Today I’m looking at two FTSE 100 (INDEXFTSE: UKX) stars offering unmissable bang for your buck.
Weapons-grade wonder
Investor appetite for BAE Systems (LSE: BA) has exploded in the wake of the UK’s Brexit decision, the defence sector living up to its reputation as a safe haven in volatile times. The arms builder has even visited 16-month peaks above 540p in the process. And I believe BAE Systems still offers terrific value despite recent share price strength.
For 2016 the engineer currently deals on a P/E rating of 13.4 times, comfortably below the big-cap average of 15 times. And a 4% dividend yield takes apart the FTSE 100 average of 3.5%.
BAE Systems is anticipated to endure a small earnings slip in the current year thanks to lumpy contract timings. But the firm’s long-term outlook remains pretty secure, in my opinion, thanks to its excellent relationship with the US and UK armed forces. Indeed, the company inked a £2.1bn, 10-year agreement with the Ministry of Defence to support its fleet of Typhoon fighter jets just last month.
The London firm is an expert across a variety of fields, from submarine construction and missile building through to designing counter-terrorism software, making it a top-tier supplier to the world’s major militaries.
This, along with positive currency effects, helped revenues edge 3% higher during January-June, to £8.7bn. And the firm’s order book stood at a healthy £36.3bn as of the end of the period.
With sales also taking off in developing markets — BAE Systems expects sales to grow 5% to non-Western customers in 2016 alone — I reckon the blue chip defence play is a steal at current prices.
A financial firework
But BAE Systems isn’t the only Footsie giant experiencing strong demand growth in exciting foreign markets.
Indeed, the wide geographical reach of insurance giant Prudential (LSE: PRU) has helped power profits higher in recent years. But I don’t believe this quality is currently reflected at current share prices — the stock is actually dealing at a slight discount to pre-referendum levels thanks to worries over the health of the British economy.
Consequently ‘The Pru’ deals on a mega-low forward P/E rating of 11.4 times, peaking above the bargain-basement benchmark of 10 times.
Of course significant economic turbulence in the UK would cause a problem for Prudential. But I believe investors need to look to the brilliant progress Prudential is making elsewhere. The insurer saw operating profit at its Jackson life division in the US explode 10% in 2015, while its performance in Asia was even better — life and asset management profits here surged 17% on an annualised basis.
Prudential clearly has its finger on the pulse to meet the needs of its customers in new and established territories alike. And I expect rapid expansion across its global markets — facilitated by its brilliant cash-generative qualities — to continue driving the bottom line in the years ahead.
