Greggs - 361p

It is true to say that the Greggs business is solid rather than exciting, but this has meant that the company has been well insulated against the current downturn.

Most readers must be aware of Greggs stores even if they are not fans of the fare on offer, which is predominantly sandwiches, savoury products such as sausage rolls, bakery sweets and drinks.

The focus is on the value end of the market and this attracts a high volume of customers even when purse strings are being tightened, as we are experiencing at present.

At the end of 2008, the company had over 1,400 shops, mainly trading as Greggs but also, for the time being, Bakers Oven.

The company believes there is scope for over 2,000 shops given its lack of penetration in some geographical locations and given that it already employs over 19,000 people there is no doubt that this is a substantial operation which is standing the test of time.

One criticism of Greggs shares in the recent past was that they were too illiquid for smaller investors, with each share being worth over £50 at one stage.

This has been rectified by a ten-for-one share split and the price is now at a more sensible level for trading in.

That could be a catalyst for an increased valuation. Although the shares continue to trade on a double-digit multiple of earnings, a premium rating can be justified given the lack of borrowings and overall quality.

In the past few years profit before tax of around £40 million to £50 million has been achieved consistently. This year should see performance in the middle of that range. Cash generation has historically been strong and a net cash position maintained at each year end despite the cost of rolling out the business. There has also been sufficient free cash to buy back shares and pay a steadily increasing dividend. Last year 14.9p per share was paid out in dividends, which represents a yield of 4.1 per cent at the current share price.

The company has recently announced that interim results will be released on August 11. Although it is unlikely that there will be any surprises, the figures should underline the enduring value of Greggs even in difficult times. Fundamentally, the shares look good value and with the shops continuing to attract customers en-masse, this looks a sound long term investment opportunity.

WARNING: Opinions expressed are the writers’ judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.