Beginners' Portfolio: Watchlist Update

Published in Investing on 21 December 2012

How are our watchlist shares going? We take a look.

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

Over the past couple of months, I've pretty much neglected our Beginner's Portfolio watchlist. I have been keeping an eye on the shares in it, but there's really been little to move -- other than to actually buy shares in BAE Systems, which really wasn't on the list for very long before I realised I couldn't resist.

So, here's an update on what our watchlist shares look like now, as we reach the Christmas holidays -- and you should spot a couple of new additions.

CompanyMarket capPriceForward P/EForward dividend
WS Atkins (LSE: ATK)£769m762p9.84.2%
TUI Travel (LSE: TT)£3.2bn286p10.74.4%
Unilever (LSE: ULVR)£31.1bn2,409p18.73.2%
United Utilities£4.6bn681p16.54.9%
Trinity Mirror (LSE: TNI)£248m94p3.30.2%
Daisy Group (LSE: DAY)£256m94p6.81.7%

The first thing to note is that WS Atkins has put on 8.5% in the past three months, taking the share price to 762p. The price did actually plunge on the approach to the firm's interim results on 15 November, dropping as low as 638p. But the results were just as the firm's earlier update had suggested, everything was in line with expectations, and the price powered back up again. But the shares are still on a forward price-to-earnings (P/E) ratio of just 9.8, and missing the recent rise doesn't mean we should ignore further potential undervaluation.

TUI Travel has continued its surge, gaining a massive 24% to 286p since I featured it in September. Prior to the travel firm's full-year results, I noted "a forecast dividend of 5.1% from a share on a P/E of 10, and no debt", so maybe I should have acted on that -- the results were very strong, as expected. But we'll always miss short-term opportunities, and looking ahead to forecasts for the year to September 2013, the shares certainly don't look overvalued.

Two newcomers

On to the two new entrants in the table, Trinity Mirror and Daisy Group.

I've been watching both for quite some time myself, and at its lowest point, Trinity Mirror shares looked to be ludicrously undervalued. A lot of that was emotional, especially during the days under the leadership of the unpopular Sly Bailey. In addition, many people think that printed newspapers are as dead as the trees they're made from. But people have been saying that about printed reading material for years, and Trinity Mirror is still expected to carry on making decent profits. Current forecasts put the shares on a P/E of just 3.3, even after the share price has more then trebled since August, which still seems silly. This could be one for further investigation in the New Year.

Having a telecommunications background, I've always had a soft spot for small telecoms companies -- even though I expect many to be failures in the long term. But every now and then one comes along that looks promising, and I think Daisy could be one. One thing I hadn't realised until I recently read a September article by fellow writer G A Chester is that Neil Woodford's investment funds are heavily invested in Daisy. So this is another one for a January analysis.

What next?

Next week is a holiday week, so I've prepared a quick look at my idea of how beginners should approach the whole vexed question of how to value shares, which you can read at your leisure.

And next week there will also be a new look at the valuation of our portfolio. I don't want to give too much away, but it's looking like a satisfactory end to the year.

Finally, a big part of the Beginner's Portfolio is based on a strategy of buying strong dividend-paying shares, and Neil Woodford is an acknowledged expert on it. The free Motley Fool report "8 Shares Held By Britain's Super Investor" takes a look at some of his major holdings, and I strongly recommend learning from successful investors as part of the beginners' process. Click here to get your free copy, while it's still available.

The free report "10 Steps To Making A Million In The Market" is also one I'd urge beginners to have a read of, because it's inspirational and it really does make a convincing case for the great potential of long-term investing in quality companies.

> Alan does not own any shares mentioned in this article.

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SmilingKiller 21 Dec 2012 , 2:44pm

"..other than to actually buy shares in BAE Systems, which really wasn't on the list for very long before I realised I couldn't resist.."

"Alan does not own any shares mentioned in this article"


apprenticeDRL 21 Dec 2012 , 3:09pm

I think this is a virtual portfolio so it was probably a virtual could not resist :-) - Easy if you are not spending real money.

jaizan 22 Dec 2012 , 3:15am

Virtual portfolio? So we're reading fiction then?

ANuvver 22 Dec 2012 , 6:06pm

For goodness' sake chaps. He's paper trading for educational purposes.

Think you'll find he's not a beginner either...

SmilingKiller 23 Dec 2012 , 2:06am

"For goodness' sake chaps. He's paper trading for educational purposes...."

It's a bit like The Joy of Sex, written by a virgin.

I cannot find a single piece by this author where he has declared a shareholding in ANY company. Maybe he's just not into the whole equity ownership thing personally.

BTW, I own shares in 4 of the companies mentioned above.

Brings me on to TMF staff/freelancers trying to make a living by flogging share tips. Presumably if they had a clue, they'd spend their time doing something other than writing. Investing maybe.

ANuvver 23 Dec 2012 , 2:42am

Well, I accept the "skin in the game" point. But I don't see why someone shouldn't be able to write about securities they don't own. And there's always caveat emptor...

I've never been a fan of paper trading much beyond learning the basics - playing poker for fun isn't playing poker. But then this series of Alan's is aimed at beginners - clue's in the title.

It's based on sound principles, and anything that helps people do better than being mugged by the industry is okay by me. You could argue that MF is part of the industry. Well sure, but where are the commission and management fees?

I think they've just made a reasonable commercial decision to pull more content into their paid offerings.

I've given up criticising the Buffwood boilerplate stuff. Don't think it does them any favours, but then it's easily ignored.

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