Share tips for 2014

I notice that the Sunday Telegraph have published their share tips for 2014 in today's paper which include the following companies:-

Barratt Developments
Monitise
AstraZeneca
Drax
Chemring
Home Retail Group
RSA group
Firstgroup
Imagination Technologies
Barclays

I must confess that I generally ignore tips in newspapers, and anywhere else for that matter, but in fairness their picks for 2013 did well with an average gain of 54.53%.

http://www.telegraph.co.uk/finance/markets/10540409/The-Telegraphs-share-tips-for-2014.html

The rational for each tipsters choices are generally well written, but as with all newspaper articles they rarely refer to the all important underlying figures that are always my first point of call before I delve further into their businesses and prospects.

What I have decided to do then is have a brief look at the figures for these companies.

I'll start with Chemring, a company I mentioned at about this time last year:-

http://michae1mouse.blogspot.co.uk/2013/01/new-year-resolution.html

The share price looks like it hasn't moved much during that time, although savvy traders might have made double digit profits as the share price originally moved above 300p before a rather abrupt retrace.

So what are the figures for Chemring? Do they back up the reporters optimism for 2014? Well firstly this is a company that has paid regular dividends to shareholders in the past. In fact they have paid out as much as 50p per share in 2010 which is almost a quarter of the current share price (special dividend?). Last year's dividend was less generous at 9.5p or 4.4%, not bad, but of course it may fall further this year. Nevertheless, I do like companies that have tried to adopt a progressive dividend policy. If the good times roll again then you can expect dividend hikes.

The NAV (from Advfn figures) is around 224p which is above the current share price. However, if you strip out the intangibles then TNAV is just 10.5p. In a fire-sale intangibles are absolutely worthless, and hence if Chemring were to get into real trouble then don't expect to get any of your money back.

They also have high levels of debt, although I notice that net debt fell by £45m in the quarter to 31 October, at £249m it is around the same levels as last year.

Heavily indebted companies with little asset backing are not really my cup of tea, although in certain circumstances and with the right conditions and some good fortune these companies can turn out to be an excellent punt. A recent example would be Thomas Cook Group which at one point looked in real trouble. A risky strategy, but it can pay off handsomely at times.

Overall, it appears to be a highly cash generative company, although I did notice there was a small cash outflow reported in the interims.

It's the sort of company that would possibly interest me if the share price were to fall much further since the risk/reward would be far more attractive to me, but at present I'll not be investing. I could quite easily see the share price moving upwards though with some strategic disposals and improved trading. As the report suggests there is also the possibility of a suitor, although I wouldn't like to guess the price that any offer would be pitched at.

As ever, no advice is intended or given.

P.S. I don't have holdings in any of these companies.