Why Diageo plc And HSBC Holdings plc Are Set To Be The Surprise Packages Of 2015

Diageo plc (LON: DGE) and HSBC Holdings plc (LON: HSBA) could be worth buying right now

| 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.

Diageo

Investor sentiment in Diageo (LSE: DGE) (NYSE: DEO.US) has improved markedly in recent months following a period of disappointment for the company’s share price. In fact, shares in Diageo are up by 9% in the last six months while the FTSE 100 has risen by just 2% and, looking ahead, Diageo could continue its outperformance of the wider index.

That’s because it offers a very appealing mix of defensive qualities and excellent long term growth potential. For example, its industry remains one of the most defensive on offer, with alcohol sales being lowly correlated to macroeconomic performance. In addition, Diageo also has a wide range of brands so that, should consumer fashions and tastes change, it is unlikely to see a major fall in its top or bottom lines.

As well as this defensive appeal, Diageo also offers long term growth potential. Its brands are among the most desirable in the emerging world and, with the wealth of the developing world set to soar in the long run, it could be well-placed to benefit from an upsurge in demand moving forward. As such, now could be a good time to buy a slice of Diageo and it could be a strong performer during the course of the year, as investor sentiment continues its upward momentum.

HSBC

Investor sentiment in HSBC (LSE: HSBA) (NYSE: HSBC.US) continues to be relatively weak. For example, the bank has seen its share price rise by just 1% this year, while the wider index is up 4%. However, HSBC could be a surprisingly strong performer this year, since its share price appears to offer stunning value for money at the present time.

For example, HSBC has a price to earnings (P/E) ratio of just 10.9, which compares very favourably to the FTSE 100’s P/E ratio of 15.7 and highlights its upward rerating potential. That’s especially the case because HSBC is forecast to grow its bottom line in-line with the wider index, with earnings growth expected to be 6% in the current year, and 8% next year.

In addition, HSBC also yields a highly enticing 5.7% at its current price level and, with dividends per share expected to rise at a rapid rate over the course of the next year, it could be yielding as much as 6.3% in 2016. As such, investor sentiment may not remain weak for long and HSBC’s share price could soar this year, as investors continue to seek out high yields while interest rates remain low.

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 HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. 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

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

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

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »