Neil Woodford’s Biggest Blue-Chip Losers Of The Past 12 Months: Imperial Tobacco Group PLC, G4S plc And British American Tobacco plc

Are Imperial Tobacco Group PLC (LON:IMT), G4S plc (LON:GFS) and British American Tobacco plc (LON:BATS) now good value?

| 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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Ace investor Neil Woodford has a market-trouncing record spanning 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 its always interesting to look at Woodford’s picks. Imperial Tobacco (LSE: IMT) (NASDAQOTH: ITYBY.US), G4S (LSE: GFS) and British American Tobacco (LSE: BATS) (NYSE: BTI.US) are his blue-chip bets that have underperformed the market by the widest margin over the past 12 months — all well behind the Footsie’s rise of 13%. Are Woodford’s losers now good value?

Imperial Tobacco

Imperial Tobacco’s products include iconic French brand Gauloises, and Golden Virginia, the world’s best-selling roll-your-own tobacco. Investors have been concerned about Imperial’s exposure to the economies of the European Union (over 40% of sales) in light of what Imperial’s chief executive referred to as “a deteriorating EU environment” earlier this year. Imperial’s shares have fallen 15% over the past 12 months, making the company Woodford’s biggest blue-chip loser.

However, City analysts still see Imperial growing earnings per share (EPS) and its dividend this year and next. At a share price of 2,141p, the market has the company on a forward price-to-earnings (P/E) ratio of just 10.2 for the current year — firmly in value territory relative to the FTSE 100 average of 15.9. At the same time, a prospective dividend yield of 5.2% is a full two percentage-points higher than the Footsie’s 3.2% average.

G4S

The world’s biggest security firm has been through the wringer during the past 18 months. Among other things G4S: messed up its staffing contract for the Olympic Games, lost its longstanding chief executive, and has lately come under investigation for potentially over-billing the government for tagging offenders. The company’s shares are now 11% lower than 12 months ago.

G4S’s troubles haven’t shaken Woodford’s faith in the company, and his Invesco group increased its holding as recently as 29 July. In fact, Invesco now owns over 16% of G4S’s share capital. Analysts are forecasting a 5% decline in EPS this year followed by a double-digit bounceback for 2014 (with the dividend growing both years). A share price of 235p puts G4S on the value side of the market: the forecast P/E for the current year is 11.7 and the prospective yield is 4.1%.

British American Tobacco

As with Woodford’s biggest winners, there’s a bit of a theme among his losers, with British American Tobacco (BAT) joining Imperial as a bottom-three underperformer. BAT, whose global brands include Dunhill and Lucky Strike, has less exposure to Europe than Imperial, and better overall geographic diversity. BAT’s shares are unchanged over the past 12 months, bettering Imperial’s 15% decline, but still conspicuously underperforming the 13% rise of the Footsie.

BAT’s chairman recently said, within the company’s half-year results: “The business is performing well and we are confident of another year of good earnings growth”. Analysts are forecasting 7% growth for both EPS and the dividend. At a share price of 3,465p, BAT’s forward P/E of 15.5 is not only much higher than Imperial’s, but also close to the Footsie average. However, the prospective income is a market-beating 4.1% — albeit not a match for Imperial’s 5.2%.

Finally, I can tell you that two of the companies I’ve featured here 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 assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

Should I still be cautious about Rolls-Royce shares?

Rolls-Royce shares are flying. But is now the time for this Fool to open a position? Here, he explains why…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Is the Diageo share price coiled to rebound?

Christopher Ruane explains why he remains bullish about the long-term outlook for the Diageo share price and would happily invest…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

How I could make a 10% yield for high passive income a reality

Jon Smith explains how he can target high passive income from top-yielding stocks, including one specific example he'd consider.

Read more »

Investing Articles

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

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

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »