I have held this one for a while and seen the shares double since 2012. It has been on my value, yield and quality screens for a long time. However, recently I noticed that it was coming up in the bottom decile on my oversold overbought ranks. This prompted me to revisit it and I saw that it has pretty much sold off like a ski jump ramp in Sochi since mid January shortly after they announced their trading update for the year. Now this is slightly odd given that the trading update, albeit brief, was of the in line / reiterating guidance for 2013 variety and talked about good revenue visibility for 2014 to boot. Now the market did itself suffer a setback at that time on emerging market concerns and I guess this one was also ripe for some profit taking at the time and estimates have nevertheless continued to drift down.

Thus I suspect a clumsy or big seller has been in operation and as a result, even though the market has since recovered most of its losses since January, this one has continued to languish under performing FTSE by around 18% in the process. I had not found any evidence of this until holdings in the Company were announced yesterday showing that JPM have gone below 5% and it looks like Standard Life have been increasing above 5%, I guess that's what makes a market - for every seller there has to be a buyer. In addition I note that three Short Interest Positions were opened in the last month totalling about 2% of the equity, which will have done quite well up to now.

Now this is where it gets interesting as a trade as the Company have reminded the market in an announcement today that their final results are due out next Friday 28th February 2014. Thus unless the shorts know something is fundamentally wrong with this one (in which case they could increase their shorts down here) I would have thought they would be tempted to close their positions next week ahead of the results. 

So what can we look forward to next week? The interim dividend was increased from 6.4 to 6.8 pence and increase of 6.25%. Factoring the same rate of increase to last years final of 14.1 pence gives me a forecast of 15 pence which would be a nice round figure for the  board to announce and therefore give a full year total of 21.8 pence which would be 2.3% ahead of the current consensus. This would represent a yield of 3.9% @560p with a 2.7% yield on the final alone. This is also more than two times covered by the expected earnings of around 46 pence. In terms of the P/E it is on around 11x forward based on current forecasts of around 51p, which is below the lowest 2013 P/E it has traded on this year.

The company is slowly transforming itself from being reliant on construction related activities to a more support service and facilities management operator. A good overview of prospects and outlook was given by the Company in their Capital Markets Update last year. The balance sheet was not that leveraged at the last year end with £215m of a £250m facility still available and this runs to 2017 so no funding issues. Their covenants are Net Debt : EBITDA <3x and Interest Cover > 3.5x, this was 38x at last year end. There was a Pension deficit of £77.8m  under IAS19 last year.

So what are the prospects for this one. Well I guess we will have to wait for the results (which the Company have already set expectations for) and more importantly the outlook. Technically the shares were looking oversold and are trading around their 200 day moving average and near a support level they rallied from last Autumn. If all is well with that then I wouldn't be surprised to see the shares heading back up above 600 pence in the near term and if they can get back to around 650 pence that would be around a 16% return from the 560 pence they got down to yesterday when I topped up my holding, plus the final dividend to come. Of course the market and the short sellers may know more than I do so please do your own research and don't take my word for it.

Today I thought I would share a couple of research papers I read recently about the merits or otherwise of following a yield based investment strategy. The first one looks at whether this is the best way to invest in the value part of the market, as I feel it is always important to read things that do not necessarily agree with your view point. Otherwise I think you suffer from what is called confirmation bias - which is over emphasising or only seeking out things that agree with your view point. 

So the first article can be seen on ValueWalk or download a PDF if you prefer. The second one is referenced in the first article and can be found on Advisor Perspectives or in PDF form. If you can't be bothered to wade through them (although they are not too technical)  - the bottom line is that a yield based strategy may not be the best value approach for the highest total returns. However, since yield based strategies tend to be lower beta, on a risk adjusted basis they measure up to more volatile value strategies like low P/E and low Price to book.

I like the concept here of reduced estimation risk, the greater predictability of my income returns and lower capital volatility that investing for yield brings. I realise and I'm prepared to miss out on some potential upside from more volatile value stocks that don't have the immediate income that I prefer. As ever I guess you pay your money and take your choice, hell you can even buy highly rated growth stocks if you want, but I wouldn't recommend it!

Further to my recent post about Warren Buffet's advice about saving and a day after Poundland announced its intention to float - I thought I would try and go one better. So I have updated my site with a Free Stuff section to may be help you save some money and reach your financial goals.

Now don't get too excited, but hopefully you might find something useful in there. In addition as a service to my select band of readers I am offering you a free pound (yes a free pound) if you click through and sign up via the Quid link on the Free Stuff page (if you are not already a member of that service). I'll try and expand this section going forward when I get around to it.

In addition to this, as part of my learning curve on building a web site and as a service to you, I have added a form in case you would like to be notified by e-mail of new posts. If that is of any interest to you then please sign up and I'll see if I can get it to work for you. 

Results from BHP Billiton are the main feature today. They are actually quite good despite all the gloom surrounding commodity prices recently, with underlying operating profits up by around 15%. The dividend was increased by 3.5% and they currently yield close to 4%, 2 times covered by earnings which put them on a 12x earnings multiple.

Consequently these had started to feature in my value and yield screening and come up on contrarian three year under performance screens. Apart from the yield it was the breadth of the portfolio of assets here and the industry noises about reducing levels of capital expenditure and focussing on returns that got me interested recently. Early evidence of the success of this is demonstrated in these numbers with EBIT margins up 9% to 38% and return on capital up to 22%. Allied to this there was also a 65% increase in net operating cash flow and a 25% reduction in cash outflows from investing activities which led to a US$7.8 billion increase in free cash flow, which should also help to underpin dividend payments going forward. Debt levels also appear manageable and are likely to be coming down given the reduced capital expenditure commitments. You can download a presentation covering the results and their capital discipline and production growth outlook.

Thus having had very little or no exposure to this sector in the last few years I picked some of these up back in January this year at around £18 having top sliced some Vodafone above 230 pence. Pleased to see the results back up the investment case for this one longer term. The other majors in the sector like Rio and Anglo American are also generating  interest in some quarters and so it may also be worthy of some further digging around there too?

He was asked this question on a TV show:

 "What's the biggest mistake we make when it comes to money?" and Buffett had a direct, but vitally important response:

"Well, I think the biggest mistake is not learning the habits of saving properly early. Because saving is a habit. And then, trying to get rich quick. It's pretty easy to get well-to-do slowly. But it's not easy to get rich quick."

This accords with my way of thinking and a few of the things I have been writing about on here recently and came from another article from the always useful Motley Fool. Click the link to read the whole article and if you want to give them your e-mail, you can get some of Buffets investing tips which then becomes a plug for a newsletter from Motley Fool. I can't comment on the newsletter, but sometimes e-mails from them highlight interesting stuff.