Six shares that have it all

Source: Datastream

The Have-It-All screen is inspired by what is perhaps one of the less-worthy aspects of the festive period. It is devised as a kind of Christmas wish list that a spoilt child might put together. The screen aims to embody many of the key demands that most investors have - growth, value, income, track record and business quality. Indeed, my main fear when originally devising the screen was that any stocks that met all the criteria would in fact prove too good to be true and end up disappointing. But so far the screen has been very successful (see graph).

Source: Datastream

Given the extent of what the Have-It-All screen demands from stocks, the individual criteria used are not too demanding. For instance, the growth rates the screen looks for are hardly exacting. Stocks are also only required to pass eight of the nine screening tests. I've also had to soften the screen's requirements for value and income this year due to the general rise in valuations across the market. Rather than set an arbitrary level for forward PE and yield, as I have in previous years, I am now just demanding that stocks are among the cheapest third of the market on a forward PE basis and among the highest yielding third of dividend-paying stocks screened.

SIX SHARES THAT HAVE IT ALL

Provident Financial

The credit crunch was a boon for Provident Financial (PFG), which specialises in lending to the type of less desirable borrower that big banks have turned their backs on. The key area of growth has been the company's Vanquis credit card business. Both customer numbers and the size of balances have been rising fast and the company is now rolling out the business in Poland. Spending on this launch is expected to hold profits back this year, but analysts think the move could represent a major opportunity in the longer term for International Personal Finance, which was spun out of Provident in 2007, in overseas markets.

Provident's traditional home lending business has been more stodgy than Vanquis, though, but there are plans afoot to reinvigorate the operation. The company has launched the Satsuma brand to try to take advantage of the online instalment loan market, which is believed to be about four times the size of its traditional home credit market. The group believes its experience in home credit coupled with rising regulation to curb the practices of payday lenders will give it a significant advantage in this exciting market.

Source: S&P CapitalIQ

Last IC View: Buy, 1,566p, 21 Nov 2013

BHP Billiton

Following many years of strong performance, shares in resources companies have truly come off the boil. But there are good reasons to think BHP Billiton's (BLT) shares now represent good value. The company is well diversified and has better growth prospects than many of its peers. Indeed management has recently been making good progress pushing up production while at the same time selling off non-core businesses, scaling back capital expenditure and cutting costs.

There is little the company can do about the price movements of the commodities it mines, but the strong fundamentals of the business could help shift investors' focus towards dividend prospects, which was once the mainstay of resources investors. From this perspective BHP looks very attractive. The group boasts a very strong dividend track record, and according to broker Killik & Co, as well as being over twice covered by earnings, the dividend is more than three times covered by free cash flow.

Last IC View: Hold, 1,924p, 23 Aug 2013

Micro Focus

In many ways Micro Focus (MCRO) - a stock-screen favourite having been picked by different screens on no less than six occasions this year - is a stock that just keeps on giving. Its core business of improving the efficiency of computer mainframes may not be in an exciting high-growth part of the IT market, but it does generate lots of cash and coupled with management's staunch focus on creating the best returns from the business shareholders have prospered. High standard dividend payments have been accompanied by further special dividends. Indeed, last month the group paid out its latest special dividend of 60p and a similar payment is widely anticipated the same time next year.

But despite the clear attractions of this income and what broker Panmure describes as a "ridiculously cheap" rating, there is a problem with the stock which is that top line growth has been elusive. There are reasons to be optimistic that the company could buck the trend in 2014. It has lined up some product launches, sales should be helped by recent acquisitions, and the improvement in the US economy, where the group generates 46 per cent of revenues, should also help. There would probably need to be a major strategic change, possibly through acquisition, to really set the shares alight. But in the meantime there are those excellent cash returns on offer. Interim results are due to be published between the time of writing and publication of this article.

Last IC View: Buy, 793p, 29 Aug 2013

XP Power

The shares of power conversion company XP Power (XPP) have been another regular feature for a number of my stock screens in 2013. The company boasts a number of attractive characteristics, such as its high yield, strong balance sheet, excellent cash generations and industry-leading margins. The group's prospects have also been helped by its strategic move away from its traditional reliance on distribution to higher-margin manufacturing activity.

However, the improvement in global economic conditions could prove to be the icing on the cake. In its most recent quarterly update the group reported 11 per cent year-on-year sales growth with revenues up 7 per cent over nine months. It also reported another period of bookings outstripping billings. While it is early days, these are promising signs that a cyclical upswing could be on the way that would have the potential to drive further significant earnings upgrades - broker Edison boosted its forecasts for both 2013 and 2014 by 4 per cent following the most recent quarterly figures. In the meantime, dividend growth prospects look strong with expectations of 8 per cent growth this year.

Last IC View: Buy, 1,325p, 29 Jul 2013

Interserve

End markets are not easy for Interserve (IRV) at the moment but the group is managing to make the most of the situation. A good amount of work has been coming in from the company's UK support services business and, as of 13 November, Interserve had won £1.8bn of new work so far this year. The group is also driving though self-help measures that will help prop up earnings, and acquisitions will assist the performance of the international business. So pre-tax profit growth of 3 per cent is being pencilled in by broker Numis for this year followed by 13 per cent in 2014.

The key area of weakness for Interserve at the moment is its international construction operation, but there are signs that demand may be picking up. Indeed, while it is early days in any global economic recovery, there are grounds to hope Interserve shares could benefit from some cyclical upside in 2014. Comfort can also be taken from the group's balance sheet, which Numis believes is the strongest in the UK-listed peer group. Cash conversion has also continued to be above the target of 100 per cent recently, which should support ongoing dividend growth. Forecasts suggest the dividend will be increased by 5 per cent this year and 9 per cent in 2014.

Last IC View: Hold, 553p, 14 Aug 2013

Kentz

For some time the market has applied what is perhaps best described as a "too-good-to-be-true" rating to Kentz (KENZ) shares. That's understandable given the abundant signs that work is becoming more scarce in the oil services market, which has led to rolling earning-expectations downgrades and profit warnings from many of Kentz's peers. But amid this flurry of disappointments, Kentz has stood out as the company that continues to deliver. Indeed, the group's most recent update reiterated promises of double digit earnings growth next year and reported strong order intake. The company has also been the subject of bids this year underlining the shares' apparent cheapness and the company's quality.

True, it would be foolhardy to consider any company immune to wider issues in its industry, but comfort can certainly be taken from Kentz's reported $3bn order backlog in October, up from $2.8bn in June. And, if Kentz continues to buck the trend and doesn't disappoint, then there is little arguing with the fact that the shares are a bargain at current levels. Indeed, broker Investec points out that even based on its modest 600p target price, the shares would represent an 8 per cent discount to the rest of the bedraggled sector once the group's cash pile is taken into account.

Last IC View: Hold, 589p, 20 Aug 2013