Even with the stock market recovering well from its steep March fall, there are opportunities for savvy investors to pick up shares that are still very cheap.
A discount on a range of companies and assets One such share I think is Temple Bar Investment Trust (LSE: LON:TMPL) which has a dividend yield of over 7%. On top of that, the discount to net asset value is around 10%. This is a great combination and makes the shares great value in my opinion.
The trust has a gearing of around 13.3% which is higher than some other similar trusts and this does add some risk, especially when the market falls.
At the end of March, the trust had Royal Dutch Shell (LON:RDSa) and Barclays (LON:BARC) and RBS (LON:RBS) as its third, fifth, and sixth biggest holdings respectively. It’ll be interesting to see if that’s changed in light of dividend cuts.
13.3% of the trust is in cash with further hedges provided by 2.9% being in physical silver and gold. The heavy weighting towards big UK companies at a time of dividend cuts is slightly concerning, but for now, I think the big cash position should see it through.
The limping asset manager Jupiter Fund Management (LSE: JUP) combines a yield of 7.5% with a price-to-earnings ratio that is under eight. This indicates to me that the shares are very cheap.
Jupiter is looking to scale up its business by buying growth. In February Jupiter agreed to acquire Merian Global Investors for £370m. It has since stated the deal will go ahead despite the economic uncertainty at the moment.
Both asset managers have been hit by outflows which makes the deal challenging but Merian does have margins of around 50% which is very high, even in this industry. Merian will also boost earnings per share from 2021 as well which is good for management and shareholders.
This isn’t a business that’s firing on all cylinders, but that gives it the potential to recover from a low base. I think the shares look cheap and could be worth a look, especially with a long-term mindset.
Relying on squeezed marketing budgets WPP (LSE: LON:WPP) is one of those businesses that suffers during a downturn. But assuming any economic downturn isn’t too long-lasting I expect it offers value at the current depressed price. I’m tempted to pick up more of the shares.
That’s because the P/E is now under eight, which puts it on a very similar level to Jupiter. What that shows is many investors are fearful for the future. But if management can keep slimming the business down and further cut debt, while keeping the agencies in the business performing well, then I’m optimistic about WPP’s future.
Conventional wisdom is that companies should reduce marketing spend during a recession. However, there is academic evidence that actually it might be the best time to spend and gain market share, as less well-financed competitors struggle. If enough companies take this view, WPP could do well and for now, the shares are embarrassingly cheap.
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Andy Ross owns shares in WPP. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020