Why Value Is Up for Grabs With HSBC Holdings plc, SABMiller PLC & GlaxoSmithKline plc!

HSBC Holdings plc (LON:HSBA), SABMiller PLC (LON:SAB) and GlaxoSmithKline plc (LON:GSK) are appealing investment propositions, argues Alessandro Pasetti.

| 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.

The current market turmoil offers a great opportunity to snap up the shares of HSBC (LSE: HSBC), SABMiller (LSE: SAB), and GlaxoSmithKline (LSE: GSK). Let’s check out their recent performances and a few other financial metrics. 

HSBC: Time To Buy?

The bank is selling assets to shore up its capital position, but the market is concerned about sluggish growth in Asia, where a large portion of its operations are based.

Its shares currently change hands at around 500p and are down 20% in 2015; according to consensus estimates from Thomson Reuters, they offer upside of about 20%, but if bullish analysts are right, capital gains could be in the region of 50% over the next 12 months.

Should you invest £1,000 in Barclays 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 Barclays made the list?

See the 6 stocks

I am inclined to agree with those projections, and not only because HSBC stock trades at depressed trading multiples of 10x forward earnings. Its payout ratio is fine, while its high dividend yield (6.4%) signals that the shares may be oversold as investors overreacted to very bad news from China in recent weeks.

SABMiller: A Solid Buy At This Price?

This is a slightly less risky investment than HSBC, at least based on its beta of 1 versus HSBC’s 1.1. 

The brewer is a long-term bet on emerging market growth, but even if growth sputters there, it remains an appealing proposition at its current share price of 2,960p. I have long argued that its fair value is around 3,200p, so if I am right — and if you buy its shares today! — you could pocket an immediate 8% pre-tax paper gain.

Its equity valuation has fallen 10% year to date but has come under more pressure in recent days as Citigroup and Credit Suisse downgraded the stock to 3,300p and 3,100p, respectively. While it’s true that large acquisitions will be difficult to pull off following the $10bn+ purchase of Foster’s in 2011 (hence SAB now offers less “synergy potential” than in previous years), SAB management has historically been particularly good at targeting efficiency measures, while receiving the backing of relationship banks, which has helped it manage effectively its capital base.

All this will likely support a dividend yield of between 2.5% and 3% over the next 30 months. 

One Direction For GlaxoSmithKline

With a lowly beta of 0.6, GSK should be the less risky investment of the three in a bear market, but I have doubts that management will be able to meet expectations. There’s no sign of much-needed spin-offs, which were expected towards the end of the year.

After a decent start in 2015, management has failed to convince investors that they should pay up to own Glaxo stock: one problem is that managers have proved to be too conservative, although Glaxo has clearly outperformed both SAB and HSBC, having recorded a -6% performance since early January. 

According to market consensus estimates from Thomson Reuters, potential upside here is lower than that of HSBC and SAB at between 11% and 34%. My take is that based on a multitude of factors — trading multiples, assets base, returns cycle, drugs pipeline — its shares may have only one way to go, and that is up!

Should you buy Barclays now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation 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.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and 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

At $184, I reckon this S&P 500 juggernaut is still on sale

Our writer sees Amazon (NASDAQ:AMZN) as an attractive S&P 500 stock to consider while it is priced 23% lower than…

Read more »

Investing Articles

Cheap FTSE 250 shares to consider buying right now?

These FTSE 250 growth stocks had weak starts to 2025, and face short-term uncertainty. But their long-term valuations could be…

Read more »

Investing Articles

As stocks dive, is this a rare chance for ISA investors to build generational wealth?

Globally, stocks have pulled back significantly following the announcement of tariffs by the US president. Is this an opportunity for…

Read more »

Investing Articles

2 ultra-cheap shares to consider right now!

These cheap UK shares offer considerable growth and income potential over the long term, reckons our writer Royston Wild.

Read more »

Investing Articles

Legal & General Group shares go ex-dividend on 24 April – time to grab that 9% yield?

Harvey Jones holds Legal & General Group shares and is already looking forward to the next bumper dividend from this…

Read more »

Young female analyst working at her desk in the office
Investing Articles

3 FTSE 100 dividend stocks to consider buying while they’re on sale

Paul Summers reckons canny investors should think about snapping up quality, dividend-paying stocks while they're going cheap

Read more »

Investing Articles

2 cheap passive income shares to consider buying right now

The passive income we can earn from the UK stock market looks set to climb this year, and could even…

Read more »

Investing Articles

Down 15% in a month, this FTSE 100 dividend share offers investors a stunning 10.8% yield

Harvey Jones plucks out a FTSE 100 dividend share that offers frankly a quite staggering yield and is now a…

Read more »