3 Screaming Buys: Tesco PLC, British American Tobacco plc And SSE PLC

These 3 stocks look set to deliver superb returns in the long run: Tesco PLC (LON: TSCO), British American Tobacco plc (LON: BATS) and SSE PLC (LON: SSE)

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Tesco

Such has been the improvement in investor sentiment in Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) during recent months that its shares are now down just 12% over the last year. Considering how disastrous the period has been for its bottom line, that’s a very good result and provides evidence that investors can be very forgiving for stocks with turnaround potential.

And, looking ahead, Tesco is very much on course to turn its fortunes around. For example, next year it is forecast to return to earnings growth for the first time since the 2012 financial year and, following that rise, it is expected to increase its bottom line by a whopping 30% in financial year 2017. This puts Tesco on a price to earnings growth (PEG) ratio of just 0.6, which indicates that its share price strength in recent months could be just the beginning of a prolonged period of strong performance.

British American Tobacco

In the short term, British American Tobacco (LSE: BATS) (NYSE: BTI.US) may not seem like such an appealing stock to buy a slice of. That’s because the dual threat of increased regulations and greater illicit trade in cigarettes is causing volumes across the tobacco industry to fall. And, while price increases will offset much of this decline, it is likely to hold back investor sentiment in the short run.

However, British American Tobacco still has a very bright future. Notably, the e-cigarette space holds significant growth potential and could rejuvenate the industry’s top and bottom lines. And, in the meantime, British American Tobacco remains a top income stock, with it yielding 4.3% at the present time and being forecast to increase dividends per share by an impressive 2.9% next year.

SSE

The best time to buy any stock is when its near term future appears to be somewhat uncertain, but while it also has a bright long term future. That’s the current situation for SSE (LSE: SSE), with there being significant political risk in investing in the company right now, owing to the potential for an energy price freeze and new regulator under a Labour government.

As such, shares in SSE trade on a very appealing valuation with, for example, it having a price to earnings (P/E) ratio of just 13.8 (versus 16 for the FTSE 100). In addition, SSE offers a yield of 5.9%, which is not only stunning, but is also set to rise to 6% next year. As such, and while the short term may be challenging, SSE appears to be a great buying opportunity right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of SSE, British American Tobacco and Tesco. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »