More prospects

I've been looking at a few other potential prospects, so I thought I'd note them down here. I'm not yet wholly convinced by any of them, but they all look cheap right now.

TPK: Travis Perkins. The share price on this one has been in steady decline for about a year, presumably over concerns about falling house prices. It's almost a straight line decline (on a logarithmic chart) for the last 10 months. Almost enough to make me a Technical Analysis convert. Looking at the fundamentals, it's clearly vulnerable to a housing market crash and/or a recession causing lower demand, and has a medium-sized heap of debt. It's on a P/E of 7, yield of just under 4%. They're still expanding, opening new stores. I'm guessing they have pretty high fixed costs, so could end up making a loss in a severe downturn, but otherwise things look pretty solid. It's currently on 967p; I think 1250p would be a fair price, so a discount of 25%. I don't believe in TA, but.... just this once I'm going to keep an eye on the chart and try to time the bottom. Let's see if I regret it.

LAD & WMH: Ladbrokes and William Hill. Now I wouldn't normally lump in two companies in the same boat, but I crunched my numbers on these two and decided that they're identically good value (at LAD 284 and WMH 348). I put a fair price of 400 and 480 on them, which means they're trading at a 30% discount. Interesting. I believe that historically bookmakers have done reasonably well in a downturn, so a looming recession shouldn't be too much of a concern. However, they're both quite old-fashioned compared to the likes of BetFred and Paddy Power who are rapidly stealing market share and are clearly more competent on the internet side of things. Paddy Power, interestingly, doesn't carry any debt, while WMH and LAD have a fair amount (nothing too worrying though). Ladbrokes benefited last year from some quite stupendous profits from "Telephone High Rollers" which I can't imagine will be sustainable, so I've assumed that their earnings will fall. William Hill is in the process of replacing its proprietary internet platform with something built on a standard platform, so I'm expecting an improvement there offsetting a recession-linked decline in shop-based profits.

So, some more prospects for me to consider. I've continued to research my other prospects and come to the conclusion that Taylor Wimpey and Shell are the two best value at the moment, trading at a discount to my valuation of 36% and 32% respectively. (My latest top-up of RBS at 305p was at 34%). I can see TW getting cheaper over the next 6 months to a year. I can't fathom Shell at all (the soaring oil price doesn't seem to be doing them any favours) so won't try to make predictions.

GSK and MKS still look too expensive. Yell looks cheap (even after assuming a 20% chance of complete wipeout due to their debts) but not cheap enough at a 16% discount to my valuation.