3 Stocks Set To Beat Their Rivals: Rio Tinto plc, BAE Systems plc And Greencore Group plc

These 3 stocks could beat the wider index: Rio Tinto plc (LON: RIO), BAE Systems plc (LON: BA) and Greencore Group plc (LON: GNC)

| 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.

All investors are constantly looking for the best stocks in which to invest their hard-earned cash. However, finding the most profitable investment opportunities can be a challenging task and, even if they are found, an opportunity to make money can often be disguised as a potential disaster that could lose money.

For example, take  Rio Tinto (LSE: RIO) (NYSE: RIO.US). It is enduring one of the most difficult periods in its recent past, with the price of iron ore collapsing to a multi-year low. And, while Rio Tinto has other operations, its dependence on iron ore for over 90% of its profit has been evident in terms of the impact of the commodity’s price fall on its bottom line, with Rio Tinto set to deliver a 52% decline in its net profit in the current year. As a result, its share price has fallen by 21% in the last year alone, thereby making many investors wary of investing in the Australian miner.

However, Rio Tinto offers excellent long term investment potential. For starters, it trades on a very low valuation, with a price to book (P/B) ratio of just 1.3. This indicates that there is significant scope for an upward re-rating of Rio Tinto’s shares, since a price to book ratio that is so low appears difficult to justify while the company remains well-financed and with such low cost curves. Furthermore, profit growth is set to return next year, with the mining giant forecast to post bottom-line growth of 13%, which could catalyse investor sentiment and push its shares higher.

Equally, BAE (LSE: BA) (NASDAQOTH: BAESY.US) may appear to be a rather risky investment at the present time, with defence cuts being a reality for much of the developed world. However, with an improving global economy, BAE’s income prospects appear to be much more stable than they were a year ago.

For example, BAE currently yields a very impressive 4.3% and, with earnings set to rise by 6% next year, it means that there is significant scope to move shareholder payouts upwards at a faster rate than inflation over the medium term. And, with dividends being covered 1.8 times by profit, BAE appears to be a relatively stable income play which could see its share price rise due to continuing high demand for higher yielding stocks over the medium term.

Meanwhile, convenience food producer, Greencore (LSE: GNC), continues to be one of the more reliable stocks in which to invest. Unlike Rio Tinto and BAE, it has an excellent recent track record of growth, with its bottom line having risen at an annualised rate of 16% during the last five years. And, looking ahead, it is expected to post growth of 14% in the current year, followed by 13% next year.

Despite such a strong growth profile, Greencore trades on a price to earnings growth (PEG) ratio of just 1.1 and this indicates that its shares could move significantly higher over the medium term. And, with a yield of 2% from a payout ratio of only 35%, Greencore could become a top notch income choice over the medium term, too.

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 BAE Systems and Rio Tinto. The Motley Fool UK has recommended Greencore. 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

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »

Investing Articles

Why I’ve just sold two of the largest investments in my Stocks and Shares ISA

Stephen Wright has been making room for a new addition to his Stocks and Shares ISA. What is it and…

Read more »

Investing Articles

2 UK shares I’m avoiding like the plague in today’s stock market

Stephen Wright is a big fan of UK shares. But both the FTSE 100 and the FTSE 250 contain companies…

Read more »