2 Unloved Stocks That Could Make You A Mint: BP plc And Barclays PLC

There’s money to be made with BP plc (LON: BP) and Barclays PLC (LON: BARC) Here’s why.

| 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.

Cash

Share prices are never cheap without reason. Indeed, the idea of buying low in order to maximise profit comes with a fair amount of risk. If a company’s performance was strong, its shares would not be cheap. Similarly, if the macroeconomic outlook was rosy, share indices would be at all-time highs.

However, just because shares are cheap does not necessarily mean they are to be avoided. Sometimes they can turn out to be the most profitable investments around. With that in mind, here are two unloved stocks that could turn out to be your best performers in the long run.

BP

Recent news flow on BP (LSE: BP) (NYSE: BP.US) has sent the company’s share price lower, with a US federal judge deciding that the company was grossly negligent in the 2010 Deepwater Horizon oil spill. This could end up costing BP up to $18 billion in pollution fines. In addition, sanctions against Russia could also impinge on future profitability, which together means that investor sentiment is very weak at present.

However, BP could still be well worth buying. Certainly, its outlook seems pretty black at the moment, but the company could still enjoy a prosperous long-term future. That’s because, despite shedding a number of high-quality assets in recent years, BP continues to have an asset base that is stuffed full of highly lucrative and potentially profitable prospects. For example, in 2015 the company is expected to increase its bottom line by as much as 8%, which highlights the potential (even in the short run) of BP moving forward.

Furthermore, BP is generous with regards to sharing profitability with investors. It currently pays out 49% of profit as a dividend, which means that shares in the company currently yield a highly impressive 5.1%. With shares in BP trading on a price to earnings (P/E) ratio of just 9.6, there seems to be upwards rerating potential as well as enticing income and earnings growth prospects, too.

Barclays

With continued allegations of wrongdoing surrounding its dark pool trading system, Barclays (LSE: BARC) (NYSE: BCS.US) is not a favourite among investors at the moment. Indeed, shares in the bank have fallen by 18% since the turn of the year, which is well below the FTSE 100’s gain of 1% over the same time period.

However, the long term holds huge potential for Barclays. It is forecast to increase its bottom line by 28% in the current year and by a further 26% next year. This means that its earnings are forecast to be 61% higher in 2015 than they were in 2013, which is a stunning rate of growth. Furthermore, at least some of this growth is due to be shared with investors, as dividends per share are expected to increase by 40% next year. At its current share price, this means that Barclays currently yields an impressive 4.4% based on next year’s anticipated dividend.

With shares in the bank currently trading on a P/E of just 10.4, it continues to offer a potent mix of income potential, earnings growth and the scope for an upwards rerating. As a result, it could be a star performer.

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.

Peter Stephens owns shares of Barclays and BP. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Here’s how Warren Buffett says he’d start investing today

Warren Buffett says if he was starting again with investing, he’d try to find undervalued opportunities where other investors aren’t…

Read more »

Happy parents playing with little kids riding in box
Investing Articles

2 FTSE 250 dividend growth stocks I’m considering for passive income

Paul Summers thinks the best dividend stocks to buy are those that consistently return more money to investors every year.

Read more »

Investing Articles

The Compass Group share price looks ready for growth after positive 2024 results

The Compass Group share price is up 4% today following positive full-year results. Our writer considers its prospects in 2025…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

How I plan to build an £86k yearly second income in the stock market

Is it realistic to aim for a substantial future second income by investing in high-quality shares? This writer firmly believes…

Read more »

Investing Articles

Here’s the Vodafone share price forecast up to 2027

Can anything stop the Vodafone share price slide? It's still early days for the company's turnaround plan, so we might…

Read more »

Investing Articles

Down 37%, here’s one of my favourite FTSE 100 bargain shares to consider

This FTSE 100 retailer's shares have collapsed in 2024. Despite tough trading conditions, is now the time to consider buying…

Read more »

Investing Articles

Which do I like best today, Nvidia or Tesla stock?

EV maker Tesla stock is on the up, while Nvidia growth is softening a bit. But they're both in the…

Read more »

Investing Articles

After jumping 15%, my favourite FTSE 250 stock looks set for the premier league

Games Workshop stock recently reached an all-time high, placing it within touching distance of promotion from the FTSE 250.

Read more »