Why Savvy Investors Are Bargain Hunting At Burberry Group plc, Banco Santander SA And GKN plc

Royston Wild explains why now is the time to dive in at Burberry Group plc (LON: BRBY), Banco Santander SA (LON: BNC) and GKN plc (LON: GKN).

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Today I am discussing three bombed-out beauties that could be poised for a sharp snapback.

Burberry Group

Luxury handbag and raincoat play Burberry (LSE: BRBY) has long been battered by concerns over demand from hot growth market China. Although sales in the mainland continued to climb steadily during April-June, activity in the critical Hong Kong market continues to deteriorate and revenues declined by double-digit percentages during the quarter.

It therefore comes as little surprise that intensifying fears over the Chinese economy sent Burberry’s shares tumbling during the past month, and the designer is now trading at a 13% discount to levels seen at the start of August. But I believe this represents a very decent entry point.

Underlying retail revenues advanced 8% during the first quarter to £407m due to strong sales growth across the globe. And I expect revenues to keep on surging — Burberry’s store restructuring programme has seen it open shiny new outlets in New York, Dubai and London in recent months, while an improved online proposition helped mobile sales triple during the first quarter.

These measures are expected to push earnings marginally higher in the year ending March 2016 before fuelling a 10% charge in 2017, pushing a P/E ratio of 17.9 times for this year to a very respectable 16.3 times for 2017. I reckon this is a snip for a company with such strong growth prospects. And dividend yields of 2.7% for 2015 and 3% for 2016 sweeten the investment case.

Banco Santander

Shares in banking giant Santander (LSE: BNC) have moved steadily lower during the summer, and the stock has shed 11% of its value since the start of August alone. But with the stock currently flailing around multi-year lows I reckon this provides a brilliant buying opportunity — the firm continues to benefit from improving economic strength in established territories UK and North America, while its Latin American presence promises rich returns in the years ahead.

Santander saw ordinary attributable profit improve 23% during January-June, to €3.43bn, and the bank saw profit at its three biggest markets of the UK, Brazil and Spain explode during the period — indeed, the bottom line increased by 33% in its British and Brazilian units, while Spanish profits leapt by an eye-watering 50%.

Not surprisingly the City expects Santander’s growth story to keep on trucking, and earnings are expected to expand by 8% and 11% in 2015 and 2016 correspondingly. These figures produce P/E multiples of 10.3 times for 2015 and 9.3 times for next year — any reading around or below 10 times is widely considered too good to pass up on. On top of this, Santander has planned to pay a dividend of 20 euro cents per share for 2015, carrying a tasty yield of 3.5%. And I expect payouts to chug comfortably higher looking ahead.


Diversified engineer GKN (LSE: GKN) has been one of the major casualties of the summer, and an 11% stock price decline during the past four weeks has extended the poor run that kicked off at the start of the sunny period — the business has fallen 23% since the start of June to touch levels not seen for almost two-and-a-half years.

Sure, concerns over the faltering Chinese economy on global auto sales is bound to have an effect on investor appetite, but I believe GKN’s ability to grow ahead of the broader car market remains overlooked — indeed, Driveline saw organic revenues rise 4% during January-June thanks to the firm’s increased content per vehicle. On top of this, the engineer’s top-tier supplier status to the world’s biggest planebuilders should help it to hurdle current problems at its Aerospace division and punch long-term sales growth as aircraft demand ticks steadily higher.

Current problems at its plane parts and Agriculture divisions are expected to drive earnings 10% lower in 2015, although a 9% bounceback is expected in 2016. As a result GKN sports mega-cheap P/E ratios of 10.8 times for this year and 10 times for 2016. On top of this, predicted dividends of 8.8p per share for 2015 and 9.5p for the following period produce decent yields of 3% and 3.2% correspondingly. I reckon GKN is a great pick for more patient investors.

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.

Royston Wild owns shares of GKN. The Motley Fool UK owns shares of GKN. 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.

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