3 Stock Picks From Top Professionals

Published in Investing on 19 November 2012

These three companies are favoured by proven professional stockpickers.

Can amateur investors make money by hanging on the coattails of professional stockpickers?

A little while ago, I tried an experiment that could potentially answer the question. In a series of articles here on The Motley Fool, I highlighted some of the best ideas from a select pool of expert stockpickers.

Today, I'm going to take a look at how their large-cap picks have performed so far, and tell you why three of the picks -- BG Group (LSE: BG), Rio Tinto (LSE: RIO) and British Sky Broadcasting (LSE: BSY) -- could still make good investments today.

The pro pickers perform

The following table details the performance to date of the blue-chip picks that featured in the series, together with the performance of the wider market in the shape of the FTSE 100 (UKX) index.

CompanyHighlighted share priceCurrent share priceGain/(loss) (%)FTSE 100 gain/(loss) (%)
BG Group1,252p1,000p(20.1)6.0
Rio Tinto3,389p2,934p(13.4)6.0
Smiths Group (LSE: SMIN)965p1,018p5.56.0
Rio Tinto3,096p2,934p(5.2)3.4
Lloyds Banking Group (LSE: LLOY)23.6p44p86.43.4
British Sky Broadcasting692p745p7.7(4.3)
Carnival (LSE: CCL)2,013p2,427p20.6(4.3)
ARM Holdings (LSE: ARM)506p711p40.50.6
Average  15.22.1

Overall, the experts' picks I highlighted for you are showing a handsome return so far, with recovering bank Lloyds, microchip designer ARM and cruise-ship operator Carnival leading the way.

However, it's three of the laggards that I think are particularly interesting for investors today, and I'm going to tell you what our experts have to say about them.

BG Group

Back in July 2011, BG Group released interim results ahead of analysts' expectations, and the shares closed on the day at 1,467p. Nevertheless, the shares were sucked down when global markets began sinking rapidly a few days later.

One of our experts, Mark Sheppard (Manchester & London IT (LSE: MNL)), said at the time that BG "may now be one of the most undervalued stocks on the market". Sheppard saw the company not only as a good long-term growth story, but also as a potential takeover target because of its attractive assets. I highlighted BG at 1,252p in September 2011.

Having climbed to over 1,500p earlier this year, BG's shares have been clobbered by a recent announcement that the company expects zero production growth in 2013. Flat production was well below market expectations and doesn't sit too well with BG's prior target of compound annual growth of 6-8% through to 2020.

However, Sheppard has recently said: "Much of this reduction related to the deferral, rather than loss, of production. As such, the underlying value of its assets should remain broadly unchanged and with the market's heavy reaction now offering a discount in excess of 40% to some [intrinsic] NAV estimates, we see this as an opportunity."

Rio Tinto

Richard Buxton (Schroder UK Alpha Plus) was a buyer of Rio Tinto in June 2011 when the shares were trading north of 4,000p. A couple of months later, in the first week of August, the shares were hit hard by a combination of the general market meltdown and interim results that fell a little short of analysts' expectations.

Several of our experts stayed bullish on the company, arguing that "the fundamentals do not justify the extent of these falls" and that Rio was "materially undervalued on a longer-term view". I highlighted the shares at 3,389p in September 2011, and again in December after they'd fallen a further 10% or so to 3,096p. Since then, Rio and other miners have largely remained in the doldrums.

Having added to his holding on share price weakness, Buxton maintains an overweight position in Rio. Sheppard likewise remains keen on the company, which is a top 10 holding for him. Sheppard doesn't believe the urbanisation and industrialisation story in Asia has fully played out, and he particularly likes Rio's low cost of production.

British Sky Broadcasting

Mark Slater (Slater Growth and Slater Recovery) was a buyer of BSkyB in July 2011. The shares had crashed from 850p to under 700p after News Corporation withdrew its bid to take over the company following the News of the World phone-hacking scandal.

I highlighted BSkyB in March this year when the shares were once again under 700p (at 692p to be precise). Slater had recently said: "Trading on a PEG of slightly less than 1, with a price-to-earnings (P/E) ratio of 13.3, likely earnings growth of 15% and a healthy dividend yield, the shares are attractive."

Since then, BSkyB's shares have seen a reasonable rise, but analysts have also upped their earnings and dividend forecasts. As such, the shares remain on a similar rating to the rating they were on in March: the P/E is now 13, the PEG is around 1 and the dividend yield is a healthy 3.9%.

Another expert pick

One super-investor who didn't feature in my pool of experts is US multi-billionaire Warren Buffett. Buffett rarely invests outside the US, but this year he's made a big bet on one British household name.

If you'd like to know the name of the company, the price Buffett paid for his shares and whether you can still buy in today at the same kind of price, just help yourself to the free, no-obligation Motley Fool report "The One UK Share Warren Buffett Loves".

This exclusive report is available for a limited time only, but you can have it dispatched to your inbox immediately: simply click here.

> G A Chester does not own shares in any of the companies mentioned in this article.

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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.

apprenticeDRL 19 Nov 2012 , 11:08am

I have been watching BG closely - will they hit 950? they are now below 1000 for the first time in a while.

jackdaww 19 Nov 2012 , 11:56am

i hold bg - bought at about 1130p.

thinking of adding at 1000p- is that a good idea ?

historically cheap and possible takeover target .

any thoughts welcome here.


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