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3 FTSE 100 Shares You Should Have Bought In August: Lloyds Banking Group PLC, Glencore Xstrata PLC and Aviva plc

The FTSE 100 (FTSEINDICES: ^FTSE) had one of its worst months in ages in August, putting in four straight weeks of losses to end the month 208 points (3.1%) down on 6,413. Various worries contributed to the fall, with fears that the US Federal Reserve might soon be cutting back on its economic stimulus measures at the forefront of the hand-wringing — though it beats me why people apparently seemed to think it was going to go on forever.

But if the index itself had a bad month, are there any of its constituents that had a brighter August and may well have even better things to come? Here are three possibilities:

Lloyds Banking Group

Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US) shares have more than doubled over the past 12 months, so you could be forgiven for thinking the recovery is now played out. And a rise of 4.1p (6%) to 72.6p was not the biggest of the month by a long way. But what’s the story and is there more to come?

Well, Lloyds opened the month with half-year results, and they indicated a faster-than-expected return to health. The bailed-out bank recorded a statutory profit of £2.13bn, against a £456m loss at the halfway mark last year, with underlying profit given as £2.9bn. Net interest margin is improving and is expected to approach 2.1% by year-end, and we heard of cost reductions, with asset reduction going ahead of plan. Lloyds’ fully loaded core tier 1 ratio should break 10%, a year ahead of expectations.

The valuation has crept up, with the shares now on a forward P/E of over 14 with hardly any dividend yet. But it’s only the start, and a 27% rise in earnings per share (EPS) forecast for 2014 would drop the P/E close to 11, with a dividend yield of around 3% on the cards. The government seems to be in no rush to sell off the taxpayers’ stake, and for once I agree with one of their fiscal decisions.

Glencore Xstrata

Buy a miner? Well, the sector seems to be in favour one moment and out the next these days, depending on the latest panic of the day — today it’s all sweetness and light as news of Chinese domestic demand is good. But whatever the short-term heads are thinking, over the long term the mining business must surely head up from its down cycle, mustn’t it?

And that brings me to the biggest, Glencore Xstrata (LSE: GLEN). Glencore also released first-half results, on 20 August, covering a pretty traumatic period that included the completion of the Xstrata merger. After an earlier upbeat production report, but amid falling commodities prices, the firm reported a more modest fall in revenue than some of its rivals — down just 2% to $121bn. We did hear of a 99-cents-per-share loss, but a dividend of 5.4 cents per share was announced.

For the full year, the City is forecasting an EPS fall of around a third, pushing the P/E up over 16. But there’s a rebound expected next year, dropping the P/E to 13, with dividend yields predicted to exceed 3%. The share priced recovered 28p during August to end on 305p, and I’m expecting more in the longer term.

Aviva

I have Aviva (LSE: AV) in the Fool’s Beginners’ Portfolio as my pick of the insurance sector, and even though the shares gained 15.3p (4.1%) during August to reach 387p and are now up 33% since the end of March, I still think they’re one of today’s best bargains.

Interim results on 8 August showed the firm’s turnaround going well, and while chief executive Mark Wilson was honest enough to say that “tackling our legacy issues will take time“, I liked what I saw. Profit after tax rose reached £776m, from a £624m loss at the same stage a year previously, cash flow was up 30%, and operating expenses were down 9%.

With strong EPS rises forecast, the shares on a forward P/E of 9 for this year falling to 8 for next, and with well-covered dividend yields in excess of 4% expected, what’s not to like?

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> Alan does not own any shares mentioned in this article.