(04/03/12) It’s Not Too Late to Buy 2 UK Stocks

While a number of recommended picks have risen out of their buy zones after the strong quarter, the value proposition for these names is still strong, writes the staff at Motley Fool UK.

Tesco (London: TSCO) dominated the headlines when retailers released their traditional Christmas trading updates in January. The UK’s biggest supermarket chain announced disappointing figures and warned of minimal profit growth this year and next.

I can’t recall another piece of company news that has so polarized buying and selling among top investors. As my Foolish colleague Maynard Payton reported, Warren Buffett accumulated Tesco shares as fast as Neil Woodford disposed of them.

Among our Expert Eight, one manager who had sold his holding in the second half of 2011 repurchased the stock at a lower price in January. Meanwhile, another manager who had bought the stock in the second half of 2011 dumped it in January in the belief that "Tesco has a lot of work to do before it is again a reliable growth business."

When it comes to recent blue-chip buying, our stock pickers have been plowing their own furrows, with little common ground between them.

Single-manager buys that have caught my eye include microchip designer ARM Holdings (London: ARM), telecoms giant BT Group (London: BT-A), and electronic inter-dealer broker ICAP (London: IAP). However, the shares of all three have subsequently risen—strongly in the cases of BT and ICAP.

So, the blue chips I would highlight as being of particular interest to investors today are:

British Sky Broadcasting
Mark Slater was a buyer of BskyB (London: BSY) in July last year, when the shares plummeted after News Corporation (NWS) withdrew its bid to take over the satellite broadcaster following the News of the World phone-hacking scandal.

BSkyB’s lowest closing price in that tumultuous week was 696p, although it did go lower intraday on the date of the announcement.

The current price is 692p, and the valuation is little changed since Slater said in the wake of BSkyB’s recent interim results: "Trading on a PEG of slightly less than 1, with a P/E of 13.3, likely earnings growth of 15%, and a healthy dividend yield, the shares are attractive."

Carnival
Veteran blue-chip stock picker Richard Buxton had earmarked cruise-ship operator Carnival (London: CCL) as a company that could surprise on the upside in 2012—but that was before the tragic capsize of the Costa Concordia off the Italian coast in mid-January.

Buxton had previously been a big buyer of Carnival when the shares were way north of the current price. He added to his holding following the Costa Concordia disaster. on the basis that "history suggests…these events have a one or two-year impact," and his belief in Carnival’s longer-term prospects.

The company’s shares traded above 3,000p little more than a year ago. [Shares were just under 2,000p, or £20, at press time—Editor.]