Shares Offering Everything for a Bear Market

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LONDON -- When markets are down, investors can afford to be a lot more choosy.

Last October, with the FTSE 100 (INDEX: ^FTSE) at 5,128, I ran a series of mechanical screens aimed at finding shares offering a little bit of everything. Specifically, I was looking for favorable price-to-tangible-book value, yield, and price-to-earnings (P/E) ratios to generate some prospects to have a closer look at.

The minimum prospective yield of 5%, a P/E maximum of 12, P/TBV of 1.2, and a PEG ratio of 1.2 to factor in at least some growth generated these candidates in order of descending market capitalization:

Company

Share Price, Oct. 3, 2011 (pence)

Current Share Price (pence)

Royal Dutch Shell  (NYS: RDS.B)

2,012

2,082

Sainsbury  (ISE: SBRY.L)

274.8

294.6

Intermediate Capital

214.7

259.5

F&C Commercial Property Trust

95.7

101.6

Beazley  (ISE: BEZ.L)

116.5

135.4

St Ives

68.5

68.75

Fiberweb

43

58.5

Invista Real Estate Investment Management

11.75

12.25

Hellenic Carriers

47

31.5

Molins

84

117

Swallowfield

115

121

Slingsby H.C

662.5

575

Fletcher King

28.5

25

FTSE 100 Index

5,128

5,370


Companies finding themselves on such a short list are usually there for a good reason. But the basics tend to suggest they're undervalued and worthy of a closer look. Overall, the mean average improvement was more than 6%, versus the FTSE's 4.7% over the same period. But this doesn't factor in dividends, and most on the list paid out over the period.

The best two performers were Fiberweb, a company recently covered by Stephen Bland, and Molins, still a constituent of Stephen's value portfolio. The laggard was dry-bulk vessels transporter Hellenic Carriers.

So it's not a bad performance, particularly if you avoided Hellenic Carriers, most of whose book value lies in depreciating vessels. Obviously, almost all the shares on the list have been substantially higher over the period, in line with market sentiment.

Where today?
Repeating the same experiment today gives us just six companies of different shapes and sizes. By descending order of market capitalization, they are as follows:

Company

Share Price (pence)

HSBC Holdings  (NYS: HBC) 514.6
Melrose Resources97
Intermediate Capital261.1
Marston's98.6
Aquarius Platinum69.2
Fletcher King25

These are simply figures generated by mechanical screening (using a combination of Morningstar and Digital Look tools). In other words, they're only a starting point for further research.

It's interesting to see HSBC making the "short" short list, but the PEG ratio will be far higher in reality. I'll be taking a closer look at all six companies over the next week or so, and I will follow up on any that look particularly interesting.

Absolute minnow Fletcher King, the property services group, is valued at just 2.3 million pounds at 25 pence. It seems a good value all-around to me, but it remains far too small for comfort for many private investors.

Finally, let me finish by adding that more share ideas can be found within this Motley Fool report: "8 Shares Held By Britain's Super Investor." The guide reviews the investing approach and portfolio of City dividend legend Neil Woodford and is free to download today.

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Further investment opportunities:

At the time this article was published David owns shares in Royal Dutch Shell, Sainsbury and Invista Real Estate Investment Management. He doesn't own shares in any of the other companies mentioned. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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