5 Shares You Should Have Bought in September


LONDON -- The FTSE 100 (UKX) ended September on 5,742 points, which is a mere 31 points up on its end of August level of 5,711 points. That's only a 0.5% rise, but if we got that every month without fail, we'd actually be doing pretty well.

But the FTSE indices are just aggregates of all of their individual constituent companies, and plenty of those have piled on much more than 0.5% in September. We take a look at five that have grown nicely during the month, and that look like they might still have further to go.

(LSE: HFD.L) , the high-street purveyor of bicycles and car parts, and the operator of Halfords Autocentres, has had a tough time of the recession, with its shares falling from a peak of over 530 pence in mid-2010, all the way to 190 pence by July this year -- a fall of 64%.

But they're on the way up again, and September saw them rise by 26 pence to 261 pence, for an 11% gain. Are they now on for greater things? With forecasts for the year to March 2013 putting them on a forward price-to-earnings (P/E) ratio of around 10.5, they could well be, as a return to earnings growth (albeit a modest one) is forecast for 2014.

The dividend will be important. Currently it's forecast to hit 7.7% this year, but that should be barely covered by earnings. Whether Halfords has the confidence to pay that much is a risk, but at the halfway stage in July, the planned interim dividend of 8 pence per share was upheld.

Royal Bank of Scotland
(LSE: RBS.L) had a pretty strong September, and you could have enjoyed a 14% rise to 257 pence during the month. Banks have been pariahs to many an investor, and RBS is only with us today thanks to that taxpayer bailout, but there will be a time when banks are undervalued again. Is that time now and, specifically, is RBS cheap?

Last week, chief executive Stephen Hester told us that RBS has reached the end of the first phase of its recovery, with the bank's loan-to-deposit ratio once again coming back very close to 1. During the worst of the crisis, it had 50% more out on loan than it had on deposit.

There's no dividend yet, but asset values are looking a lot better than they were. I'm not much good at valuing banks, but RBS really is starting to look like a proper viable bank again to me -- it will be interesting to look back in two or three years to see if this was the time to get in.

Miners have been having it tough, too, with fears of a prolonged Chinese slowdown, but a number saw a rebound in September. Leaving aside the precious metals miners, Antofagasta (LSE: ANTO.L) did about the best of all of them, with its shares rising 163 pence (15%) to 1,262 pence by the end of the month.

The shares are currently on a forward P/E of 15, falling to just under 14 for December 2013, and with a dividend of around 2.5% expected, they're probably now fairly valued in the relatively short term. But if worldwide demand picks up for the long term, the shares could still be worth buying.

Bwin.Party Digital Entertainment
(LSE: BPTY.L) has been on a roller coaster in recent years. In an earlier form, PartyGaming was the leader of the online poker craze from a few years ago, but it was pretty much crushed by new American legislation.

But since starting September priced at 94 pence, Bwin.Party climbed to end the month on 106 pence, for a gain of 13%. At one point during the month, it broke the 110 pence barrier before falling back -- and now, a couple of days into October, it's back up at 110 pence. Forecasts are pretty flat, but the shares are on a P/E of 9.5, and there's a dividend of over 3% forecast for this year -- the party could still be on.

Barratt Developments
Who'd have thought a year ago that housebuilders would have more than doubled by now? That's what has happened to Barratt Developments (LSE: BDEV.L) , which put on 11% in September alone to end the month on 169.5 pence.

The big homebuilders bought up land while it was cheap during the recession, and now have nice land banks to build on. And with selling price for new homes starting to creep up, they're looking a lot healthier now. Barratt is on a P/E of nearly 14, which is about the long-term FTSE average. But that's at a time when the housing market really is only just coming off its depths, and mortgages are still hard to come by. What about another five years' time? We could well be looking at a healthier market and decent dividends again -- and a significantly higher share price.

It's a return to paying dividends that often makes the different to a share price recovery, and Neil Woodford is an acknowledged expert in looking-good payers. The free Motley Fool report "8 Shares Held by Britain's Super Investor" takes a look at some of his major holdings. Click here to get your free copy while it's still available.

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Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Halfords.