LONDON — Some private investors won’t give professional fund managers the time of day. Not me. In fact, I follow eight pros closely. My Expert Eight are proven bottom-up stock pickers, who generally invest on a long-term view and have their own money invested in their own funds.
The way I see it, I’ve got eight hot analysts throwing their best investment ideas at me. I’ve highlighted a number of these ideas for you over the past couple of years, and I’ve got three more for you today.
Lloyds Banking Group PLC (ADR) (NYSE:LYG) and BG Group plc (LON:BG) have both featured previously, while fellow FTSE 100 company Aggreko plc — the world’s largest temporary power generation supplier — is a brand-new stock idea.
Before getting down to what our experts have to say about these companies, the following table shows the performance of the blue-chip opportunities I’ve highlighted for you previously.
| Company | Highlighted Share Price (pence) | Recent Share Price (pence) | Gain/(loss) | FTSE 100 Gain/(loss) |
|---|---|---|---|---|
| ARM Holdings | 506 | 940 | 85.8 | 13.6 |
| BG Group | 1,252 | 1,142 | (8.8) | 19.7 |
| BG Group | 1,000 | 1,142 | 14.2 | 12.9 |
| British Sky Broadcasting | 692 | 828 | 19.7 | 8.1 |
| British Sky Broadcasting | 745 | 828 | 11.1 | 12.9 |
| Carnival | 2,013 | 2,505 | 24.4 | 8.1 |
| Lloyds Banking Group | 23.6 | 54.7 | 131.8 | 16.8 |
| Rio Tinto | 3,389 | 3,733 | 10.2 | 19.7 |
| Rio Tinto | 3,096 | 3,733 | 20.6 | 16.8 |
| Rio Tinto | 2,934 | 3,733 | 27.2 | 12.9 |
| Smiths Group | 965 | 1,238 | 28.3 | 19.7 |
| Standard Chartered | 1,485 | 1,718 | 15.7 | 7.0 |
| Average | 31.7 | 14.0 |
Bank on recovery
Veteran blue-chip stock picker Richard Buxton (Schroder UK Alpha Plus) plays the long game. For some time, he’s been bullish on banks and miners to lead a general recovery.
It might seem strange to be highlighting Lloyds today after the stunning 132% gain since I brought it to your attention at 24 pence in December 2011, but let’s go back a further six months to May of that year.
Buxton told Citywire: “We don’t see why the market wouldn’t pay 1.5x book value if the banks get back to mid-teen ROE [return on equity] and Lloyds could well double on a three to four-year view.”
Lloyds’ shares were then trading at the same kind of 50-something-pence level as today. Many analysts — and Lloyds itself — now expect ROE will get into the teens more or less on Buxton’s time frame, while book value can also be expected to start to rise again in due course. As things stand, 1.5 times the most recent book value gives a share price of 89 pence. Lloyds continues to be the largest holding of several banks Buxton has backed.
Brazil bonanza or bid
Mark Sheppard (Manchester & London Investment Trust) sees good value in BG Group, despite some downward revisions to the company’s production targets that have led to the shares falling more than 20% over the past year compared with an 8% rise in the FTSE 100.
However, it’s the underlying value of BG’s assets — including huge reserves in the Santos Basin off Brazil — that particularly excites Sheppard and makes BG one of the top holdings in his portfolio with a weighting of around 6%. In a recent “Stocks for 2013” feature in the Manchester Evening News, Sheppard said:
[BG] now trades at a substantial discount to net asset value, despite a truly world-class portfolio… While unlocking this value organically may take time, we would not be surprised to see mergers and acquisitions play a big role this year, particularly given the predatory nature of the sector.
Analysts reckon BG’s assets could be worth as much as 1,900 pence per share, which puts the shares at a discount of 40% — certainly wide enough to attract a bidder.
Full power ahead
My Expert Eight don’t “churn” their portfolios a great deal, so my ears always prick up when I hear that one of these pros has made an investment in a new company. That’s just happened in the case of Buxton, who told us in his January fund update:
We initiated a position in Aggreko. The company designs and rents out specialized power generation and air conditioning equipment. The CEO recently [Dec. 17] stated its revenue guidance for 2013 was overoptimistic, and the resulting share price fall created an attractive entry point for long-term investors. It is a high-quality well-managed business that is strongly positioned in a structural growth market.
The shares rallied over Christmas and through January but have since fallen back, closing on Friday at 1,680 pence. Buxton’s use of the phrase “initiated a position” suggests he could be in the market to buy more Aggreko shares.
Finally, if you’re looking for other growth opportunities among the FTSE’s larger companies, you may wish to read this exclusive in-depth report.
You see, the blue chip in this report has lifted its earnings per share by 46% since 2009, owns subsidiaries that might carry “considerable value” not reflected within the shares, and has just been declared “The Motley Fool’s Top Growth Stock for 2013.”
The article 3 Stock Picks From Top Pros originally appeared on Fool.com and is written by G. A. Chester.
G.A. Chester does not own shares in any of the companies mentioned in this article, but does own shares in “The Motley Fool’s Top Growth Stock For 2013.” The Motley Fool owns shares in Standard Chartered.
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