Why Standard Chartered PLC & Wm. Morrison Supermarkets plc Are A Great Value Combination!


A key aim of all investors is to buy low and sell high. It makes perfect sense in theory, since it means that profit is maximised and, on paper, it appears to be a relatively straightforward tactic.

However, it doesn’t take into account the risk involved in the first part of the strategy. Indeed, ‘buying low’ entails a significant amount of short-term risk, since shares are rarely (if ever) low without good reason.

Of course, if you can find stocks that are too low, given their risk levels, then they could prove to be the really strong performers in the long run. With that in mind, here are two companies that seem to be trading at unjustifiably low share prices right now.


On the valuation front, Morrisons (LSE: MRW) (NASDAQOTH: MRWSY.US) has huge appeal. Its shares are very low due to a highly challenging supermarket sector that has seen competition rise to a level not previously witnessed in the UK. For this reason, profitability has been hit hard, with Morrisons essentially being forced into a price war with its main rivals.

As a result, profitability is being hit hard, with the company’s bottom line due to fall by around 50% in the current year. Despite this, Morrisons remains very profitable and financially sound, with relatively low debt levels being a major plus for investors as interest rates are set to rise. With shares in the company trading on a price to book ratio of just 0.77, they appear to scream value right now.

In addition, Morrisons has the potential to turn things around. For example, the addition of online and convenience stores to its estate should help to boost sales, with more outlets due to be focused on its under-served South-East England region. These developments could, taken together, help Morrisons to deliver stronger profit growth than expected in future years.

Standard Chartered

A profit warning earlier this year hit the share price of Standard Chartered (LSE: STAN) (NASDAQOTH: SCBFF.US) very hard, with a regulatory fine also crushing sentiment during 2014, too. For these reasons, shares in the Asia-focused bank now trade on a very appealing price to earnings (P/E) ratio of just 9.9. This is low on an absolute basis, but is even more attractive when you take into account the fact that the FTSE 100’s P/E ratio is 12.9.

In addition, Standard Chartered’s exposure to the Asian economies is helping it to grow earnings at a rapid rate. For example, although the first half of 2014 was highly challenging, next year is expected to be much stronger and the bank is due to increase its bottom line by 10%. This puts shares on a price to earnings growth (PEG) ratio of less than 1, which is very appealing.

So, while the short term may prove tough for both companies and their share prices could move lower, for long-term investors they seem to be unjustifiably low at present. As a result, they could both make a hugely positive impact on Foolish portfolios.

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Peter Stephens owns shares of Morrisons. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.