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

Lloyds Banking Group PLC (LON: LLOY), Glencore Xstrata PLC (LON: GLEN) and Aviva plc (LON: AV) were good buys in August.

| 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.

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:

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

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.


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?

Finally, if you’re looking for top quality investments in the UK’s biggest and best companies, which should take you all the way to a comfortable retirement, I recommend the Fool’s special new report detailing five blue-chip shares. They’ll be familiar names to many, and they’ve already provided investors with decades of profits.

But the report will only be available for a limited period, so click here to get your hands on these great ideas — they could set you on the road to long-term riches.

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

More on Investing Articles

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Best British dividend stocks for July

We asked our freelance writers to share the top income stocks they’d buy in July, which included Dividend Aristocrats and…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »