Interactive Investor

Six value share tips for 2023 – and beyond

20th January 2023 14:11

by Richard Beddard from interactive investor

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Our columnist Richard Beddard invests in a basket of profitable firms with coherent strategies that treat people fairly. Here are his best ideas for 2023.

Value share ideas 600

It is that time of year again. interactive investor’s editor has put a gun to my head and he is going to pull the trigger unless I pick six of the 40 shares I follow closely as my favourite long-term investments. Before I do, please excuse three caveats.

The first caveat is that bad things sometimes happen at good businesses. A few months after I included XP Power (LSE:XPP) in last year’s version of this article a judge ruled that it had stolen intellectual property. This may not have permanently damaged the company, but it has depleted its finances and the confidence of investors.

The opposite is also true. Good things do not always happen to good businesses. It can take many years before other investors recognise the value we see.

Even over many years, my individual stock picks may not perform. That is why I hold 29 shares in the Share Sleuth portfolio. My philosophy is to invest in a basket of profitable firms with coherent strategies that treat people fairly. I believe the aggregate result will be more than satisfactory.

Since these are my best ideas, it is tempting to big them up, but I am going to use the few words I have left to examine my biggest worry about each share.

Scratch any good business and there will be something to worry about, but if our biggest fears are unlikely to come about, or modest threats, then perhaps we can stay the course.

To qualify for this list each share has to score 7 or more out of 9, according to my system. Each company's score links to the article in which I scored it, and the shares are listed from highest scoring to lowest.

If income is your priority, Howden Joinery (LSE:HWDN), Goodwin (LSE:GDWN) and Games Workshop (LSE:GAW) are the highest yielders at close to 3%.

Howden Joinery

Enterprise Value: £4,025 million

Earnings Yield (normalised): 6%

Dividend Yield: 2.9% (forecast)

Decision Engine Score: 9/9

Most of us buy kitchens infrequently, which makes selling them quite tough. Howden Joinery Group (LSE:HWDN) grew to be the UK’s biggest fitted kitchen supplier by finding regular customers, small builders, and building its business around them. Small builders make a living by selling the kitchens on to people like you and me, and installing them.

Howdens’ profitable growth over the years is very reassuring, but it will suffer when activity in the housing market slumps. One reason we replace our kitchens is because of the tawdry and dated interiors we inherit from previous owners when we move.

Transactions in the property market can decline dramatically. The most recent contraction occurred during the pandemic and Howdens’ profits suffered in 2020. Since then, Howdens has achieved its highest-ever profit.

Fluctuations in demand are inevitable, but that does not stop me holding Howdens for the long term. With no bank debt, substantial profit margins and a greater than 30% market share in the UK, Howdens should not only endure, but emerge stronger from downturns than its competitors.

A Howden kitchen 600


Enterprise Value: £491 million

Earnings Yield (normalised): 6%

Dividend Yield: 0.7% (forecast)

Decision Engine Score: 9/9

Focusrite (LSE:TUNE) designs and manufactures equipment that makes it easier for musicians to create, record and play music. It is a growing stable of famous, and highly profitable brands run by enthusiasts and industry legends.

The company is highly profitable, but its recent history may present a more rose-tinted perspective of its performance than we can expect in future. The company performed extremely well during the pandemic, when musicians forced to work from home, and hobbyists with time on their hands, loaded up with kit.

In some industries that prospered during the pandemic such gains are proving ephemeral, but Focusrite believes custom, although normalising, will remain much stronger than before the pandemic.

One of the reasons may be that more musicians know that affordable recording equipment is available to them now. In comparison to its most popular products, interfaces that connect instruments and headphones to computers, recording studios are more expensive and less convenient.

Churchill China

Enterprise Value: £138 million

Earnings Yield (normalised): 5%

Dividend Yield: 2.3% (f)

Decision Engine Score: 8/9

It was all going so well for Churchill China (LSE:CHH) until the pandemic. Its stylish and hard-wearing tableware was selling in increasing volumes in Europe. An automated factory, and a proprietary manufacturing process, kept manufacturing costs low and profit margins high.

Then the restaurants, pubs and hotels closed, and demand for tableware evaporated. Churchill China broke-even in 2020 and staged a partial recovery in 2021. My biggest concern is that margins might not recover to the levels achieved in 2019. As far as I can see the fear is baseless.

The company reports improving margins in 2022, but they are still lower than normal, probably because of high material and energy costs. However, we still need to eat off plates and as the industry adjusts, I would expect a company as efficient as Churchill China to benefit relative to European competitors dealing with the same inclement conditions.

A new restaurant has opened in the village where I live, and the tableware is from Churchill China. Perhaps it is a sign.


Auto Trader

Enterprise Value: £5,223 million

Earnings Yield (normalised): 6%

Dividend Yield: 1.5% (forecast)

Decision Engine Score: 8/9

Familiarity is a good confidence builder. I have been reading the annual reports of the other companies in this selection for many years, which has given me plenty of opportunity to conjure risks and come to terms with them. Not so Auto Trader (LSE:AUTO), which I scored for the first time in 2022. The biggest risk may be that I missed something.

Of course, it is impossible to fully evaluate what we do not know, but I worry that Auto Trader’s status as the UK’s largest online used car marketplace by far puts it in a very powerful position. Retailers feel they have little alternative but to advertise and buyers know there is a huge choice of cars.

To grow in the short term, Auto Trader could just raise the fees it charges retailers, but gouging customers is not a good long-term strategy. Doing more for them, and charging a fair price is more sustainable.

I think the signs are mostly positive. Auto Trader is innovating services that facilitate the online car buying process including arranging part exchange, finance and delivery. Small dealers may welcome the ability to transact online, and larger dealers that have developed online capabilities themselves may be tempted to outsource them as long as Auto Trader is more efficient, and they can stomach becoming even more dependent on it.


Enterprise Value: £340 million

Earnings Yield (normalised): 6%

Dividend Yield: 2.8% (historic)

Decision Engine Score: 7/9

Goodwin (LSE:GDWN) is a small family-owned conglomerate headquartered in Stoke-on-Trent. It makes components and equipment for heavy industry, nuclear submarines and the transportation and storage of nuclear waste. Other businesses in the group process minerals consumed in the manufacture of jewellery and tyres.

Its steel businesses have only been intermittently profitable since the middle of the last decade, when a collapse in the oil price precipitated a reduction in demand for valves that control the flow of oil and gas in pipelines.

Recovery has been a long time coming because the company pivoted, investing heavily to enlarge the foundry so it could cast bigger components required by the defence and nuclear power industries. It also had to gain accreditation and win contracts from new customers.

The good news is Goodwin says it has done the work. It has a very large order book and manufacturing is ramping up. The bad news is that it has had little impact on profitability yet, so Goodwin is testing investors’ patience.

The directors are confident that once the foundry and machine shop are busy again, they will operate as efficiently and profitably as before, and since it is their family’s money on the line and there are few foundries in the world that can cast super-alloys at the scale Goodwin can now, patience is probably the best policy.

Henry Cavill 600

Games Workshop

Enterprise Value: £3,063 million

Earnings Yield (normalised): 4%

Dividend Yield: 3.2% (forecast)

Decision Engine Score: 7/9

Games Workshop (LSE:GAW) created great excitement among investors and even greater excitement among fans when it announced a deal with Amazon Studios in December. Amazon will develop Warhammer stories and characters into television and film productions. Superman, aka actor Henry Cavill (pictured above), a Warhammer superfan, will be the executive producer and star of the shows.

It is hard not to get carried away, as the fantasy wargaming and modelling company is already earning a lucrative second income from video game royalties. Complacency though, the company says, is the biggest risk it faces. The hobby has flourished in recent years, straining the company’s systems, and a period of popularity ended with regrets nearly two decades ago. Then, the Games Workshop invested in new and bigger stores due to the popularity of the Lord of The Rings game and models, which it produced under licence, but its new customers were not dedicated and the fad died.

This time should be different. Its popularity is home grown and probably longer lasting, based on its own Warhammer intellectual property, the result of innovations in the games, models and how they are marketed, particularly online. Royalties are the icing on the cake.

Richard Beddard is a freelance contributor and not a direct employee of interactive investor.

Forecast dividend yields are from SharePad.

Richard owns shares in all of the companies mentioned except Auto Trader.

For more information about Richard’s scoring and ranking system (the Decision Engine) and the Share Sleuth portfolio powered by this research, please read the FAQ.

Contact Richard Beddard by email: or on Twitter: @RichardBeddard


We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

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