One company which is extremely happy about the high levels of volatility present at the moment is spread betting provider, IG (LSE: IGG). It benefits from increased volatility, since it means trading shares and other instruments becomes more popular. As the company’s recent update shows, August was unusually busy and IG was able to post a 24% rise in revenue versus the same quarter of last year.
Clearly, high levels of volatility are unlikely to last indefinitely but, even if markets do become more subdued, IG appears to have a very bright future. It remains a relatively resilient player in an industry that is constantly evolving and appears to have at least a degree of customer loyalty. This should help it to maintain a high degree of profitability and, looking ahead, it is forecast to post a rise in its bottom line of 10% next year.
This rate of growth may not be as high as a number of IG’s index peers but, with its shares having a price to earnings growth (PEG) ratio of 1.6, they seem to offer significant upside over the medium to long term.
Similarly, Aviva (LSE: AV) is a finance stock with a bright future. Its merger with Friends Life appears to be progressing as planned and the main benefit for investors in Aviva is the synergies that could be realised in the coming years as well as the enlarged group becoming a dominant force within the life insurance marketplace.
In the near term, Aviva continues to offer index-beating profit growth. Its bottom line is expected to rise by 10% next year and yet the market is still not getting excited about its future prospects. Evidence of this can be seen via Aviva’s price to earnings (P/E) ratio of just 9.9, which could easily rise by a third or even a half and still be reasonably priced. As such, being a contrarian investor and buying a slice of Aviva after its 6% fall since the turn of the year could prove to be a shrewd move.
That’s also the case for RBS (LSE: RBS). It remains a rather unusual investment opportunity in so far as it is a large company which is highly profitable with a bright future – and trades at a huge discount to its net asset value. In fact, RBS has a price to book value (P/B) of only 0.6 and, as a result, its shares could rise significantly over the coming years.
Of course, the government’s share sale is a likely reason why RBS is so cheap at the present time. Certainly, this may dampen investor sentiment in the stock but, on the flip side, it shows that RBS is able to come off life-support and operate as a fully private (i.e. not nationalised) bank. With a sound strategy, appealing asset base and the potential for an economic tailwind, RBS appears to be a stunning buy for the long term.
