Top fund manager Neil Woodford has long held a view towards the pessimistic end of the spectrum on the outlook for global growth. However, he continues to see value in some areas of the market. And the core holdings of his equity income fund are blue-chip companies that he believes can still deliver in a low-growth world.
If you're looking for shares for your ISA, but are concerned about the state of the global economy and volatile stock markets, AstraZeneca(LSE: AZN), BT (LSE: BT-A) and British American Tobacco(LSE: BATS) -- three Woodford core holdings -- have a lot going for them.
"Doing all the right things"
You wouldn't have AstraZeneca down as a great business, if you looked only at the decline in sales and earnings since 2011. You'd probably be more inclined to avoid this FTSE 100 drugs company like the plague.
In its 2015 annual results, released last month, AstraZeneca guided on a further "low to mid single-digit" decline in revenue and core earnings for 2016. With the shares currently changing hands for something under £40, AstraZeneca is trading on a forward price-to-earnings (P/E) ratio of 14.5, with a dividend yield of 4.8%. On the face of it, that looks pretty poor value for a company with such an uninspiring outlook.
However, Woodford is looking further into the future, and expects AstraZeneca's performance to vindicate his support for the board's decision to reject a £55 a share takeover bid from US group Pfizer two years ago.
As recently as yesterday, Mitchell Fraser-Jones -- Woodford's head of investment communications -- said:
"We had a meeting with Astra's management just after the results and we continue to believe that they are doing all the right things to return the business to growth and create meaningful long-term shareholder value."
"Very strong dividend growth"
BT's earnings progression in recent years has been almost a mirror opposite to that of Astra. Woodford is supportive of BT's recent £12.5bn takeover of Britain's biggest mobile network company, EE, and is pleased with the group's solid strategic progress and continued strengthening of its leading position in the UK broadband market.
BT's financial year end is 31 March, and at a current share price of around £4.50 earnings forecasts put the company on a P/E of 14.6, with a dividend yield of 3.1%.
Stephen Lamacraft -- a blue-chip specialist on Woodford's team -- said last week: "The shares aren't as cheap as they were a few years ago but it continues to offer an attractive yield and the prospect of very strong dividend growth."
"Steady and sustainable growth"
British American Tobacco (BAT) commands a higher earnings rating than AstraZeneca and BT. At a share price of around £40, the Footsie's top tobacco company trades on a forward P/E of 17.6, with a prospective dividend yield of 4.1%.
Woodford has long considered tobacco companies to be under-appreciated by the market. As Lamacraft recently pointed out, the industry has a history of "delivering steady and sustainable growth in cash flows, earnings and dividends year in, year out, regardless of the economic environment".
Woodford and his team also attribute value to what they believe is the strong position of BAT and its peers to be the winners in designing and commercialising e-cigarette and other next-generation products.
G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.