3 Neil Woodford Low P/E Shares: Imperial Tobacco Group PLC, HSBC Holdings plc And Catlin Group Limited

Imperial Tobacco Group PLC (LON:IMT), HSBC Holdings plc (LON:HSBA) and Catlin Group Limited (LON:CGL) are three of the master investor’s low P/E shares.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Renowned fund manager Neil Woodford has been thrashing the market for a quarter of a century. Woodford is a very selective stockpicker. Fewer than 1 in 10 of the UK’s top 350 companies earn a place in his funds.

Hence, I always keep an eye on his holdings for promising investment ideas.

The following three firms are all currently on forward price-to-earnings (P/E) ratios of less than 13, compared with the FTSE 100 long-term average of 14:

Company Recent share price P/E
Imperial Tobacco Group (LSE: IMT) (NASDAQOTH: ITYBY.US) 2,677p 12.8
HSBC Holdings (LSE: HSBA) (NYSE: HSBC.US) 595p 10.6
Catlin Group (LSE: CGL) 535p 10.1

Imperial Tobacco

He’s been saying it for donkey’s years, and he’s said it again just this week: “The tobacco sector continues to trade significantly below an appropriate valuation”.

In addition to barriers to entry, pricing power and predictability, Woodford is confident a further round or two of consolidation in the industry will benefit all the players.

Right now, US groups Reynolds American and Lorillard are in the process of merging. In the hope of heading off objections from competition authorities the pair have agreed to sell a clutch of assets and brands — including Winston, Kool and e-cigarette blu — to Imperial Tobacco.

Imperial is already trading on an attractive P/E of 12.8, and the company says the deal “is expected to be significantly EPS enhancing in the first full year post completion”.

HSBC

Famously bearish on banks since before the financial crisis, Woodford has now changed his stance — at least as far as one bank is concerned: global giant HSBC.

Woodford believes HSBC has the capacity to build up its capital at the same time as growing earnings and dividends. He reckons: “HSBC on some measures is rated worse now than it was at the height of the financial crisis – that is how cheap it is”.

The current P/E of 10.6 is certainly one measure on which HSBC is valued attractively.

Catlin

While Woodford turned his back on banks and life insurers before the financial crisis, he was comfortable with investing in a number of mid-cap non-life insurers.

Catlin, a FTSE 250 company with a market valuation of £2bn, is one such company. This global speciality property/casualty insurer and reinsurer is diversified across more than 30 lines of business, and currently trades on a P/E of 10.1.

When management last updated the market at the company’s AGM in May, chief executive Stephen Catlin said the firm had “made a good start to the 2014 underwriting year … and we continue to look ahead with confidence”.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.

More on Investing Articles

Investing Articles

Could I use a stock market crash to turn £20k into half a mil in just over a decade?

A stock market crash might sound terrifying to some but it can also present a once-in-a-lifetime opportunity to accumulate generational…

Read more »

Investing Articles

Recently released: October’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Investing Articles

Here’s how a Stocks and Shares ISA and Lifetime ISA could supercharge my wealth!

Individual Savings Accounts (ISAs) can help UK share investors take their earnings to the next level. And their importance is…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

A high-yield dividend ETF and an investment trust to consider this November!

Investors wanting to boost their passive income could benefit from investigating these high-yield funds and trusts, says Royston Wild.

Read more »

Investing Articles

2 of my favourite, cheap FTSE 100 growth shares this November!

These FTSE 100 growth shares could be great long-term picks to consider, reckons Royston Wild. At current prices he thinks…

Read more »

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »