A Trawl For Value Through The FTSE 250

Published in Investing on 29 November 2012

Stephen Bland takes a mechanical index trawl through the FTSE 250.

Following on from last week's mechanical trawl of the FTSE 100 (UKX) for value, I'm repeating the exercise this week on the FTSE 250 (MCX) index. Same idea but on the market's mid caps.

Similar warnings apply about the potential errors that exist in databases and that I haven't checked the entries in any way, they are a direct extraction from the data. Also, do note that due to my finding a more comprehensive database, I am now able to use the value investor's far preferable price-to-tangible book (P/TB) ratio rather than the price-to-book (P/B) of earlier versions of this. For anyone unaware, the difference is that P/TB excludes intangible assets like goodwill.

Yields and P/Es are forecasts, while P/TBs are based on the last annual accounts, not updated for interims or news.

Top 10 yields

 PriceForecast yield (%)
FirstGroup (LSE: FGP)18113.2
Tullett Prebon (LSE: TLPR)2227.8
ICAP (LSE: IAP)2887.6
C&W Comm (LSE: CWC)347.3
Intermediate Capital (LSE: ICP)2906.9
London & Stamford (LSE: LSP)1086.6
Go-Ahead (LSE: GOG)1,2316.6
Segro (LSE: SGRO)2296.5
KCOM (LSE: KCOM)696.4
Amlin (LSE: AML)3846.4

10 lowest P/E

 PriceForecast P/E
Afren (LSE: AFR)1314.4
Centamin (LSE: CEY)564.8
Bank of Georgia (LSE: BGEO)1,0714.9
Tullett Prebon2225.1
FirstGroup1816.1
Ferrexpo (LSE: FXPO)2086.5
Carillion (LSE: CLLN)290608
National Express (LSE: NEX)1656.8
Balfour Beatty (LSE: BBY)2477.1
SOCO (LSE: SIA)3577.6

10 lowest P/TB

 PriceP/TB
Bumi (LSE: BUMI)2620.31
Daejan (LSE: DJAN)2,8030.53
NB Global (LSE: NBLS)1010.56
BH Macro (LSE: BHMU)$18.650.56
Segro2290.66
BH Global (LSE: BHGG)1,1200.69
TR Property (LSE: TRY)1640.71
Mill & Cop (LSE: MLC)4780.74
BlackRock World Mining Trust (LSE: BRWM)5520.74
Investec (LSE: INVP)3790.74

There are no triple appearances this time and only three doubles. My change to using tangible book rather than total book may well have reduced the likelihood of multiple appearances, but the trade-off is that the usefulness of the tables in revealing potential value should have improved as a result.

The doubles are rail and bus operator FirstGroup and interdealer broker Tullett Prebon making the yield and P/E tables, while property company Segro is a yield and low P/TB play. As these three shares are in totally unrelated sectors, there is no pattern there. This doesn't mean they are not worth further investigation, just that their multiple appearances don't tell us anything about any particular industry from a value viewpoint.

General cluster

Another object of my exercise is to show up any clusters of shares in similar sectors, thereby indicating that they are currently the target of the market's disfavour and a search in those sectors, not only for the shares shown but also for other constituents, may be rewarding. When a sector is the victim of poor sentiment, even if there may be some general underlying reason for it, the good are often dragged down with the bad by mere association.

Passenger transport is bit of a theme here, with FirstGroup, Go-Ahead and National Express all featuring in yields and P/Es. Among the low P/TBs, unsurprisingly because they tend to trade below book, four out of the 10 shares are in property or closely related to it, being Daejan, Segro, TR Property Investment trust and Millennium & Copthorne Hotels.

Also in the P/TB, there are four funds and a fund manager, Investec. The remaining share in this group is troubled mining business, and possibly in consequence aptly named, Bumi. One of the funds -- BlackRock World Mining Trust -- is, as the name tells us, a specialist mining shares fund. BlackRock is a leading US fund manager.

Resource shares are quite highly represented in the tables, echoing the same story in my FTSE 100 analysis last week. But this time they are the smaller specialists, concentrating much more on just one mineral or one particular area and thus higher risk than a big, broadly based miner. These shares dominate the P/E table with four, Afren, Centamin, Ferrexpo and SOCO plus among the P/TBs there is Bumi, as I mention above, together with the BlackRock WMT.

A smaller theme is interdealer brokers with Tullett Prebon and ICAP in the yields, while Tullet makes a second showing in the P/Es. That's significant because there aren't a large number of shares in this business listed on the market, in contrast to miners for example for which a much larger number of shares exist.

Another sector worth mentioning is telecoms, with Cable & Wireless Communications and KCOM in the yield table. Their big cap telecom sector compatriots also appeared last week, so I'd say that telecoms are definitely not flavour of the month.

Finally there are two construction and related businesses in the P/Es: Carillion and Balfour Beatty.

Foolish final thought

As with all value investing, remember that cheapness alone as signalled by appearances here does not by itself represent value. A share appearing to be cheap is no more than a starting point. It is when it appears unreasonably cheap where value may reside. Finding cheap shares is the relatively easy bit -- it's an objective mechanical assessment as demonstrated by analysis like this. But what makes a share unreasonably cheap is the hard bit because that's a subjective decision for the investor.

> Stephen does not hold any of the shares mentioned in this article. The Motley Fool owns shares in Daejan.

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Comments

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ProfessorMarcus 29 Nov 2012 , 8:38pm

Hello Stephen.

Could you provide more information or a link to how a subjective decision is made after a value share screen is conducted please?

Thanks.

goodlifer 30 Nov 2012 , 12:24am

ProfessorMarcus
"Could you provide more information or a link to how a subjective decision is made after a value share screen is conducted please?"

Cast lots,
Ask your financial advisor,
Consult your horoscope,
Gut feeling,
Look at a graph,
Ask Mr Woodford,
Try the Investors' Chronicle or
The Telegraph,

To name but a few.

goodlifer 30 Nov 2012 , 12:27am

PS

Use your loaf.

TheHowler 30 Nov 2012 , 1:41pm

I like this type of article as it throws up companies I've often never heard of. Good starter for future research.

Would be good if periodically these were followed up with an analysis of how any "doubles" or "triples" performed against the market, to see if these screens are of any use.

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