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

Woodford is very selective in picking shares for his 20 billion-pound 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). They are ranked cheapest first:

CompanyShare Price (pence)P/E
BAE Systems (LSE:BA) 351 8.5
AstraZeneca (LSE:AZN) 2,969 8.7
Wm Morrison Supermarkets (LSE:MRW) 257 9.2
BT Group (LSE:BT-A) 237 9.5
Vodafone (LSE:VOD) 157 9.6

BAE Systems
The defense contractor is a top 10 holding in Woodford's funds with a weighting of around 4.5%. The company has suffered from recent defense spending cutbacks in its major U.S. and U.K. markets, but news of the fiscal cliff deal in America sent the shares up 4% on Wednesday. BAE Systems' earnings are expected to show a double-digit decline for 2012, followed by modest growth of 3% in 2013.

The drugs company is Woodford's biggest single holding with a weighting of around 9% in his funds. Analysts continue to fret about expiring patents on major drugs putting pressure on revenues and earnings. The City scribblers are expecting earnings to decline by 18% in 2012 and are forecasting a further 7% decline in 2013. Woodford has certainly nailed his contrarian colours to the mast by making such a big bet on this pharma group.

Wm Morrison
The U.K.'s fourth-largest supermarket doesn't make it into Woodford's top 10 holdings, but it is significant as the only supermarket -- indeed, the only retailer of any shade -- that the master investor deems worthy of backing. All the listed supermarkets are forecast to deliver mid-single-digit earnings growth in the year ahead, but Morrison's P/E is markedly lower than Tesco's and Sainsbury's.

BT Group
The U.K.'s leading fixed-line telecoms group is a top 10 holding in Woodford's funds with a weighting of over 5%. Analysts are forecasting flat revenues and earnings for the company's 2013-14 fiscal year. However, newsflow has largely been positive over the past year, and there seems to be good momentum in the business. Any upgrades to analyst forecasts would bring an already fairly low P/E deeper into value territory.

Woodford reduced the size of his investment in mobile giant Vodafone in 2012. Nevertheless, the company sat just outside his top 10 holdings at the last reckoning. The shares are currently trading close to their 52-week low, despite analysts' expectations of mid-single-digit earnings growth in the years to March 2013 and March 2014 -- which is not bad growth for a global giant in the prevailing difficult economic conditions.

Three 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 hugely successful investing strategy and discovering his favourite dividend-paying blue chips with steady growth potential, simply click here for your free report.

G A Chester does not own shares in any of the companies mentioned in this article. The Motley Fool has recommended shares in Vodafone. 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.