The recent market volatility has thrown up some great bargains. Companies like Aviva (LSE: AV), Prudential (LSE: PRU), Hargreaves Lansdown (LSE: HL) and Standard Life (LSE: SL) are all cheaper now than they have been for a long time and are unlikely to be affected by China’s economic troubles.
Long-term outlook
As two of the UK’s largest pension and long-term savings providers, Aviva and Standard Life are insulated from emerging market turbulence — slowing Chinese economic growth isn’t going to affect the demand for pensions here in the UK.
Legal & General believes that over the next 15 years the value of savings in UK defined-contribution pension schemes will nearly quadruple to approximately £3.3tn. Standard Life and Aviva are well placed to capture an enormous share of this additional business. Standard Life is the leading provider of workplace pensions in the UK.
After recent declines, Aviva trades at an attractive forward P/E of 10.1 and the company’s shares support a dividend yield of 4.4%. In contrast, Standard Life trades at an expensive looking forward P/E of 17.9. However, City figures suggest that the company’s earnings will grow 54% this year. Based on these forecasts for growth, Standard Life’s shares currently trade at a PEG ratio of 0.3.
Asian exposure
Prudential has outperformed almost all of its peers over the past five years. From June 2010 to date, the company’s shares have produced a total return of 23% per annum. Over the same period, earnings per share have roughly doubled, and the company has hiked its dividend payout by 70%.
Prudential’s well-timed expansion into the Asian life insurance market has helped the group grow faster than its peers in the past, and despite regional economic worries, Asia should continue to be a growth driver for Prudential going forward. Indeed, demand for life insurance is set to grow by around 10% per annum within Asia during the next four years.
City analysts currently expect Prudential’s earnings per share to grow 14% this year and a further 11% for 2016. What’s more, according to forecasts, Prudential is expected to hike its dividend payout by 10% per annum for the next two years. The company’s shares currently support a dividend yield of 2.8% and trade at a forward P/E of 12.8.
UK demand
Hargreaves Lansdown is one of the UK’s most recognisable asset administrators, and looks after more than £55bn of people’s investments and pensions.
The company’s shares are a play on the wider market’s performance over the next few years. City analysts believe that if the markets head higher during 2016 and 2017, assets under administration could expand by 20% per annum. But a negative market performance could cost the company 10% per annum in client assets.
With Hargreaves Lansdown’s future dependent on the direction of the market, the company’s current valuation might be too pricey for some. At present, Hargreaves Lansdown trades at a forward P/E of 32.7 and its shares support a dividend yield of 2.9%.
