5 Bargains After Yesterday’s Rout: Foster Wheeler PLC, BAE Systems plc, A.G. Barr plc, Burberry Group plc & Johnson Matthey PLC

Amec Foster Wheeler PLC (LON: AMFW), BAE Systems plc (LON: BA), A.G. Barr plc (LON: BAG), Burberry Group plc (LON: BRBY) and Johnson Matthey PLC (LON: JMAT) all look cheap after yesterday’s declines.

| 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.

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.

Yesterday’s market turbulence threw up plenty of opportunists for value investors with a long-term investment horizon. Here are five top picks.

Misunderstood

Amec Foster Wheeler (LSE: AMFW) is one of London’s most misunderstood companies. As an engineering company with ties to the oil sector, investors have turned their backs on Amec, believing that the company’s earnings will slump along with the price of oil.

However, Amec continues to win new engineering projects both in, and outside the petroleum sector. Revenue dipped by 0.9% during the four months ending April 2015, but the group’s order book increased to £6.7bn, which is more than a year’s worth of revenue.

What’s more, Amec’s low valuation fails to take the company’s robust order backlog into account. The company currently trades at a forward P/E of 10 and supports a yield of 6.2%. 

Time to buy

recently advised selling BAE (LSE: BA), because the company looked expensive compared to its international peer group. But after recent declines, BAE now looks to be cheaper than its international peer group. 

For example, BAE’s main peers, the likes of General DynamicsLockheed MartinNorthrop Grumman and Raytheon Co, trade at an average forward P/E of 14.5 compared to BAE’s forward P/E of 11.5. Further, BAE currently supports a dividend yield of 4.7%, and the payout is covered 1.8 times by earnings per share. 

Defensive play

Shares of A.G. Barr (LSE: BAG), the soft drinks group, have declined by around 20% over the past six months, presenting an attractive opportunity for value investors. Barr is a slow-and-steady growth stock. During the past three years, pre-tax profit has increased by a third and earnings per share are forecast to rise by 6% per annum for each of the next three years.

Unfortunately, as A.G. is a defensive business with years of steady growth ahead of it, the company’s shares trade at a premium to the wider market. Still, A.G.’s shares are now cheaper than they have been at any point during the past year. The company currently trades at a forward P/E of 19.6 and supports a dividend yield of 2.1%. 

Chinese exposure

Burberry (LSE: BRBY) has lost a third of its value since the end of February as investors fret about the company’s exposure to China. Indeed, according to City figures, Burberry’s earnings will stagnate this year but for investors with a long-term outlook now is the perfect time to buy Burberry’s shares.  

Burberry’s shares are cheaper now than they have been at any point during the past decade. In particular, Burberry currently trades at a forward P/E of 17.8, compared to its ten-year average of 19.5.

City analysts expect the company to return to growth next year, and this should send Burberry’s valuation back to its ten-year average. Burberry’s shares currently support a dividend yield of 2.7%. 

Record growth

Johnson Matthey’s (LSE: JMAT) growth is expected to slow to a crawl this year. Nevertheless, over the past five years the company has achieved one of the best growth records of any FTSE 100 company.

Johnson Matthey’s earnings per share expanded 52% since 2011, and with this record of growth behind it, the company’s shares have traditionally traded at a high valuation.

However, like Burberry, after recent declines Johnson Matthey’s shares are now cheaper than they have been for five years. The company currently trades at a forward P/E of 14.7. 

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.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Burberry. 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

Mixed-race female couple enjoying themselves on a walk
Investing Articles

A once-in-a-decade chance to get rich buying growth stocks?

We haven't seen a good spell for growth stocks for quite a few years now. But I reckon the signs…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

The FTSE 100 is full of bargains! Here’s 1 stock I’m eyeing up

A weak economic outlook has hurt the FTSE 100. This Fool explains why she likes the look of this consumer…

Read more »

Investing Articles

2 no-brainer beginner FTSE 100 stocks to buy for my portfolio

Getting started with investing can be daunting. Here are two stocks for beginners to consider buying to build their first…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 recession-resistant UK shares investors should consider buying

Our writer details two UK shares she feels could withstand some of the ill-effects of the current malaise to provide…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Glencore share price drops on results. Time to buy?

The Glencore share price wobbled a bit after a weak set of 2023 results. Here's why I have the stock…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Big trouble in China sinks HSBC shares. Should I invest after record FY results?

HSBC shares have slumped following a disappointing end to 2023 for the FTSE stock. Royston Wild explains why this may…

Read more »

View of Tower Bridge in Autumn
Investing Articles

3 dirt cheap FTSE 100 shares to snap up today?

The FTSE 100 is rallying, but many shares still look super cheap on fundamentals. Is our writer buying these three…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

FTSE 100 earnings: what can we expect from Rolls-Royce in 2024?

The Rolls-Royce share price tripled in 2023. Roland Head wonders whether this FTSE 100 stock could continue that impressive trajectory…

Read more »