3 Stock Picks From Top Professionals
Nov 19th 2012 4:25PM
Updated Nov 19th 2012 4:28PM
LONDON -- 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 (ISE: BG.L) , Rio Tinto (ISE: RIO.L) and British Sky Broadcasting (ISE: BSY.L) -- 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.
Highlighted share price
Current share price
FTSE 100 gain/(loss) (%)
|Smiths Group (ISE: SMIN.L)||965p||1,018p||5.5||6.0|
|Lloyds Banking Group (ISE: LLOY.L)||23.6p||44p||86.4||3.4|
|British Sky Broadcasting||692p||745p||7.7||(4.3)|
|Carnival (ISE: CCL.L)||2,013p||2,427p||20.6||(4.3)|
|ARM Holdings (ISE: ARM.L)||506p||711p||40.5||0.6|
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.
Back in July 2011, BG Group released interim results ahead of analysts' expectations, and the shares closed on the day at 1,467 pence. 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 (ISE: MNL.L) ], 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 1,252 pence in September 2011.
Having climbed to over 1,500 pence 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."
Richard Buxton (Schroder U.K. Alpha Plus) was a buyer of Rio Tinto in June 2011 when the shares were trading north of 4,000 pence. 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 3,389 pence in September 2011, and again in December after they'd fallen a further 10% or so to 3,096 pence. 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 urbanization and industrialization 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 850 pence to under 700 pence 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 700 pence (at 692 pence 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 U.S. multi-billionaire Warren Buffett. Buffett rarely invests outside the U.S., 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 U.K. Share Warren Buffett Loves."
The article 3 Stock Picks From Top Professionals originally appeared on Fool.com.G.A. Chester does not own shares in any of the companies mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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