Welcome to Naked Greed, the column that will not only let you have your cake, but also let you eat it!
Be unashamedly greedy because you just know it’s a no brainer! This regular column will celebrate the ludicrously undervalued, offering silly yields with great capital growth potential: Well managed companies with a raison d’être and not afraid of the dirty words profit and dividend; companies that don’t feature on the catwalk and hence can’t fall off it; companies that would have been gobbled up long ago had it not been for the crunch and hence provide the perfect fodder for future M&A. In a nutshell: The Ocado antichrists!
Bored with BP, fed up with Fresnillo, tired of Tullow? Then you should consider the ones that got away with it! However, the golden rule applies: Buy on weak sentiment, buy when the crisis hits and buy when there’s blood in the street! Right now the markets are still melting up which makes it particularly tricky… however, even now there are a few great buys:
No.1 on Pinkers’s list is Smiths News (Support Services). On 22 April 2014 it will become Connect Group PLC. The Group Structure will include three market-focused divisions: Connect News & Media; Connect Books and Connect Education & Care. This name change is overdue, reflecting the successfully implemented strategy to diversify away from magazine distribution towards the digital age. The s/p has come down substantially from a high of 248p to 153p with a current P/E of 8.9 and a yield of 6.1%. Pinkers agrees with Martin Waller of Times Tempus who sees no good reason for the s/p fall. This is an exceptionally well-managed company with a great future and almost certainly a potential candidate for M&A.
No.2 on the list is Catlin Group (Insurance). Punished for not dishing out a special divi after bumper results, the shares now trade at a P/E of 5.4 and yield 5.1%. Current price 533p and better capital growth potential than Amlin &Co. Pinkers likes companies that invest rather than keeping investors happy with sweeties.
Naked Greed will be back, soon… with picks from Construction, Food and Healthcare… a bientôt!