This article was written by Peter Shearlock and published in The IRS Report in October 2011.

Looking for bargains in previous value selections

For the past six months, the table listing my past value selections has comprised only those companies reviewed since the beginning of 2008. The decision to prune it was taken for space reasons. The previous list included entries from as far back as 1998 and was starting to grow to unmanageable length. I am, however, aware that some readers have a continuing interest in the "oldies" and that a review could be timely. Others might find some new ideas here that are worth pursuing.

A good starting point is to divide the portfolio into two categories - defensive shares and the rest. Among the defensives I would include BG Group, Centrica, Ladbrokes, Marstons, Mitchells & Butlers, Whitbread and, despite its major production mishap in 2010, De La Rue. Most of these have solid, assured businesses. Several are asset-rich while a number offer dividend yields of 5% or 6%.

Mitchells & Butlers looks to be on the receiving end of a bid from its recalcitrant 22.8% shareholder, billionaire Joe Lewis, though the mooted price fails to reflect what the business is worth. Brewer and pubs group Marstons looks particularly attractive on a yield of well over 6%, though the sector clearly remains out of favour. Whitbread's Premier Inn hotels business has been trading strongly and there is huge growth potential for the Costa Coffee chain in China and elsewhere. I remain positive about most of these shares.

Legal & General also offers a good yield, with the prospect of a rising payout as the ratio of cash generated to dividends paid is reduced. L&G now has a world-class investment management business while fears over the future of its annuities business in the wake of new European legislation look to habe been overdone. Composite insurer RSA Insurance has good recovery potential after the recent share price tumble. It now offers a yield of well over 8% - with the latest dividend payment being lifted 7%.

Among the rest, there are several that are performing well and should continue to do so. Pearson has been the subject of repeated updates here. With its big US educational business, it should be a beneficiary of the strengthening dollar. Tate & Lyle put in a strong performance in 2010/11 and looks to set to do so again. Neither looks overvalued.

The packaging group, David S Smith, has seen its shares come back 80p to 172.5p since some stellar figures in late June. There is no reason for this, other than concern that the packaging market will suffer if Europe goes back into recession. Bunzl, the distribution and outsourcing business, would also be hit. Right now, it is performing well, getting the benefit of some good acquisitions and benefiting from the stronger dollar. But McBride, which produces own-label toiletries for Europe's retailers, looks caught between price squeezes and inflation.

Shares in mining giant Anglo American have fallen by a quarter since the company's impressive half-year figures at the end of July. These showed a 45% jump in core operating profit and a 40% improvement in earnings per share.

Anglo remains a quality act but it is worth remembering that the shares fell to around £11 at the depths of the 2008/09 bear market. A return to that level would mark a further halving of the share price. While a long-term fan of the shares, I am negative short-term.

There are three sectors that rightly look out of favour. One is retail, where the portfolio is represented by HMV and Kingfisher. The former has been a disaster with sales imploding at an alarming rate. The company needs a stellar Christmas to avoid making a loss this year. Anyone sticking with the shares must accept the prospect of a rights issue in the New Year. Kingfisher, on the other hand, has been producing exciting numbers and is continuing to expand its footprint. The shares may be vulnerable to deteriorating sentiment but look reasonably priced at 240p.

The second is defence. Aerospace business Meggitt has been performing strongly. But there must be a doubt whether its civil aviation side can compensate long-term for the likely squeeze on defence spending on both sides of the Atlantic. By contrast, Rolls-Royce looks a continuing winner from an ever-expanding airline sector and looks cheaply rated. This is one share investors should keep on their watch list for whenever the markets take a dive.

The third is building materials. Wolseley shares look reasonable value again after falling by a third from their year's high. Debt is being cut, profits have bottomed out and the company has returned to the dividend list. But holders here will still need a lot of patience.

The two banks in the list present something of a quandary. Right now, investors are dumping European bank shares at almost any price, conscious that a Greek default would have potentially crippling implications for some and knock-on effects for others. Lloyds, however, is essentially a domestic UK operation and contagion should be limited. It still has plenty to do in sorting out its £24 billion of bad real estate loans but the new man at the helm, Antonio Horta-Osorio, has come in with lots of energy. The shares are surely languishing in the bargain basement, though they could stay there for some time.

Barclays' shares made a good recovery from crisis levels in 2010, but have recently succumbed to the selling that has hit the rest of the sector. The  bears point out that more than 60% of Barclays' profits still come from the investment banking side and are likely to be volatile at best. But at 155p the bank is valued at not much more than a third of book value. If the mooted bail-out for vulnerable European banks becomes reality. Barclays shares could have a lot of upside.