A UK Blue-Chip Starter Portfolio

Company	Industry	Share Price (Pence)	P/E	Yield (%)
HSBC	Financials	561	9.0	5.2
Royal Dutch Shell	Oil & Gas	2,225	7.6	5.0
BHP Billiton (LSE: BLT.L  )	Basic Materials	1,806	7.6	4.3
British American Tobacco	Consumer Goods	3,242	14.6	4.5
Tesco (LSE: TSCO.L  )	Consumer Services	310	8.8	5.0
GlaxoSmithKline	Health Care	1,447	11.4	5.3
Vodafone (LSE: VOD.L  )	Telecommunications	179	10.9	7.4
Rolls-Royce	Industrials	858	14.2	2.4
National Grid	Utilities	676	12.4	6.1
ARM Holdings	Technology	506	32.2	0.9

Excluding tech share ARM, the companies have an average P/E of 10.7 and an average yield of 5.0%. The numbers were 9.8 and 5.2%, respectively, when I last carried out this exercise in October 2011.

So, the group is rated a bit more highly today than it was nine months ago. However, I think it still veers towards the value end of the spectrum, because my rule of thumb for this group of nine is that an average P/E below 10 is firmly in "good value" territory, while a P/E above 14 starts to move toward expensive.

http://www.fool.com/investing/international/2012/07/04/a-blue-chip-starter-portfolio.aspx

5 Stocks With Staying Power

By Motley Fool Staff July 3, 2012

Some press comments I read over the weekend suggested -- gasp! -- that readers ought to think about putting money in the stock market. Over the long term, ran the logic, the market looked set to outperform bank accounts, mattresses, gilts, and property.

Such sentiments aren't novel, of course. Just the other day, I pointed out three reasons to buy into the market today. But such a stance does pose an obvious question, especially for the novice investor.

Namely, which shares offer long-term staying power?

Go the distanceSo here, I offer up five stocks for the long haul: five decent businesses, with decent Warren Buffett-style "moats," decent histories of long-term dividend growth -- and very reasonable prices.

Better still, they're all large-cap companies, thereby offering robustness and resilience against the inevitable uncertainties that lie in the future. Three, in fact, are in the top 10 FTSE 100 stocks -- and all five of them make the top 20.

And I make no apology for another feature that they all share: a high exposure to consumer non-discretionary expenditure. With the consumer contributing about 65% to GDP, stocks reliant on captive consumer expenditure provide a good buffer of insurance against the business cycle.

But before diving into the financials, let's start with a quick "pen picture" of each company.

Five for the futureFirst up is GlaxoSmithKline (LSE: GSK.L  ) , which employs around 97,000 people in more than 100 countries. Every minute, apparently, more than 1,100 prescriptions are written for GlaxoSmithKline pharmaceutical products. Almost as attractive is its strong range of consumer-friendly brands: Ribena, Horlicks, Lucozade, Aquafresh, Sensodyne, and the Macleans range of toothpaste, mouthwash and toothbrushes.

Next comes Vodafone (LSE: VOD.L  ) , the world's second‑largest mobile telecommunications company measured by both subscribers and 2011 revenues, which has 390 million customers, employs more than 83,000 people, and operates in more than 30 countries across five continents.

Third comes British American Tobacco (LSE: BATS.L  ) , the world's second-largest quoted tobacco group by global market share, possessing 200 brands sold in around 180markets, and with 46 cigarette factories in 39 countries manufacturing the cigarettes chosen by one in eight of the world's 1 billion adult smokers.

Fourth, we have Unilever (LSE: ULVR.L  ) , which employs 167,000 people, sells its products in 180 countries, and has a clutch of best-selling brands as diverse as Flora, Dove, PG Tips, Marmite, Persil, Knorr, Ben & Jerry's and Colman's.

Lastly, consider 500,000-employee Tesco (LSE: TSCO.L  ) , which is the world's third-largest international retailer, with fully a third of its sales coming from overseas, and spread over 13 countries. Throw in innovative home shopping, finance, and telecommunications offerings, and Tesco is more than just another grocer.

Let's see the numbersThose are the five businesses. Each, clearly, is large and diversified, with a solid consumer-centric go-to-market proposition.

But how do the finances stack up? Let's take a look. The table gives the lowdown.

Company	Share Price (Pence)	Market Cap (Pounds)	Forecasted P/E	Forecasted Yield
GlaxoSmithKline	1,458	73.7 billion	11.9	5.1%
Vodafone	178	87.7 billion	11	7.2%
British American Tobacco	3,265	63.8 billion	15.5	4.2%
Unilever	2,148	60.6 billion	16.4	3.7%
Tesco	313	25.1 billion	8.9	4.9%

Now, it's fair to say that not all of these shares tick the usual "screamingly cheap" boxes. All but one is rated at above the FTSE 100's average price-to-earnings ratio, for instance -- although generally not hugely above it. That said, all but one offers yields that are above the FTSE 100's average.

But in any case, for the most part these aren't shares selected because adversity has temporarily driven down their prices: These are shares chosen to be solid picks over the long term.

In short, they're buy-and-forget shares that will deliver a decent total return stretching into the future. And on that basis, it's a matter of "price is what you pay, staying power is what you get."\

http://www.fool.com/investing/international/2012/07/03/5-stocks-with-staying-power.aspx

Tesco's recent fortunes illustrate how, like economies, companies move cyclically

Cycle path - Tesco's recent fortunes illustrate how, like economies, companies move cyclically

Andrew Lyddon

26 Jan 2012

We have discussed in the past how the broader economy moves in cycles – and how value investing looks to exploit how the market responds to different points within those cycles. However, the recent profit warning issued by supermarket giant Tesco illustrates how individual industries and even individual companies can have cycles of their own.

Over the last decade or more, Tesco has enjoyed an extraordinary rise from being just one of the food retailing herd to become, by some distance, one of the biggest beasts in the global retail jungle. At present there is no question the group dominates all aspects of retailing in the UK, from convenience stores, through traditional supermarkets and increasingly the online space as well.

Inevitably, when a company finds a formula that brings it as much success as Tesco has enjoyed in the UK, natural economic forces begin to assert themselves – perhaps, for example, the competition learns from what a winning business has done, or maybe some of the people at the top of the winning business grow so used to success that a bit of complacency slips in. Either of those factors and no doubt plenty of others could have come into play at Tesco in recent years to slowly chip away at the lead it had established from rivals.

Just as value investors will seek to take advantage of extremes of valuation thrown up by economic cycles they will also look to do so with an industry or company-specific cycle. Businesses go through phases of good and bad operational performance and of being liked and disliked by the stock market, indeed until quite recently Tesco has been a relatively loved company.  The negative reaction to its recent setback may turn out to be much more extreme than is actually justified as even if Tesco is no longer the supermarket winner in the UK that does not mean it has become a bad business overnight.

In all probability and provided its management behave sensibly, Tesco can still earn good returns in the UK and operates a large foreign business that has further to grow. Even if the next 10 years does not see it scale the heights of the previous decade relative to competitors, investors who can find the right entry point in terms of valuation could still make good returns from its shares.

http://www.thevalueperspective.co.uk/tvp/archive?id=Cycle%20path%20-%20Tesco's%20recent%20fortunes%20illustrate%20how,%20like%20economies,%20companies%20move%20cyclically

Tesco weighs future of Fresh & Easy

By James Davey

CARDIFF (Reuters) - World No. 3 retailer Tesco (TSCO.L) promised to pull the plug on its loss-making Fresh & Easy chain in the United States if it continued to disappoint, and rejected renewed calls for an independent review of its strategy for the venture.

"If we see there is no chance of success, we'll do as we've just done in Japan," said chief executive Philip Clarke, referring to Tesco's deal this month to exit that market.

"It is not about ego, we are businessmen," he told the British grocer's annual meeting in the Welsh capital, Cardiff, on Friday.

The Change to Win Investment Group, which advises U.S. trade union-sponsored pension funds, during the meeting asked Tesco to establish a committee of non-executive directors to review Fresh & Easy's future and set fixed benchmarks to measure its success.

"We will not be doing that," responded chairman Richard Broadbent.

He said the strategy for Fresh & Easy was regularly reviewed by the whole board, with the retailer providing full disclosure on the business in its annual report and accounts.

"We're not hiding anything at all on Fresh & Easy," he said.

Change to Win's proposals have been ignored by Tesco for several years. It regards them as union motivated. Fresh & Easy does not recognize trade unions.

Clarke has this year rejected shareholder calls to pull the group out of the United States.

In April he said he did not expect the chain to break even until its 2013/14 financial year, against a previous target of 2012/13.

This month, Tesco reported underlying sales growth at Fresh & Easy slowed to 3.6 percent in its first quarter from 12.3 percent in the fourth quarter of last year.

"What shareholders want to know is, where is Fresh & Easy going and how much will it cost to get there?," said Michael Zucker, Change to Win's director of retail initiatives.

PAY APPROVED

Once one of the most consistent British companies in terms of earnings growth, Tesco stunned investors in January with its first profit warning in more than 20 years, saying it needed to invest heavily to stem a steady decline in UK market share.

However, it avoided becoming the latest victim of the 'shareholder spring' which has seen investors resist big pay rises at underperforming companies.

The phenomenon has led to the departures of Aviva (LSE:AV.) boss Andrew Moss and Sly Bailey, head of newspaper group Trinity Mirror (TNI.L).

Some 96.9 percent of shareholders who voted at the meeting backed Tesco's executive pay report, even though Pensions Investment Research Consultants (Pirc), a pension fund consultant, had called on investors to vote against it.

Last month's move by Clarke not to take his 372,000 pounds ($576,800) bonus may have headed off any potential rebellion.

He told the meeting Tesco's strategy to revive its core UK business, which accounts for about one in every 10 pounds spent in British shops, and about 70 percent of Tesco's annual trading profit, was making progress as he addressed shareholder concerns ranging from empty shelves to rodent-infested stores.

This month, Tesco reported a fall in first-quarter underlying sales in Britain and said tough trading conditions showed no sign of improving.

Broadbent gave Clarke his backing when one shareholder asked if the latter would resign if he could not deliver recovery in the U.S. and the UK.

"Phil is evidently one of the best retailers in the world. There is absolutely no question of Philip Clarke resigning," said the chairman.

After the meeting Clarke was asked if the British government should be doing more to stimulate economic growth.

"I think there's a case for it," he told reporters.

"Peoples' disposable incomes are squeezed. Until there's some change I think it will be hard for everybody."

But he welcomed this week's move by the government to scrap a planned increase in fuel duty and took some comfort from recent falls in the oil price.

Shares in Tesco, which lags France's Carrefour (CA.PA) and U.S. industry leader Wal-Mart (WMT.N) in annual sales, have lost nearly a quarter of their value over the last year. They closed down 0.6 percent at 310 pence.

30.6.2012

http://finance.yahoo.com/news/tesco-weighs-future-fresh-easy-172042722.html

Also read:

Is it Time to Sell Tesco?

Defensive Value Investing:  How to build a portfolio of world class businesses for Income and Growth

15 U.K. Shares Trading Near 52-Week Lows

Published in Investing on 20 June 2012

These shares are near the cheapest they have been for a year.

Unless the market is gripped by irrational exuberance, there will always be some shares trading at depressed prices. I trawled the market to find companies whose share price is within 5% of its lowest point in a year. Investors have to determine what has led a share price to fall and what the probability is that a significant turnaround could occur.

A list like this should be used as a starting point for further research. These shares have previously been higher and could rise significantly if sentiment improves. Alternatively, the picture could worsen, driving further falls.

Company	Market Cap (£m)	Share price (p)	% off 52-week low	P/E	Yield %
Tesco (LSE: TSCO)	24,354	303	2.9	8.9	4.9
Glencore International (LSE: GLEN)	23,136	334	2.4	7.5	2.9
Wm Morrison (LSE: MRW)	6,892	278	5.0	10.7	3.9
Resolution (LSE: RSL)	2,707	197	3.3	7.5	10.1
Songbird Estates (LSE: SBD)	1,586	102	1.8	n/a	n/a
Man Group (LSE: EMG)	1,330	74	3.2	18.0	14.4
African Minerals (LSE: AMI)	1,108	336	1.3	n/a	n/a
Genel Energy (LSE: GENL)	805	605	3.2	n/a	n/a
APR Energy (LSE: APR)	564	722	1.6	n/a	0.9
Fidessa (LSE: FDSA)	550	1,495	3.9	18.5	2.5
Computacenter (LSE: CCC)	500	325	4.4	8.9	4.6
Shepherd Neame (LSE: SHEP)	497	625	0.8	12.6	3.8
Halfords (LSE: HFD)	476	239	2.4	7.0	9.2
Shanks (LSE: SKS)	308	78	0.7	11.4	4.4
London Mining (LSE: LOND)	292	212	2.7	n/a	n/a

Here are three shares I found particularly interesting.

1) Tesco

In the entire FTSE 100 (UKX) index, there is not a single company with a lower price-to-earnings (P/E) ratio, higher dividend yield and better forecast profit growth than Tesco.

The shares trade on 8.8 times forecast earnings for 2013. The forecast dividend yield is 4.9%.

21 FTSE 100 stocks are expected to pay a higher dividend than Tesco. The same number of FTSE 100 companies trade on a lower forward P/E. Only eight FTSE 100 companies trade on both a higher expected dividend and lower forward P/E than Tesco. None of those eight companies is expected to match Tesco's profit growth. At today's price, Tesco represents a unique proposition of blue-chip value, income and growth.

Much of the investment discussion on Tesco describes the company as "struggling". That pessimism is not matched by the professional analyst community. They expect Tesco to deliver modest eps growth for 2013 of 1.0%, followed by 7.7% growth for 2014. The dividend is forecast to rise 1.2% for 2013 and by another 7.9% for 2014.

Investors may have been encouraged by Tesco's recent announcement that it is withdrawing from the Japanese market. This decision leaves management more focused on the company's core markets. Worryingly, trading statements from rival firms such as Sainsbury's (LSE: SBRY) suggest Tesco is losing UK market share. Tesco's success in the UK market had driven international expansion and shareholder returns. The company's current valuation suggests investors expect Tesco rivals to continue to gain ground on the market leader.

2) Fidessa

Don't be fooled by the current low in Fidessa's share price. The financial software specialist is a great growth story.

Fidessa provides multi-asset trading and analytics software to major investment banks and asset managers.

Fidessa has established itself in an industry where technology solutions have enjoyed increased demand. Fidessa software might be used by a stockbroker to send your trades to the market and then report the transaction back to you electronically. Fidessa's products are also used by the increasingly significant algorithmic trading desks.

In the last five years, the company has delivered compound eps growth of 21.2% per annum. The dividend growth averages out at 22.7% every year.

It would appear Fidessa has suffered some rating compression. Five years ago, the company traded on a forward P/E in the high 20s. Although growth was delivered, the market is now placing a lower rating on Fidessa shares. Today, the company trades at 18.1 times the consensus 2012 eps forecast and 16.7 times the estimate for 2013.

Shares in the company have fallen 21% in the last 12 months. This might be explained by the previous high rating and the fact that analysts are now expecting single-digit growth for the next two years. For the shares to rise from here, either Fidessa will have to deliver better growth or the market will have to start expecting it again.

3) Songbird Estates

Songbird Estates is one of the largest companies listed on AIM. Unfortunately, that means the shares are not eligible for ISA investment.

Songbird's share register is dominated by three overseas investment groups. Their combined holdings total 68% of the shares in issue. As a result, there is not a lot of liquidity in the company's shares.

It appears that the company's small free float and lack of dividend are deterring investors.

The company's operations have traditionally focused on Canary Wharf. Songbird owns a majority stake in Canary Wharf Group, owners of the eponymous tower. The Canary Wharf estate spent a long time being derided as a white elephant. This changed in the mid-90s when the working population there more than doubled in four years. The company is now diversifying beyond Canary Wharf. Such large-scale construction projects are long-term in their nature.

Perhaps it is the absence of a fast payout that is seeing investors send their cash elsewhere. However, for long-term investors Songbird looks to be one of the best ways to get exposure to the multi-decade boom London is enjoying. Other companies looking to exploit London's construction and development bonanza include Capco (LSE: CAPC) and Quintain Estates and Development(LSE: QED).

Warren Buffett buys British! The legendary investor has recently topped up on his favourite UK blue chip. Discover what he bought -- and the price he paid -- within our latest free report!

Further investment opportunities:

• 2 Share Tips For Olympic Gold
• The 12 Fastest-Growing Blue-Chip Shares
• A £332 Billion Problem For UK Investors

> David does not own shares in any of the above companies. The Motley Fool owns shares in Tesco and Halfords.

http://www.fool.co.uk/news/investing/2012/06/20/15-shares-trading-near-52-week-lows.aspx?source=ufwflwlnk0000001