3 More FTSE 100 Shares To Soar If The Market Rises: Royal Bank of Scotland Group plc, Legal & General Group Plc And GKN plc

Royal Bank of Scotland Group plc (LON:RBS), Legal & General Group Plc (LON:LGEN) and GKN plc (LON:GKN) have spent the last 12 months exagerrating the market’s moves.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Using a market statistics package, I searched for the shares whose price movements have previously exaggerated the market’s by the most. This produces a list of shares that statistics show would be most likely to rise furthest should the market rise.

These are known as high-beta shares. There are two important things to note. First, just because a share has been high beta in the past does not mean it will be in the future. Second, just as these shares are expected to rise most in a bull market, statistics also suggest they would fall hardest if the market went into a decline.

Royal Bank of Scotland

Weekend press reported that the government looks set to scrap plans to split Royal Bank of Scotland (LSE: RBS)(NYSE: RBS.US) into a ‘good’ bank and a ‘bad’ bank. Many analysts had feared that RBS might suffer this fate and have been discounting the shares accordingly.

Should you invest £1,000 in Lancashire Holdings Limited right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Lancashire Holdings Limited made the list?

See the 6 stocks

RBS management has been rapidly reducing the size of RBS’s ‘bad’ bank. The long-feared prospect of damaging government interference at RBS is receding.

The significant share price discount to book value and favourable trading outlook leave RBS shares well poised to advance sharply in any market rise.

The shares are up 21% in the last six months while the FTSE is just 3% ahead. I expect outperformance to continue.

Legal & General

As a provider of managed investment funds, Legal & General (LSE: LGEN) will often be regarded as a geared play on the stock markets. That is because such businesses enjoy a double-whammy of increased business and high fees when markets rise. In a market setback, that process reverses.

Legal & General shares have risen 38% so far this year versus a 12% rise for the FTSE 100. Laying the share price graph of one over the other shows just how Legal & General has amplified the ups and downs of the blue-chip index.

The shares today trade on 13 times forecast earnings for 2013 and offer a prospective yield of 4.5%. That still leaves room for further rises.

GKN

Engineering firm GKN (LSE: GKN) is a big supplier to the world’s highly cyclical automotive market. As such, its shares are frequently bought/sold based on people’s expectations for the global economy. These swings lead to the shares carrying a high beta. This means that the shares suffer large falls in market declines and enjoying stunning rises during rallies.

This status seems to be borne out in the company’s profit record over the last five years. GKN reported losses for 2008 and 2009 before returning to big profits in 2010.

The company is forecast to report earnings per share for the year of 26.4p and pay a dividend of 7.8p. At today’s (five-year high) share price, that equates to a P/E of 13.6, with a prospective yield of 2.2%.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> David owns shares in Royal Bank of Scotland but none of the other companies mentioned.

More on Investing Articles

Small cap sticky note
Investing Articles

Just released: April’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Up 33%! Here’s why I’m not buying more Lloyds shares this month

Lloyds shares are on a tear in 2025, up almost a third since the year began. But Mark Hartley remains…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

£3,000 in savings? Here’s how it could be used to start investing and earning a monthly passive income

Christopher Ruane outlines how someone could start investing today with a spare £3K to try and build passive income streams…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Tesco shares go ex-dividend on 15 May. Time to consider buying them?

Harvey Jones admires Tesco shares because they combine solid share price growth with a decent level of dividend income. The…

Read more »

Senior couple are walking their dog through a public park in Autumn.
Investing Articles

Is today’s market turmoil a brilliant opportunity to get a high second income from dividends?

Falling share prices drive up yields in a boost for those after a second income from dividends. Harvey Jones looks…

Read more »

piggy bank, searching with binoculars
Investing Articles

Outlook: in just 12 months the BP share price could turn £10,000 into…

Forecasters seem pretty optimistic about prospects for the BP share price, suggesting it could be in for a major rally.…

Read more »

Santa Clara offices of NVIDIA
Investing Articles

Down 28%, is Nvidia stock a bargain – or a value trap?

Nvidia stock has crashed this year -- but it's still a star performer over the long term! So, is this…

Read more »

Investing Articles

£10k invested in Barclays shares at the start of 2025 is now worth…

Harvey Jones says Barclays shares were unlikely to continue 2024's blistering run, given all the uncertainty out there. Yet long-term…

Read more »