10 Top Share Ideas

Published in Investing on 2 December 2011

A round-up of the best buying opportunities from the last month.

Oh well, perhaps another good month for shares was too much to ask for.

Following a barnstorming October -- when the FTSE 100 managed to rally 8% -- November saw the rebound falter and the market lose 1%. Indeed, various worries about the eurodebt crisis had seen the blue-chip index plunge 7% during the first part of last month. It's all left the FTSE 100 needing to add 400 points to surpass 5,900 if it is to record a gain this year.

As always, the market's ups and downs provided numerous share ideas from your favourite investment website and, just in case you missed them the first time, we've decided to round-up a selection to help you take advantage of any further volatility.

After highlighting some overseas opportunities last time around, we've returned this month with some well-known FTSE large-caps as well as the usual selection of smaller companies. We hope all the ideas prove rewarding during December -- and beyond!

1. Sainsbury

David Holding went shopping for baked beans and, er, shotguns during November and found them -- sort of -- at J Sainsbury (LSE: SBRY). Even with financial Armageddon possibly on the horizon, David reckoned people still had to eat and Sainsbury at 300p looked attractive trading below its book value. Indeed, David said the supermarket's accounts remained flush with property and a 5%-plus income would provide a welcome income.

2. Lloyds Banking Group

Counterbalancing his steady Sainsbury selection, David Holding also predicted the shares of Lloyds Banking Group (LSE: LLOY) could be worth twice as much as the bank's then share price of... 30p. That could mean today's 22p could be an absolute steal if, as David said, "you have the courage to average down on the market's fears". His sums suggested buyers at 30p were paying the equivalent of just 3.5 times underlying pre-tax profits and 51% of the balance sheet.

3. Vodafone

Now to G A Chester and his liking for Vodafone (LSE: VOD). He reminded us about the telecom group's dividend promise -- that is, to lift the annual payout by 7% this year and next -- and he thus predicted a 9.5p per share income for current holders. With a 4p per share special dividend as well, the 177p shares therefore offered a "whopping" 7.6% yield. Positive news on profit guidance also supported his enthusiasm.

4. Smith & Nephew

G A Chester was convinced Smith & Nephew (LSE: SN), the FTSE 100 medical equipment group, would in the future benefit from "significant demographic and lifestyle tailwinds". Impressive earnings growth and excellent cash generation had in previous years seen the firm valued at 20 times profits, but these days the 537p shares trade on a P/E of 11. He noted S&N had been subject to takeover speculation earlier this year, and believed any further rumours were in for free!

5. Kcom

Now to a pair of share picks from Alan Oscroft, the first of which is Kcom (LSE: KCOM). Alan reckoned Kcom -- the old Kingston Communications -- was one of three telecom shares better than BT (LSE: BT-A). Indeed, Kcom still serves Hull with the country's only non-BT landlines, but has since expanded to supply telecom services to businesses throughout the UK. Alan noted Kcom's promise to lift the dividend 10% this year put the 71p shares on a 5.5% yield.

6. London Stock Exchange

The second of Alan's shares is London Stock Exchange (LSE: LSE), which he revealed to be a significant beneficiary of the Italian debt crisis. Alan spotted the LSE reporting a sensational 79% profit leap, which was based largely on the group's Italian clearing division making overnight loans to the country's struggling banks. All told, Alan felt the LSE "looked a decent long-term possibility" with the 818p shares trading at 9 times forecast earnings.

7. Man

Interim figures from hedge-fund firm Man Group (LSE: EMG) caught the eye of Cliff D'Arcy, who spotted the group's funds declining by 7% and a lack of performance fees thumping profits by 48%. However, Cliff also saw the dividend being held and the balance sheet retaining some $733m of net cash. Furthermore, he claimed the 145p shares were now "worth buying as a geared play on a market recovery", based on a P/E of 10 and potential 8% yield.

8. Computacenter

A dividend that has consistently improved during the recession prompted Kevin Godbold to showcase the attractions of Computacenter (LSE: CCC). The IT services mid-cap lifted its payout by 76% between 2006 and 2010 and a 370p share price could, so Kevin calculated, lock in a 4.4% income. Bullish management remarks supported earnings growth of 10% and underpin a P/E of 9, while modest borrowings and a 30-year trading history also reinforced the bull case.

9. Greene King

The Fool's beer analyst, Tony Luckett, reported back from further on-site research and told us Greene King (LSE: GNK) could still brew a decent pint. Tony also confirmed the brewery/pub group had lifted its dividend in each of the last six years by more than the rate of inflation, and reckoned the steady nature of the company ought to let its shareholders "sleep peacefully". A 5%-plus income and a 452p per share asset base were his value highlights at 446p.

10. Punt of the month

This month's punt -- AorTech International (LSE: AOR) -- comes courtesy of David Holding and private investor Roy Mitchell. Roy owns 5.4% of this £9m AIM tiddler, so his £500,000-or-so stake is pretty large as blue-sky gambles go. Anyway, Aortech is developing a material for medical devices, has only ever recorded losses, while cash reserves run at less than £2m. But Roy expects profitability soon and presumably expects multibagger returns.

What next?

We hope you liked this round-up of share ideas from November. As always, don't buy blindly, but instead use the articles as starting points for your own further research. However, if you can't decide what to buy, or don't like this particular selection, then you may wish to read Malcolm Wheatley's study of the cheapest index trackers and the cheapest FTSE-tracking ETFs!

We'll be back in early January for another round-up of our favourite investment ideas. Until then, happy investing... and good luck!

> Searching for even more Foolish share ideas? Enjoy our latest report -- 3 Shares We're Ready To Tip -- while it's still free and available!

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TheMufinman 02 Dec 2011 , 1:34pm

Aortech....the guy must be mad to have over £500,000 tied up in a "punt' and 'blue sky gamble", more money than sense obviously, I wonder how it has performed since the article by David was written. I see it was 193p then and today it is.....290p......an increase of over 50%...so the £500,000 is now £750,000..gulp.....

I think you will find that this is a well researched investment rather than a punt or blue sky gamble and is not so much reliant on future profits as being a value play, see post:


It is also not true to say that "Aortech is developing a material for medical devices" the material, elast-eon is already developed and received FDA approval back in 2005 for use in the human body


MaynardPaton 02 Dec 2011 , 2:23pm

Hello Roy

I think you will find that this is a well researched investment rather than a punt or blue sky gamble and is not so much reliant on future profits as being a value play, see post:

Fair enough. I took the "developing a material" phrase from David Holding's original article, which cited: "is focused on developing its biologically stable 'Elast-Eon' materials for use in medical devices."

SteveMarkus 02 Dec 2011 , 6:15pm

Congratulations Roy!

eccyman 02 Dec 2011 , 9:01pm

Just an interesting point about KCOM. They do run the only network in the UK outside the BT franchise - but KCOM have outsourced the running of their network to BT!

Both companies are on my watch list.

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