Barratt Developments, RSA Group and Firstgroup

For completion, I shall take a brief look at the final three companies on the Sunday Telegraph's share tips list for 2014. They are Barratt Developments, RSA Group and Firstgroup. Please note that my thoughts are based on a fairly cursory glance at the figures, and I'm not saying the Telegraph is right or wrong to tip these companies. As mentioned before, it is rare that tipsters make any reference to the fundamentals of the companies they recommend, and I'm simply adding a few figures. As always stock pickers should carry out their own informed research.

Before I assess Barratt Developments, I should mention that I never buy housebuilders. Rightly or wrongly I class them as a trader's share as opposed to a long term buy and hold. It's a very cyclical industry, and I'd find timing when to buy and sell very difficult.

The chart shows that Barratt is in a clear uptrend, and although the share price has risen substantially from its lows, it is nowhere near it's 2007 high of over £12. The shares are trading above Net Tangible Asset Value (£2.21) which I don't find particularly attractive, and they currently sit on an historic p/e of 45 with last reported EPS of 7.7p. They haven't paid dividends since 2008 (interim of 12.23p). However, prior to that it appears that they had a progressive dividend policy, and in 2007 they paid a whopping dividend of 35.68p which would be a 10.2% dividend compared to the current share price. Maybe they will be able to re-instate the progressive dividend policy in future years. On the face of it, it doesn't look attractive to me, but as I said I'm not a fan of housebuilders and they are subject to the vagaries of both the British economy and the government.

RSA Insurance looks potentially interesting. Clearly the recent profit warnings have taken a toll on the share price which is now at 12 month lows and appears to be falling towards a possible 10 year low (we shall see)? I find it difficult to value insurers, but for income investors the larger cap. insurers usually pay handsome dividends. According to ADVFN's figures, the p/e ratio is currently below 10 and the yield is around 8%, although I suspect this will fall substantially this year given the interim payment and subsequent profit warnings. This is the sort of company I would put on my monitor as having recovery potential, I might wait to see if it falls further before serious consideration though. Aviva is a good example of how these insurance company recovery plays with a record of generous dividend payments can be good investments.

Finally,  Firstgroup also looks like a very interesting recovery play. The share price sits at a 10 year low. It's an easy business to understand, and until recently it boasted a record of being able to increase dividends each year. Following a discounted rights issue it is unlikely to go bust in the foreseeable future. Has it already hit it's share price nadir? Always difficult to know, but I'd bet it's somewhere near, and if it's not going bust then the share price has only one way to go in the longer term. I'd classify this company in the same bracket as RSA, in other words, potentially very rewarding if management can get their act together. If not, then shareholders may benefit from a activist Hedge Fund shareholder (Sandell) pushing for asset sales.

As ever, no advice intended or given. It will be very interesting to re-visit the Telegraph's tips at the end of the year.