Do Shares Of HSBC Holdings Plc, Glencore Plc And Telit Communications Plc Have The Potential To Double?

Will contrarians love investing in HSBC Holdings Plc (LON: HSBA), Glencore Plc (LON: GLEN) and Telit Communications Plc (LON: TCM)?

| 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.

With low valuations and much higher share prices in the not-too-distant past, could HSBC Holdings (LSE: HSBA), Glencore (LSE: GLEN) and Telit Communications (LSE: TCM) rebound to reward shareholders with 100% returns?

On Monday HSBC reported a disappointing 7% slump in adjusted annual profits and a 1% fall in revenues for 2015. This backsliding was unfortunate, but these results don’t change the thesis for long-term investors. The company is in the midst of a dramatic restructuring and short-term pain was to be expected. For investors who believe universal banking is still a sustainable model, and that Asia will be the main source of global growth in the coming decades, HSBC should still be an attractive investment.

Shares are currently trading at nine times forward earnings, suggesting there’s little growth currently baked into prices. If management can increase annual return on equity from the current 7.2% to the 2017 target of over 10%, shares could be in for significant upward rerating. This will be dependent on continuing to shift assets from low-return European and Americas operations to high-return Asian divisions. Coupled with significant cost-cutting actions underway and an eventual rebound in Asian economies, I believe HSBC shares do hold the potential to double. It must be said though that proponents of HSBC have been saying this for going on seven years now, so buyer beware…this is a risky proposal!

Should you invest £1,000 in Carlsberg Britvic right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Carlsberg Britvic made the list?

See the 6 stocks

The debt’s the thing

Speaking of risky investments, diversified mining and commodities trading giant Glencore has seen share prices more than halve over the past 12 months. While plunging commodities prices were the catalyst, the company’s highly leveraged balance sheet is what sent shares careening down further than competitors. However, Glencore has moved quickly to shore up its capital situation and is targeting year-end 2016 net debt levels of $18bn, down from $30bn in June of last year.

While meeting this target will be quite an accomplishment, it does still leave the company with a staggering debt load. Furthermore, shares are trading at 18 times forward earnings, a level higher than the FTSE 100 at large. While the company’s trading arm is very profitable, share appreciation over the medium term will still be largely dependent on an uptick in commodities prices. When prices do move upwards, I believe heavily-indebted Glencore’s shares will underperform competitors such as Rio Tinto.

Telit like it is…

Unlike Glencore, Internet of Things (IoT) device maker Telit Communications has industry tailwinds at its back. The IoT market is expected be worth many billions of pounds in the coming years and Telit is well placed to take advantage of this trend. The company focuses on making the devices that connect everything from cars to refrigerators to the cloud. Shares have been dented recently due to downward revisions to 2015 growth, but full-year revenues still rose an impressive 13.4%.

The company does remain a small player in the space and is vulnerable to giant competitors exploiting their economies of scale, but with such a massive growth market to exploit I believe it shouldn’t lack for opportunities. Shares trade at a low 11 times earnings, which suggests to me that Telit has the best opportunity of these three shares to double in size in the coming years.

Should you buy Carlsberg Britvic shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

Ian Pierce has no position in any shares mentioned. 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

Man smiling and working on laptop
Investing Articles

3 FTSE 250 shares with low P/E ratios and sky-high dividend yields!

Searching for the best bargains that London has to offer? Here's a handful from the FTSE 250 I think are…

Read more »

Investing Articles

Why is Apple stock lagging the S&P 500 in 2025?

Our writer is wondering whether now might be an opportune time to snap up shares of the largest company in…

Read more »

Investing Articles

Here’s how an ISA investor could build a £20k passive income with UK shares

Looking to make a five-figure passive income in retirement? Here's how a blend of UK shares and cash savings could…

Read more »

Investing Articles

£10,000 in savings? Here’s how an investor can target £3,560 in annual passive income

Paul Summers explains how an investor could target making thousands of pounds in passive income by holding great dividend stocks…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Up 490%, Lion Finance Group is a new name on the FTSE 250… but what is it?

Many investors won’t be familiar with Lion Finance Group, but the FTSE 250 stock has surged 490% over five years.…

Read more »

Growth Shares

I think this is the most punished FTSE stock in the market right now

Jon Smith talks through a FTSE company that has endured problems but is one he believes has a brighter future…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Stock market correction! 1 growth share down 53% to consider buying now

This writer highlights a growth stock that has hit a rough patch in recent weeks. Here's why it might be…

Read more »

Investing Articles

Here’s why the Tesco share price has dropped 18% in a month!

Tesco's share price has lost nearly a fifth of its value since mid-February. Is this FTSE 100 dividend stock now…

Read more »