Barclays PLC (LON:BARC), Royal Bank of Scotland Group plc (LON:RBS), Lloyds Banking Group PLC (LON:LLOY), Anglo American plc (LON:AAL) and Antofagasta plc (LON:ANTO) are five of the market's largest high-beta shares.
A high-beta share is one that, statistically, has been found to exaggerate the movements of the market. In a bull market, high-beta shares can deliver huge returns. However, if the market goes into reverse, high-beta shares can suffer badly.
Tread carefully with high-beta shares, and remember -- just because a share has been high beta in the past does not mean that it will be in the future.
| Name | Price (p) | Beta | P/E (forecast, FY1) | Yield (forecast, FY1) | Market cap (£m) |
|---|
| Barclays | 321 | 2.5 | 8.7 | 2.2 | 39,332 |
| Royal Bank of Scotland | 344 | 2.5 | 21.2 | 0.0 | 39,019 |
| Lloyds Banking | 54.7 | 2.2 | 21.5 | 0.0 | 38,494 |
| Xstrata | 1181 | 2.1 | 15.0 | 2.1 | 34,890 |
| Anglo American | 2039 | 1.8 | 12.6 | 2.5 | 28,366 |
| Antofagasta | 1119 | 1.8 | 12.6 | 3.0 | 11,032 |
| Legal & General | 151 | 1.7 | 10.8 | 4.9 | 8,935 |
| Wolseley | 3077 | 1.7 | 16.6 | 2.3 | 8,431 |
| Eurasian Natural Resources | 402.7 | 2.3 | 12.2 | 1.6 | 5,186 |
| ITV | 117 | 1.9 | 13.5 | 2.0 | 4,721 |
Here are five high-beta shares.
Barclays
Barclays (LSE: BARC) shares surged last week on announcement of 2012 results.
The bank reported net tangible assets per share of 373p and earnings per share of 34.5p. The total dividend for the year was increased by 8.3% to 6.5p per share.
Although the dividend yield may look light at just 2%, forecast earnings per share (EPS) of 36.9p for 2013 put the shares on a forward P/E of just 8.7.
That seems cheap for two reasons. First, the company is profitable but is trading at a discount to its net tangible asset value. That doesn't seem fair. Barclays' shares would need to rise 16% to close this discount.
Second, I think that a price-to-earnings (P/E) ratio around 12 is fairer for a company with Barclays' prospects.
Royal Bank of Scotland
Before being rescued by a taxpayer bailout in 2008, Royal Bank of Scotland (LSE: RBS) was close to going under.
If you have since sworn off investing in RBS, then you have missed some huge gains. So far this year, the shares are up 6%. In the last six months, the shares are up 51%.
RBS is forecast to make EPS of 28.3p this year. That puts the shares on a 2013 P/E of 12.2.
RBS still trades at a large discount to its net tangible asset value. If the UK and eurozone economies remain stable, I expect that more earnings growth will be forecast for 2014 and that the bank may return to paying dividends.
RBS is scheduled to report its 2012 results on 28 February.
Lloyds Banking Group
Like RBS, Lloyds Banking Group (LSE: LLOY) received a government bailout during the financial crisis. Unlike RBS, however, the UK taxpayer is a minority shareholder in Lloyds.
Lloyds suffered in 2011 and 2012 after the bank had to set aside funds to cover Payment Protection Insurance mis-selling claims. However, it now looks as though no further provisions will be required.
Secondly, sentiment toward the bank has benefited from a decline in asset impairments. The group's third-quarter results in November reported a 40% decline in loan and asset devaluations.
Lloyds is expected to report EPS for 2012 of 2.5p, rising to 3.9p for 2013. The bank is said to be planning to resume dividend payments to shareholders in 2014.
Lloyds will announce its 2012 results on 1 March.
Anglo American
Anglo American (LSE: AAL) is one of the FTSE 100's biggest employers. The company has over 100,000 staff on its books. That is more than the oil titan Royal Dutch Shell.
Anglo American is a diversified mining company. Its biggest operations are in iron and manganese, followed by coal. The company's platinum operations recently came under pressure following industrial action at one of its mines in Rustenburg, South Africa.
Anglo American is expected to report EPS of $2.51 for 2013, rising to $2.92 the year after. The dividend for the year is expected to come in at $0.81 per share this year, rising to $0.89 in 2014.
That is close to the P/E and dividend yield of the average FTSE 100 share.
Antofagasta
Antofagasta (LSE: ANTO) is one of the worst-performing FTSE 100 shares of 2013. So far this year, the shares are down 17%. That's a big fall for a company with an £11bn market capitalisation.
The fall was caused by an operations update issued by the company at the end of January. Anglo American reported an increase in mining and shipping costs. This has obvious implications for the company's profitability going forward.
In previous years, Antofagasta has been a beneficiary of rising gold prices. However, the gold price surge came to an end in 2011. In the last year, the price of gold is down 7.0%.
Analysts forecast a 7.1% dividend cut from the company this year, with earnings around 5% ahead of the 2011 figure.
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> David owns shares in Royal Bank of Scotland and Lloyds but none of the other companies mentioned.
