The stock market meltdown has not been all doom and gloom. Some of Britain’s leading investors have been turning the slide to their advantage, by snapping up shares at bargain prices ready for a bounce.

Bill Mott, manager of the £172m Psigma Income fund, said: “We have been extremely busy, buying what we believe to be some rewarding investments at what appears to us to be stunningly attractive prices.”

Global stock markets have been shaken this summer by fears that trouble in the American mortgage market could lead to a wider financial crisis. The FTSE 100 index of leading shares has fallen 7.6 per cent since hitting a six-year high of 6,732 on June 15.

The Footsie rallied 156 points to 6,220 last week as hopes of lower US interest rates restored some investor confidence. But worries about the US housing market and a global economic slowdown persist.

However, far from being a reason to quit the market, savvy investors are viewing this as a chance to pick up companies on the cheap.

We asked a panel of investment managers which bargain shares they would buy now. Here are their 10 favourites.

Royal Bank of Scotland

Banks have been badly hit because of fears they are exposed to the crisis in the US mortgage market. Royal Bank of Scotland’s share price ended the week at 581p, 12.5 per cent lower than the start of the year.

However, Stephen Whittaker, joint chief investment officer at New Star, a fund manager, tips it as one of his favourite stocks.

He said: “It is trading on a price to earnings ratio of eight, compared with 11.3 for the FTSE 100, which is just too cheap. It is also offering a 6 per cent yield. The company is well run, has attractive overseas businesses and good management.”

Marks & Spencer

Marks & Spencer’s latest quarterly sales figures were the weakest for nearly two years. Its share price has tumbled 4.6 per cent over the past month, as it ended the week at 614p.

However, Richard Buxton, head of UK equities at Schrod-ers, a fund manager, said: “Despite recent weakness in the share price we believe the company is well positioned to deliver strong growth over the next few years. Its share price-fall has presented a great opportunity for investors.”

Charter Charter, the heavy mining equipment maker, has been around since 1889 when Queen Victoria gave a royal charter – hence the group’s name – to the British South Africa Company.

It has operations around the world, from China to eastern Europe and Latin America to the US. Its shares have plunged 10% over the past month to £10.28 on fears that a global economic slowdown will hit profits.

But Mott thinks the concerns are overdone and that its share price could stage a strong recovery by the end of the year.

BP

Oil giant BP has seen its share price fall by 12 per cent to 552p since it hit a 12-month high of 613p on July 13. Fund managers think this provides an opportunity for investors to pick up shares in one of Britain’s biggest and most profitable companies.

Jim Stride, head of UK equities at Axa Investment Managers, said: “BP has been out of favour for some time as a result of environmental and safety problems. However, the company is under the new leadership of Tony Hayward and we believe recovery is under way.”

British Airways Shares in the airline were badly hit when it was fined £269m earlier this month for conspiring with Virgin Atlantic to fix prices on long-haul routes. The firm has also been heavily criticised for the number of passenger bags lost.

On Friday its shares closed at 409p, 22 per cent lower than at the start of the year.

Buxton said: “British Airways has seen a particularly aggressive sell off in its shares. We believe this is an opportunity to buy into an extremely undervalued company.”

Michael Page

Despite posting excellent results last week, shares in the Surrey-based international recruitment firm have dropped 18% over the past month.

But chief executive Steve Ing-ham was upbeat about the company’s prospects, and so is Mott. He said: “The sell off is unjustified given its growth potential.”

Millennium & Copthorne

The hotel group’s shares have struggled since the company’s chief executive, Peter Papadimi-tropoulos, resigned earlier this month after just six months because of disagreements over his management.

The company’s shares hit a high of 733p in May this year, but since then have slumped 30 per cent. Last week they finished the week at 516p.

But Stewart Methven, co-man-ager of the Dunedin Income Growth investment trust, is backing the firm.

He said: “The news that the company’s chief executive was stepping down resulted in some marked weakness in the company’s share price. We believe that following this drop the valuation now looks compelling.”

Vodafone

Vodafone is the third-largest stock in the FTSE 100, and over the past five years dividends have quadrupled. It is currently yielding 3.9 per cent.

However, over the past month its shares have slipped 2.2 per cent to 157p. They are a long way from the 399p they hit at their peak in March 2000.

But it has its fans. Stride said: “It is generating substantial cash-flows and we believe that will feed through into a higher share price.”

William Morrison

Supermarket chain Wm Morrison has been one of the worst performers of recent months, as slowing sales and a suspected outbreak of e.coli in some of its Scottish stores has hit investor confidence. Its shares have fallen by 14.7 per cent to 275p since last month. Philip Eyre at Collins Stewart Wealth Management believes they are worth a punt.

He said: “Morrison’s is supported by a valuable property portfolio, some of which could be sold with the proceeds returned to shareholders.”

Another reason the shares are worth buying is that chairman Sir Ken Morrison is mulling the possible sale of all or part of his holding as he prepares to stand down from the business. That could spark takeover interest.

Legal & General

Shares in Legal & General, Britain’s third-largest insurer, have tumbled 8.5 per cent over the past month to 138p, despite an increase in profits and plans announced for a £1 billion share buy-back.

Whittaker said: “Legal & General’s price-to-earnings ratio is only 5.5, and it is yielding 4.1 per cent. Companies with strong yields are particularly attractive now, given the market volatility.”

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