Is there value in the public sector?

Yesterday's news that the UK's largest care home provider, Southern Cross, has received an indicative non-binding offer from a private company has again put the focus back on companies who depend upon the public sector for business. The share price of Southern Cross has been under pressure for some time since the company highlighted the fact that local authorities are cutting back on their care home spending - although it did bounce 50% yesterday on the approach.

So far the company has rebuffed any potential deal although many analysts and investors are now starting to look again at the public sector and companies which operate in this area. If the ongoing reduction in public sector spending is only a temporary measure then perhaps some of the share price falls seen of late may be overdone?

For many investors it is literally concerns about the survival of some companies in the short to medium term which has seen the share price of those companies operating in the public sector fall of late. Whether looking longer-term there are better prospects than many people would assume is a matter for debate although there are obvious risks associated with investing in companies operating on reduced business turnover.