G4S plc (GFS), National Grid plc (ADR) (NGG): Five Shares to Avoid Market Madness

However, the profit warning throws some of this into doubt. There is also the fact that the Olympic fiasco gives customers an excuse not to select G4S plc (LON:GFS). The margin slip suggests that G4S plc (LON:GFS)’ offering is now less valued by customers than previously.

G4S plc (LON:GFS) shares trade on a 2013 P/E of 11.3, with a forecast yield of 3.8%.

There are good reasons shares in GlaxoSmithKline plc (ADR) (LSE:GSK) do not get thrown around by market extremes. First, as a pharmaceutical, demand for its products is unaffected by confidence in the financial markets. Its products are frequently so important to people’s well-being that the company’s fortunes are not even particularly dependent on the economy. Whatever the economic weather, patients need their medicine.

GlaxoSmithKline plc (ADR) (LSE:GSK) has a record of dividend increases going back more than 10 years. In the last five years, the payout has been increased ahead of inflation every year. Increases are forecast this year and next. That puts the share today on a forecast yield for 2013 of 4.5%, rising to 4.7% for 2014.

The 2013 P/E is 15.1 times the consensus EPS forecast, falling to 13.7 times in 2014 with the expected earnings increase.

Buy shares in British American Tobacco plc (LON:BATS) if you like, but I think that the shares are grossly overpriced.

Sentiment toward British American Tobacco plc (LSE:BATS) improved recently on the absence of plain-pack legislation in the U.K. This is a small and likely temporary victory: Tobacco legislation is tightening worldwide. Fiji will bring in tougher laws in July that will prohibit the activity in many public places. Individual cities in Indonesia are also implementing similar bans with by-laws. It feels like the tobacco industry is under attack in every country in the world.

Nevertheless, British American Tobacco plc (LON:BATS)’ track record is impressive. In the last five years, EPS has increased at an average rate of 13.6% per annum. In that time the dividend has been raised year in, year out, at an average rate of 15.3% a year.

The article 5 Shares to Avoid Market Madness originally appeared on Fool.com is written by David O’Hara.

David O’Hara does not own shares of any of the companies mentioned. He has bet that the price of British American Tobacco shares will fall. The Motley Fool recommends GlaxoSmithKline and Reckitt Benckiser Group.

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