This Month's 10 Top Share Ideas

Published in Investing on 30 January 2012

A round-up of the best buying opportunities from January.

After last year's poor showing, the market has started 2012 in positive form, with 2% gain so far this month. Indeed, let's hope the so-called 'January effect' comes good and we can go on to enjoy further gains throughout the year. Just so you know, the FTSE 100 has to top 5,900 to recoup all the losses from 2011.

As always, the market's ups and downs during January provided numerous share ideas from your favourite investment website and, just in case you missed them first time, we've rounded up a selection to help you profit in the months and years ahead.

Once again, we're providing a range of ideas, including some well-known FTSE large caps as well as the usual selection of smaller companies. We hope all the names prove rewarding during January -- and beyond!

1. Tesco

No surprise Tesco (LSE: TSCO) tops this month's round-up. The supermarket watched its shares plunge 16% after warning of slower profit growth, which prompted Alan Oscroft to remind us the business "still commands a 30% market share", was "focused on the long term" and looked on course to pay a 4.7% income. Alan then reported Warren Buffett had bought in immediately after the slump around the 320p mark. On the downside, however, Prabhat Sakya suggested Tesco's turnaround may be protracted and told us to take a 'wait and see' approach.

2. Invensys

Here's another falling knife, this time courtesy of Charly Travers. He described Invensys (LSE: ISYS) as an "intriguing share right now" after the price slumped 17% the day after Tesco's warning. Charly reckoned Invensys was actually a "fundamentally sound business", and noted the group's blue-chip customer base, overseas growth prospects, cash-flush balance sheet and price-to-earnings (P/E) multiple of less than 10. 

By the way, Charly has also pinpointed a retailer that's defying the downturn and making great strides across Europe.

3. Man Group

David Holding also risked his fingers this month by trying to catch yet another FTSE falling knife. David said Man Group (LSE: EMG), the hedge-fund specialist, had seen its shares halve during the last three months, and they were now trading at a decade low of 113p. However, David noted the forecast P/E was just 6, the yield was 13% and the balance sheet showed net cash of $733m. His gut feeling? The shares were "worth buying".

4. RSA Insurance

Still with David Holding, but this time with RSA Insurance (LSE: RSA) and the possibility of securing a reliable 9% income. According to David, the insurer's 108p shares offered a forecast income of 9.2% assuming "the fundamentals remain in place". Other attractions highlighted by David included RSA's 106p net asset value, reassuring comments about trading, low exposure to eurozone debts and sizeable profits from Canada, Scandinavia and various emerging markets.

5. Miners

Alan Oscroft remains a fan of miners, especially after fears of a Chinese economic slowdown caused a fresh wave of share-price selling. Alan's mini-sector review showcased plenty of single-digit P/Es, and pinpointed Rio Tinto (LSE: RIO) at £36 and BHP Billiton (LSE: BLT) at £20 as the "most undervalued". According to Alan, "it looks like investors are still favouring precious-metals miners and the more speculative explorers, while shunning the major producers of everyday commodity minerals."

6. Balfour Beatty

Balfour Beatty (LSE: BB) caught the eye of Tony Luckett during January when the 273p shares sported a P/E of 8 and 4.6% yield. Tony mentioned how the engineering, infrastructure and consultancy group had enjoyed a good recession, with sales, profits and the dividend for 2010 all higher than that registered during 2006. Tony suggested Balfour's overseas operations and government spending on projects such as High-Speed Two Rail would keep the share firmly on his watch list.

7. Devro

G A Chester unearthed sausage-skin specialist Devro (LSE: DVRO) as a popular mid-cap pick among eight top professional funds. The City experts apparently liked the group's "defensive qualities, the simplicity of its business and its cash generation". At 260p, the dividend was also attractive to the fund managers, and a "kicker for growth" could be exposure to emerging markets. "A fairly low-risk opportunity for long-term growth and income" was G A's conclusion.

8. Teva Pharmaceuticals

Prabhat Sakya cited Teva Pharmaceuticals (NASDAQ: TEVA.US) as a potential hedge against expiring patents at major pharmaceutical groups. He explained how Teva, an Israeli manufacturer of generic treatments, had doubled its revenues to $16 billion between 2006 and 2010... and was aiming to double them again by 2015! Indeed, Teva reckons pharmaceutical treatments with sales of $150 billion could lose their patents during the next few years. A $46 stock price came with a trailing P/E of just 13.

9. GVC Holdings

GVC Holdings (LSE: GVC) was among the 10 AIM shares David O'Hara found that boasted yields of 7% or more. According to David, GVC has paid "consistently high dividends for the last five years" and its 138p shares currently offer a forecast 12.5% income. What's more, dividend projections for next year are apparently as high as 37p per share, suggesting a 27% yield! Before you ask, GVC runs gaming websites aimed at punters in countries where online gambling is, at best, a grey area.

10. Punt of the month

January's punt of the month comes from David Holding, who this month proposed four high risk-reward small caps that had the potential to double. Carbon-credit company Camco (LSE: CAO) was among David's punts, and recent news that it had sold a business for £4.5m prompted him to buy more. David's sums indicated Camco's 7.1p shares equalled the firm's net cash position and he believed the valuation made "little sense". But David did admit he had been wrong before!

What next?

We hope you liked this round-up of share ideas from January. 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 article about backing a broad spread of blue chips via this FTSE index powered by income.

We'll be back this time next month for another round-up of our favourite investment ideas. Until then, happy investing... and good luck!

> Here's your free Essential Investor Kit. Over the next few weeks, you'll get share ideas, a sector report and much, much more. Don't miss out!


> The Motley Fool owns shares in BHP Billiton and Tesco.

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The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

MadDutch 30 Jan 2012 , 1:53pm

I am not happy with RSA Insurance.

Sharescope confirms the dividend yield, 8.25% on Friday.

But it also points out the 1.1 times dividend cover. There is no point in buying a share for income if there is a strong probability of the dividend being cut.

I prefer Aviva with its 2.6 times cover.


blackwhite 30 Jan 2012 , 3:22pm

One ordinary Joe's view...

TESCO - I agree with Prabhat Sakya, still a wait and see for me, I think there is a small fall yet to come as the management response will lag the Christmas and the next set of results.

INVENSYS - I have b burden of knowledge of this industry having worked in it for years and hence too close to it, hence staying away from it (hope that make sense)

MAN GROUP - No, too nervous about what these kinds of companies can hide (think MF Global)

RSA INSURANCE - Purchased a stake last January, just topped up more last week, still 18% down on today's value. But not complaining at this high a yield.

MINERS - RIO and BHP - Still feel there is a bottom to be reached for miners.

Balfour Beatty - picked up a stake in Dec, currently 7% up.

Devro - just not convinced that this has a 'moat' around it or has a barrier to entry for other companies. Having said that, it might just be a great takeover target exactly because it has a market lead and might be a great pick up for some large behemoth. One to 'watch'.

TEVA - Would be a great one, but all I am using now is my ISA allowance, which means this is a no-invest for me :-(

GVC Holdings - seems too risky + can't be bought in an ISA :-(

Punts - checked them all out - not my bag personally.

theRealGrinch 30 Jan 2012 , 7:56pm

only 2 are of interest and on a watch list, but not time to buy now.

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