boost the total 2018 dividend yield to around 7.3%.

Business is still going well, and though first-half completions were down 6%, a change in the mix saw average selling prices rise by 9%.

We’re looking at a housebuilder here with a strong land bank, net debt of a modest £32.4m, and with strategic targets of getting annual completions up to 4,000 homes and its gross margin up to 23.5%.

Will that be achieved? Well, one thing I’m sure of is that the UK’s housing shortage isn’t going to disappear in the next decade, Brexit or not.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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