Shares in Prudential (LSE: PRU) have disappointed in 2015, with the diversified financial company posting a rise of just 1% since the turn of the year. Of course, they made a strong start to the year and were up by 17% at their peak in March but, with the company having considerable exposure to the Asian economy, fears surrounding China’s growth rate have hurt investor sentiment and caused a prolonged decline in Prudential’s valuation.
In the short run, this lack of capital gain could continue. After all, Prudential has a new management team and, while the company’s strategy is sound in terms of aiming to provide financial products to a growing middle class across Asia, the slowdown in the Chinese economy is likely to add to a degree of uncertainty among investors.
This, then, could be an excellent time to buy a slice of Prudential. Not only does it now trade on a price to earnings (P/E) ratio of 13.6, it is forecast to grow its bottom line by 14% this year and by a further 9% next year. In addition, Prudential pays out just 36% of profit as a dividend and, while this means that it has a yield of just 2.6%, dividend rises could prove to be a catalyst to push the company’s share price higher over the medium to long term.
Meanwhile, Santander (LSE: BNC) has disappointed to a much greater extent than Prudential this year, with its shares being down 34% since the turn of the year. Although the bank is very well-diversified and has exposure to a number of major growth markets across the globe, Brazil continues to be a key market for the business and its poor economic performance has been a drag on Santander’s financial performance.
Looking ahead, investor sentiment in Santander could remain weak due to Brazil’s downbeat economic prospects, but for long term investors this presents an opportunity to buy Santander while it trades on a P/E ratio of just 10.3. Certainly, there is a risk of further falls in the short term, but with Santander being in a relatively strong financial position following its placing last year, it appears to be a sound long term buy.
Similarly, southern-focused house builder Crest Nicholson (LSE: CRST) also appears to be a strong buy at the present time. Its trading update for the full year (released today) shows that high levels of employment and good mortgage access are creating favourable trading conditions, with the company stating that unit completions for the full year are due to rise by around 8% to 2,725.
Furthermore, Crest Nicholson remains on target to meet its goal of generating £1bn in revenue by 2016 and £1.4bn of revenue by 2019. And, while interest rate rises may be a cause for concern for the company’s investors, its price to earnings growth (PEG) ratio of 0.3 indicates that a very wide margin of safety is on offer.
Looking ahead, Crest Nicholson is forecast to become a stunning income stock, with dividends per share set to rise by 43% next year. This puts it on a forward yield of 5.4% and, with dividends still due to represent just 46% of profit in 2016, further dividend rises are very much on the cards.
