Do Barclays PLC, Premier Oil PLC And Legal & General Group Plc Make Great ISA Candidates?

Will Barclays PLC (LON: BARC), Premier Oil PLC (LON: PMO) and Legal & General Group Plc (LON: LGEN) bring you ISA riches?

| 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.

You might think I’m mad to suggest Barclays (LSE: BARC) as a candidate for some of your 2016 ISA allowance. After all, the bank has decided to slash its 2016 dividend by more than half, and there are investigations into some of its past practices going on that most people suspect will lead to more fines.

And Barclays did set aside a further £1.45bn in the final quarter of 2015 to cover PPI mis-selling costs, taking its total so far to £7.4bn. But you know what? I think there’s more than a reasonable amount of pessimism built into today’s share price which, at 156p, is down 39% over the past 12 months.

Forecasts are hard to get right, but with earnings per share (EPS) expected to return to modest growth this year and with a 34% boost pencilled-in for 2017, the shares would be on a P/E multiple of nine this year, dropping to under seven for 2017. Even with the uncertainties and risks, I see that as just too cheap, and I think Barclays is likely to be heading for a period of slow but sure share price growth — just what you need for an ISA.

A risky one

And if you thought that was mad, how about Premier Oil (LSE: PMO)? Yes, the heavily indebted oil explorer is a big risk. Yes, oil could still go lower and send the share price down. And yes, it could even go bust, or at least require refinancing that would dilute out existing shareholders if the low oil price leads to a default on debt payments. And the shares have lost 75% of their value since May 2015’s high point, to 43p — though they have been lower, at just 19p.

But on the upside, if the oil price recovery does continue, I reckon Premier Oil shares could be seriously uprated. After all, the company does still have cash and untouched borrowings to draw on, and it did take advantage of the downturn to snap up the whole of E.ON’s North Sea assets for the bargain price of $120m.

But is it too much of a gamble for an ISA? I’d usually say yes, but if you already have a few years of ISA allowances used up with safer shares, there’s nothing wrong with adding a small bit of high-risk excitement.

Back to safety

And one safe candidate that could help offset any Premier Oil risk is insurer Legal & General (LSE: LGEN), which has been handing out very attractive dividends. The shares have fallen 18% over the past 12 months to 238p, but that suggests a prospective P/E of around 12 this year, dropping to 11 on 2017 forecasts. That’s for a company which has recorded EPS growth for four years in a row with two more predicted, and is expected to pay dividend yields of around 6%.

Full-year results on 15 March were impressive, revealing a 14% rise in net cash generation, a 10% lift in pre-tax profit, and adjusted EPS up 11% on the previous year. The dividend was hiked by 19%, as chief executive Nigel Wilson told us: “We remain confident in the outlook for our business“.

The results gave the share price a boost, and it’s already up 20% since February’s low — and I can only see more progress over the next couple of years.

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.

Alan Oscroft owns shares in Premier Oil. The Motley Fool UK has recommended Barclays. 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

Google office headquarters
Investing Articles

1 reason I like buying S&P 500 shares – and 1 reason I don’t

Will this investor try to improve his potential returns by focusing more on S&P 500 shares instead of British ones?…

Read more »

Young woman holding up three fingers
Investing Articles

3 SIPP mistakes to avoid

Our writer explains a trio of potentially costly errors he tries to avoid making when investing his SIPP, on an…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Here’s how (and why) I’d start buying shares with £25 a week

Our writer uses his investment experience and current approach to explain how he would start buying shares on a limited…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s my 5-step approach to earning passive income of £500 a month

Christopher Ruane explains the handful of steps he uses to target hundreds of pounds in passive income each month.

Read more »

Investing Articles

2 UK shares I’ve been buying this week

From a value perspective, UK shares look attractive. But two in particular have been attracting Stephen Wright’s attention over the…

Read more »

Investing Articles

A lifelong second income for just £10 a week? Here’s how!

With a simple, structured approach to buying blue-chip dividend shares at attractive prices, our writer's building a second income for…

Read more »

Investing Articles

Here’s how I’d use a £20k Stocks and Shares ISA to help build generational wealth

Discover how our writer would aim to turn a £20k Stocks and Shares ISA into a sizeable nest egg by…

Read more »

Investing Articles

Billionaire Warren Buffett just bought shares of Domino’s Pizza. Should I grab a slice?

Our writer takes a look at a few reasons why Domino's Pizza stock might have appealed to Warren Buffett's Berkshire…

Read more »