While the FTSE 100 is trading at or near to its record high, there are still a number of great value stocks in the banking and insurance sectors. Certainly, they may lack the excitement of the technology sector, or the volatility of the energy sector, but with the UK and global economy making encouraging progress, financials could be a shrewd place to invest in at the present time.
Banking
For example, the UK banking sector is experiencing rapid change, with incumbents coming under attack from so-called ‘challenger’ banks. One such bank is Virgin Money (LSE: VM), which released an encouraging update today. In fact, it has increased its share of the UK mortgage market to 3.6%, with its gross mortgage lending rising by 34% in the first quarter of the year. This shows that, while it may lack the size and scale of some of its rivals, it is possible for a well-run bank that has a slick marketing appeal and a fresh appearance to post strong results in the UK banking sector.
And, looking ahead, Virgin Money is expected to increase its net profit by 5% in the current year, and by a further 49% next year. This is clearly in excess of the wider market’s forecast growth rate and, despite this, the bank trades on a price to earnings growth (PEG) ratio of just 0.2, which indicates that its share price could continue to rise after soaring by 38% since the turn of the year.
Insurance
Of course, there is considerable opportunity in the insurance sector, too. For example, Admiral (LSE: ADM) remains a hugely appealing defensive stock, with it having a beta of just 0.77 and a yield of 5.5%. And, with Admiral having increased its bottom line in four of the last five years (averaging growth of 12% per annum during the period), it appears to offer relative stability to go alongside a stunning yield.
Furthermore, Old Mutual (LSE: OML) offers a potent mix of growth and value and, as such, could be a strong performer in 2015 and beyond. For example, it is expected to increase its earnings by 11% in each of the next two years and yet trades on a price to earnings (P/E) ratio of just 11.7. Both of these figures compare very favourably to the FTSE 100, which offers growth in the mid to high single digits, coupled with a P/E ratio of 16.
And, while Amlin (LSE: AML) is suffering from a weakening in investor sentiment (its shares have fallen by 9% in the last month), now could be a great time to buy due to its low valuation. In fact, Amlin now trades on a price to book (P/B) ratio of just 1.3 and, with a dividend yield of 6.2%, seems to offer a superb mix of income and value potential.
