LONDON -- Recovery plays were in demand this morning as investors piled into three stocks seen as ripe for recovery -- what seem like beaten-down bargains, in short, with more apparent upside than downside.
First up: Lloyds Banking Group
After the torrents of bad news, of course, it's important to keep a sense of proportion: Lloyds last paid a dividend in 2008 and is still loss-making. But with fear of bad debt looking too pessimistic and cost reductions and growth strategies delivering the goods, it's easy to see that Lloyds' worst days are probably behind it. The shares are priced at 39 pence, and investors may even see a dividend next year.
Next up: Volex
Bargain hunters promptly piled in, making the company the eighth-most popular purchase by TD Direct Investing's individual clients between the market's opening and noon. On a forecast price-to-earnings ratio of just 7.5 and a PEG of 0.5 -- well into classic Slater territory -- it's not difficult to see what they liked.
Also popular this morning were shares in another profit-warning victim: upmarket fashion name Burberry
Again, the impetus was a shock profit warning, in this case that current‑year profits may come in around the lower end of City forecasts.
Falling knife -- or bargain? Many investors will have looked at the company's healthy cash position and strong brand and seen a situation analogous to the January announcement by Tesco
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Investing ideas from Malcolm Wheatley:
Malcolm holds shares in Lloyds and Tesco but has no disclosable interest in any other of the shares listed. The Motley Fool owns shares in Tesco and has recommended shares in Burberry. 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.
Disclaimer: The TD Direct Investing (www.tddirectinvesting.co.uk) list of Top Ten Buys should not be taken as a recommendation to buy or sell any particular bond or stock, and is not intended as any form of advice. Instead, it is simply an indication of the general buying trends among TD Direct Investing customers during the period stated.