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

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »

Investing Articles

Is it madness to buy Palantir shares after Q3 earnings?

Palantir stock's surging again after the firm's Q3 earnings report. But after a 150% gain, is it too late to…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£6,000 in savings? Here’s how I’d aim to turn that into £1,032 a month of passive income!

A small investment in high-dividend-paying stocks with the returns used to buy more shares can generate big passive income over…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

As Lloyds’ share price tumbles 14%, is this an unmissable opportunity for me to buy at a bargain-basement price?

The Lloyds share price is substantially below its year high, but decent earnings prospects should drive its price and dividend…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

2 UK shares that could rise if Trump wins the Presidential election

These UK shares are among the FTSE 100's most popular stocks. And they could rise in value if Donald Trump…

Read more »

Closeup ruffled American flag representing US stocks and shares
Investing Articles

2 UK stocks that could rise if Harris wins the Presidential election

Royston Wild believes these UK stocks could receive a bump if Kalama Harris wins the Presidency, giving their share prices…

Read more »

Investing Articles

After a 96% plunge, is buying more Aston Martin shares throwing good money after bad?

Just two weeks after buying Aston Martin shares Harvey Jones found himself nursing a painful loss. Yet after recent news…

Read more »

Investing Articles

After crashing 45% in October, should I buy this FTSE 250 share for my Stocks and Shares ISA?

Roland Head explains why he’s tempted to add this risky FTSE 250 turnaround share to his Stocks and Shares ISA…

Read more »