RESI10 constituent choices

The RESI10 (J210) is trading near historical lows when gauged by the relevant PE ratio.

This begs the question whether there are opportunities lurking around. One argument (and potential risk factor) is that the companies constituting the RESI10 are currently experiencing very high profit margins and reporting  above average earnings. Always the bargain hunter, potentially low valuations picks my interest so I decided to investigate.

The constituents and respective weightings in the RESI10 basket are as follows:

The objective is to analyse these constituents in order to identify 2 or 3 shares to target when the market dips again (note when, not if, the EU can't keep on kicking the can down the road indefinitely, we've seen this movie before several times and we now how it ends...).

Using the financial results of the past 10 years for each company, one is able to determine an average PE ratio, P-to-NAV, ROCE (Return on Capital Employed), Operating Profit Margin, and IBD:Eq (Interest Bearing Debt to Equity). Comparing current ratios to the 10 year averages should give an idea on whether the company is reporting above average earnings and consequently whether there is risk for future earnings depression. 

First the companies I deem unattractive out of the 10:

ANG:

Currently trading on the back of historically high ROCE and Operating Profit Margins. Relatively high P/NAV and high IBD:Eq. Extremely volatile earnings. This feels more like speculation than investing.

ARI:

Likely trading at fair value with slightly above average ROCE and Profit margins. PE ratio not particularly attractive. Not depressed enough to make it exciting.

GFI:

Volatile earnings and IBD:Eq, ROCE and Profit margins above average. Characterised by high valuations when compared to earnings, dificult to see where returns will come from.

EXX:

The contentious one. However, historically high (way above average) Profit margins and ROCE as well as high P/NAV levels makes this a risky choice with potential for disappointment and downwards re-rating should earnings be below expectations.

Companies worth considering:

(if they offer cheaper entries)

BIL:

SOL:

IMP:

AMS:

My current top 2 choices out of the RESI10:

LON:

This company is getting my contrarian juices flowing. Everyone is concerned about a bleak outlook for platinum. Some platinum mines are closing, safety regulations and labour action are causing disruptions in production, platinum stock levels are high. However, the company's valuation already reflects even more than these negatives. Low debt levels leave room for financing through tough times. Below average ROCE and Profit margins provides room for long term improvement (although near future performance will likely be abysmal). The P/NAV ratio is at unprecedented low levels. Assuming negative and zero earnings in the next 2 years, and price levels returning just to 33% below LT average levels allows for potential returns of ca 40% CAGR. 

AGL:

The low P/NAV levels makes AGL attractive. If it dips below R260 I'm a buyer.