3 Bid Targets That Could Soar This Year: Debenhams Plc, Rio Tinto plc And J Sainsbury plc

These 3 stocks could be worth buying ahead of possible bids: Debenhams Plc (LON: DEB), Rio Tinto plc (LON: RIO) and J Sainsbury plc (LON: SBRY)

| 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.

Debenhams

Even though Sports Direct has stated that it has no intention of making an offer for Debenhams (LSE: DEB) following another £85 million put-option bet on the retailer, bids from elsewhere could be a feature of 2015 for the department store.

A key reason for this is that Debenhams trades at a very low share price at the present time. For example, it has a price to earnings (P/E) ratio of just 9.6 and yields an impressive 4.6%, which indicates that a potential buyer would be acquiring the company at a very reasonable price.

Furthermore, Debenhams has a very lucrative and well-located estate, while its brand is extremely well known and could be developed internationally over the medium term. As such, a bid for the company this year would not be a major surprise.

Rio Tinto

Although Rio Tinto (LSE: RIO) (NYSE: RIO.US) is experiencing a challenging period at the present time, a bid for one of the world’s major iron ore producers seems to be rather likely. Of course, Glencore is probably the most obvious potential suitor, since it has in the past discussed the idea of acquiring Rio Tinto with the company’s board, although it would not be a major surprise for there to be interest from elsewhere.

That’s because Rio Tinto continues to have the world’s lowest cost curve for iron ore and, with China apparently on the cusp of a stimulus package, the low price of the commodity may not be a feature of the medium to long term. In addition, with Rio Tinto trading on a forward P/E ratio of 11.4 (which takes into account next year’s forecast fall in earnings) and having a yield of 4.8%, it seems to be too cheap for many of its peers to resist.

Sainsbury’s

While a bid for Sainsbury’s (LSE: SBRY) (NASDAQOTH: JSAIY.US) has been talked about by investors for around 15 years, this could finally be the year when a bid is made. Certainly, Qatar Holdings may be the most obvious suitor (since it owns 26% of the company) but interest from elsewhere is likely.

That’s because the challenges facing the supermarket sector are likely to ease this year, with disposable incomes in the UK increasing for the first time in real terms since the start of the financial crisis. This could boost Sainsbury’s bottom line and provide investors with much more confidence in the outlook for the business.

And, with Sainsbury’s trading on a forward P/E ratio of just 11.9 (taking into account next year’s forecast fall in earnings) and yielding over 4%, it seems to offer excellent value and could be the subject of a bid approach this year.

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 Debenhams, Rio Tinto and Sainsbury (J). The Motley Fool UK has recommended shares in Sports Direct. 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

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

If I’d invested £5,000 in a Nasdaq index fund 5 years ago, here’s how much I’d have now

The Nasdaq index keeps hitting new all-time records in 2024, as US tech stocks fly. How much could I have…

Read more »

A senior group of friends enjoying rowing on the River Derwent
Investing Articles

£500 to invest a month? Consider aiming to turn that into a £20,000 passive income like this!

With a regular monthly investment, it's possible to build a large and steady passive income for retirement. Royston Wild explains.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Investing Articles

As retirement needs soar 60%, here’s how I’m building wealth with UK shares

A regular investment in UK shares and funds could help Brits create a large and lasting pension. Our writer Royston…

Read more »

Investing Articles

I’d buy Games Workshop shares before they reach the FTSE 100!

Games Workshop shares look likely to join the FTSE 100 soon. Here’s why I think investors should consider buying the…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Could me buying this stock with a $2.5bn market-cap be like investing in Tesla in 2010?

Archer Aviation (NASDAQ:ACHR) stock's nearly doubled so far in November. Could this start-up be another Tesla in the making?

Read more »

Investing Articles

5,000 shares of this UK dividend stock could net me £1,700 a month in passive income

Our writer calculates the passive income he could earn from holding a significant number of shares in this powerful dividend-paying…

Read more »

Investing Articles

9.3%+ yields! 3 FTSE 100 dividend giants to consider buying

Our writer examines a trio of high-yield FTSE 100 shares and explains some of the opportunities and risks he sees…

Read more »

Investing Articles

As the Kingfisher share price drops on Budget fallout, should I buy?

The Kingfisher share price was on a strong 2024 run until the DIY group warned us of the possible effects…

Read more »