Neil Woodford's 5 Lowest P/E Shares

LONDON -- Ace City investor Neil Woodford has thrashed the FTSE 100 over the last five, 10, and 15 years. Hence, I always keep an eye on his holdings for promising investment ideas.

Woodford is very, very selective in picking shares for his 20 billion pounds funds. Fewer than one in five of the U.K.'s top 100 companies earn a place in his market-beating portfolios.

The following five companies are currently the cheapest of his blue-chip holdings based on forecast 12-month price-to-earnings (P/E) ratios. They are ranked cheapest first:

Company

Share Price (pence)

P/E

BAE Systems (LSE: BA.L  ) 308 7.4
AstraZeneca (LSE: AZN.L  ) 2,985 7.9
BT Group (LSE: BT-A.L  ) 226 8.9
G4S (LSE: GFS.L  ) 245 9.2
Wm Morrison Supermarkets (LSE: MRW.L  ) 273 9.5

BAE Systems
The defense contractor is not one of Woodford's largest holdings, but sneaks into the top 10 of his High Income fund with a weighting of 3.7%. The company has suffered from recent defense spending cutbacks in its major U.S. and U.K. markets, and analysts are forecasting fairly flat revenues and profits between 2012 and 2013. However, investors buying today can expect to receive a dividend yield comfortably in excess of 6% while waiting for stronger earnings growth to return.

AstraZeneca
The drugs group has an aggregate weighting of over 8% in Woodford's funds, just pipping fellow pharma GlaxoSmithKline to the top spot. AstraZeneca's revenues are under pressure from patents expiring on some of its major drugs, but the group is flush with cash to invest for the future and, like BAE, offers investors today a dividend yield of over 6%.

BT Group
The U.K.'s leading fixed-line telecoms group is a top five holding in Woodford's funds with an aggregate weighting of around 5%. Analysts are forecasting flattish revenues for the next year or two, but a modest advance in earnings. The dividend, which is well covered by earnings and gives a 3.7% trailing yield, is forecast to grow by double digits in each of the next two years.

G4S
The security firm is currently all over the news on account of the debacle of its staffing shortfall for the Olympic Games. G4S is not one of Woodford's biggest holdings, but he's come out publicly in support of the group's under-fire boss, Nick Buckles. You don't achieve the level of market-beating returns Woodford has by only picking shares that will win a popularity poll among investors, and for that reason alone G4S could be worth a closer look.

Wm Morrison
The U.K.'s fourth-largest supermarket sits outside Woodford's top 10 holdings with a weighting of a bit over 1.5%. Morrison isn't the cheapest U.K. supermarket on P/E and it has the lowest dividend yield. However, it has higher forecast earnings and dividend growth than its rivals, and is the only supermarket Woodford deems worthy of holding.

Two of the five shares I've highlighted feature in an exclusive Motley Fool report -- "8 Shares Held By Britain's Super Investor" -- which is free to download right now. If you are interested in learning about Woodford's successful investing strategy and discovering his favorite large caps with high dividends and steady growth potential, simply click here for your free report.

"10 Steps To Making A Million In The Market" is the very latest Motley Fool guide to help Britain invest. Better. We urge you to read the free report today – it may transform your wealth.

Further investment opportunities

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.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1950216, ~/Articles/ArticleHandler.aspx, 8/21/2014 10:33:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement