Every month, we ask our freelance writers to share their top ideas for value shares to buy with investors — here’s what they said for March!
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3i Group
What it does: 3i Group is an investment business that operates in the private equity and infrastructure fields.
By Edward Sheldon, CFA. I’m convinced that 3i Group (LSE: III) shares are undervalued right now.
For starters, the company’s price-to-earnings (P/E) ratio is very low. Currently, it’s just four. That’s well below the UK market average.
Secondly, 3i’s Chairman David Hutchison recently purchased around £230,000 worth of company shares. Generally speaking, corporate insiders buy company stock when they believe it’s undervalued. It’s worth noting that Mr. Hutchison is very experienced in the investment world. Previously, he was Head of UK Investment Banking at Dresdner Kleinwort. So, he is likely to have a good idea of 3i’s intrinsic value.
Now, 3i’s revenues and profits can fluctuate quite a bit. If they were to deteriorate, the stock may not look so cheap.
I’m encouraged by the recent director dealing activity, though. I think the risk/reward skew here is attractive.
Edward Sheldon has no position in 3i Group.
Centamin
What it does: Centamin explores, mines, and develops precious metals via its operations in Egypt and Côte d’Ivoire.
By Charlie Carman. Centamin (LSE:CEY) shares offer gold exposure, which can prove invaluable in times of crisis. The Sukari gold mine in the Nubian Desert is the jewel in the company’s crown when it comes to productive assets.
One advantage to investing Centamin over an ETF that tracks the precious metal is the passive income the stock produces. Currently, the firm boasts a 6.5% dividend yield.
The miner has lifted gold production guidance by around 5% for 2023. In addition, it expects its costs will fall below the industry average. This bodes well for future share price growth.
One risk facing Centamin is its reliance on its Egyptian operations. After a rock fall hit production at Sukari in 2020, the share price plummeted and is yet to recover.
However, a pre-development study at Centamin’s Doropo mine in Côte d’Ivoire shows efforts to diversify the company’s revenue streams are underway. I’d buy these value shares this month.
Charlie Carman has no positions in Centamin.
Forterra
What it does: Forterra makes bricks. Most notably, it makes the London Brick Company bricks that are used in UK houses.
By Stephen Wright. Shares in Forterra (LSE:FORT) trade at a price-to-earnings (P/E) ratio of around 8. I think the shares are great value at that price.
Sometimes, when a stock is trading at a low P/E ratio, it can be a sign that the market is expecting a decline in earnings. I think that’s probably true of Forterra.
Higher interest rates making mortgages more expensive is likely to reduce demand for new houses. That will be a headwind for Forterra.
But at today’s prices, I think that the stock has enough of a margin of safety built into it. The stock pays a dividend, which yields just over 5% at today’s prices.
Even if that gets cut in half due to lower earnings, a 2.5% dividend is still not a bad return in the short term. And when housing demand normalises, I think that buying Forterra shares today will prove to be a good investment.
Stephen Wright does not own shares in Forterra.
Redrow
What it does: FTSE 250 housebuilder Redrow specialises in building high-quality homes, targeting more affluent buyers.
By Roland Head. Redrow (LSE: RDW) is known for its popular Heritage range of house designs. However, the company is pushing ahead with introducing modern, low-emission technology to its new homes. Air source heat pumps and underfloor heating are now becoming standard in Redrow’s detached houses.
This FTSE 250 stock has sold off as the market has priced in a slowdown. Although I can see some short-term risk, I think this business is already priced for a cautious outlook. The shares are trading around 10% below their 580p book value and offer a forecast yield of 5.6%.
Another attraction is that founder Steve Morgan remains the company’s largest shareholder, with a 17% stake. I’d guess his influence will help ensure that management avoid costly mistakes.
Although the outlook for 2024 is uncertain, Redrow’s financial position looks healthy to me. I believe this stock offers good value at current levels, on a medium-term view.
Roland Head does not own shares in Redrow.
Ten Entertainment Group
What it does: Ten Entertainment Group operates 1,143 ten-pin bowling lanes in the UK across around 50 sites.
By Royston Wild. Ten-pin bowling has enjoyed a renaissance in the UK over the past decade. This upsurge was disrupted by Covid-19 lockdowns, but player participation has been impressive since alleys reopened.
Strong trading from leisure share Ten Entertainment Group (LSE:TEG) illustrates the strength of the rebound. Like-for-like sales were up 40% year on year in 2022, a result that led the company to predict consensus-beating profits growth.
I’m expecting the firm’s full-year report on Wednesday 22 March to reveal that trading has remained robust at the start of 2023. Bowling isn’t an expensive way to keep the family entertained and I reckon sales will remain strong this year despite the cost-of-living crisis.
Ten Entertainment’s shares are quite cheap on paper. They trade on a forward P/E ratio of just 8.5 times. Such a low valuation gives extra space for fresh share price gains if full-year numbers impress.
One final thing: at current prices, Ten Entertainment also carries a meaty 4.9% prospective dividend yield.
Royston Wild does not own shares in Ten Entertainment Group.
