6 Baked Bean And Shotgun Shares

Published in Investing on 25 November 2011

A few investments to ponder if Armageddon is nigh.

If we really are in for the kind of worldwide recession markets seem to fear, then which shares which will see out the storm? I've been hunting for a few interesting ones in all shapes and sizes. I'm not as fearful as Mr Market, as I believe we're over the worst.

In February, I said "if you were looking for excellent value plays two years ago, they were very thick on the ground -- now the opposite is true, so this should be telling us something."

Clearly, it was. I heeded my own advice to some extent, but nothing like enough. Hindsight is a wonderful thing. Now I believe the opposite is true.

But if you're nervous about pretty much everything then the Maslow's hierarchy of needs baseline, "physiological needs" may be a good starting point. These include our basic needs; air, water, and food, clothing and shelter etc.

And there are good value companies operating at the base of Maslow's pyramid. So if we're all kitting out the air raid shelters with shotguns and baked beans, metaphorically-speaking, what should we be looking at?

Bargains galore

Over the last few days, I've been poring over scores of companies and finding bargains galore. But if you've limited cash left to invest, and want to take a safety-first approach, then the real essentials providers should do well. As you'd expect, a few have fared a lot better than the overall market. But that doesn't mean they aren't good defensive value now.

Of the companies I've looked at, the following look good value Maslow-based baseliners to me:

1. Sainsbury

First, you'll need somewhere to go to buy your baked beans. I've explained recently why I like Sainsbury (LSE: SBRY).

Having looked yet again at the three big UK-listed supermarkets, at 283p, I still like it the best. That's because I like real assets and see Sainsbury almost as a property company that sells a few groceries on the side, profitably I might add!

Morrison (LSE: MRW) and Tesco (LSE: TSCO) are no doubt more exciting on future earnings and growth etc., but Sainsbury wins on assets. The prospective yield of almost 5.7% isn't bad either. 

2. BP

On the presumption that you're going to want to drive to the supermarket to get your beans, BP (LSE: BP) looks compelling long-term value to me.

At the current price of 420p, BP is valued around six times next year's expected earnings. The forward yield is a respectable 4.4% and the pre-Deepwater Horizon oil platform disaster yield is twice as high.

The balance sheet hasn't been as badly damaged by the disaster as was feared thanks, in part, to the $4bn boost BP is to receive in cash as part of the settlement with Anadarko Petroleum for the disaster.

3. Robert Wiseman Dairies

No doubt you'll want milk with your tea or coffee as a post baked bean beverage. If so, Robert Wiseman Dairies (LSE: RWD) looks a good bet.

For something of a defensive share with a solid balance sheet, Robert Wiseman's shares haven't half done badly of late. The dairy giant's shares are now down to 252p, valuing the company at 11.6 times this year's expected earnings, with a better than 7.1% yield to boot. Net tangible assets (NTAV) per share of 221p seal the deal.

4. BPI

You'll also want good value in a company that enables these other basics suppliers to do business. I see value in British Polythene Industries (LSE: BPI) at 326p.

The polythene film products maker's wares are prerequisites in all sorts of primary and secondary industries. I just wish I'd bought BPI earlier in the year with the price languishing around 230p.

Still, at 326p, the shares are trading just over six and a half times expected earnings, with a yield of around 3.7%.    

5. Carr's Milling Industries

On the other hand, I wish I hadn't sold Carr's Milling Industries (LSE: CRM) earlier in the year; probably to invest in some quality British financial institution or other!

But you'll need some bread to toast with your beans. And Carr's recent results were very encouraging and the outlook sensibly optimistic; just what you'd expect from this superbly run, feet-on-the-ground company.

Today, at 775p, the agriculture, food and engineering group, is trading on a current P/E of 9, yielding 3.4%, and 85% of its value is accounted for by net tangible assets.

6. Lees Foods

Last and least, tiddler Lees Foods (LSE: LEE) looks interesting, if you want a cake or two with your tea.

 Valued at just £4.7m at a share price of 193.5p, the Scottish confectioner had £1.1m in net cash at the halfway stage. Full-year earnings are expected to be around 32p. Take the cash out of the equation and the P/E drops to a startlingly low 4.6. There's even a near 3.9% dividend yield to spend on the confectionary.

Sorry -- I don't know where to buy shotguns!

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More from David Holding:

> David owns shares in Sainsbury, Morrison, BP, & Robert Wiseman Dairies. The Motley Fool owns shares in Tesco.

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HighbrowNick 28 Nov 2011 , 12:56pm

Love the healine!!

I dont luke Wiseman much though. A well managed company but an awful industry with sypermarkets cutting margins.

Intersting other ideas.

HighbrowNick 28 Nov 2011 , 12:58pm

Excuse the typos above. Trying to type with my android phone.

4spiel 28 Nov 2011 , 1:13pm

Sainsbury's I don't think own their stores -land or buildings now ?

Kingfisher55 28 Nov 2011 , 2:37pm

A lot of the best out of town superstore sites are owned by British Land and leased on long leases with upward only rent reviews. So BL provides exposure to the superstore operators, AND there is an opportunity of capital growth when commercial property values rebound. This along with a decent dividend paid each quarter. BL is a REIT.

LeeJG 28 Nov 2011 , 3:54pm

I'm not convinced by any of these - too much risk, not enough potential growth against their historic highs. BL might be worth a go as it is tied to a lot of retailers success and spreads the risk a little more.

Personally I'm sticking with what I have until we see some green shoots. It was the mistake I made a year ago but at the moment 'cash is king!' I really should not have dismissed the gold bubble pushers.

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