Investment Column: Legal & General is too cheap to ignore; Marston’s

Our view: Buy

Share price: 62.15p (-3.1p)

Life insurance is a complicated business, says Legal & General's chief executive Tim Breedon, adding that that explains the relative cheapness of his company's stock. The shares got even less expensive yesterday, when they fell 4.75 per cent after the group's first-half results.

Complicated accounting procedures and the lack of understanding among some analysts contributed to the fall in the share price , Mr Breedon argues, saying that punters who buy the shares today would be getting a modern, well-capitalised and efficient life insurance group that has the cash generation to provide for good dividend payments in the future.

No doubt, and we applaud Legal & General for its attention to cash generation and the balance sheet repair work it had done. However, investors will be unhappy that the dividend was slashed by 45 per cent yesterday, even if Mr Breedon argues that the payment bettered the expectations of most analysts. Profits were down, and even though this was again expected, it is not something that should fill buyers with confidence.

And yet we do rather like Legal & General. Analysts at Panmure Gordon do too, and point out that the group trades at a 31 per cent discount to enterprise value: "On an IFRS price-to-net-asset-value basis, the shares are trading at a multiple of only 1.16 times. The dividend yield based on our 2009 forecast of 3.2p a share is a healthy 4.9 per cent. We think that if the share price does not recover in the short term (based on flat investment markets), then L&G will increasingly become the subject of corporate activity".

The industry still faces challenges, not least that of helping to educate investors, and the next few months are likely to remain tough, but the stock is cheap enough to make a speculative bet worthwhile. Buy.

Our view: Buy

Share price: 72p (-0.3p)

When better to shop around for the best possible deals than when money is tight during a recession? Unfortunately for the price comparison business, that logic has not played itself out. It reported a first-half profit of £1.9m yesterday, down from £14.4m last year, on sales that were down 30 per cent.

The problem for is that its key businesses have been credit crunched. With mortgage finance having dried up and personal loans harder to come by, fewer people have been hunting down bargains. That's had a knock-on effect on insurance-related searches too. Other revenue streams have also suffered.

In the bad old days of mania, that combination would have spelled disaster. Yet is still here, still in the black in fact, and was yesterday able to offer a special dividend of 4.93p a share.

This is a well-run company with no borrowings. Its cash pile of £76m reflects a prudent approach coming into the recession, and the willingness of founder Simon Nixon to step aside from day-to-day control was a mature move that has paid off – new boss Peter Plumb has brought a fresh approach.

Indeed, is now cautiously optimistic about the second half of the year, with trading having begun to pick up during the third quarter. A marketing campaign starring Dragon's Den entrepreneur Peter Jones is performing well.

There are no obvious comparisons, but does look highly valued at around 18 times 2009 earnings according to estimates by Investec. Still, threats of competition from internet giants have not yet become a reality. This is a growth stock to put away for the long term. Buy.


Our view: Buy

Share price: 95.8p (+0.6p)

When we last looked at pub group Marston's a few months ago, the company said that, at last, it was emerging from the nuclear winter that has engulfed the industry over the past couple of years.

We were cautious and wanted more evidence that the numbers were not just a blip, especially after its chief executive Ralph Findlay, warned the market not to get carried away too.

We think that now is the time to buy. The group put out another set of steady-as-she-goes numbers yesterday, saying that like-for-like sales in the six months to the start of August were up 2.3 per cent, with a 6 per cent rise in food sales. Mr Findlay is more optimistic, saying that since February trading has been stronger, despite rising unemployment and, almost unbelievably, a wetter July than last year.

Buyers should still exercise caution, but with the stock falling by 25 per cent in the last quarter, and offering a dividend yield of 6 per cent, we think punters are getting a bargain. Buy.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map