Are Lloyds Banking Group plc, Brooks Macdonald Group plc and Arbuthnot Banking Group plc once-in-a-lifetime buys?

Should you pile into Lloyds Banking Group plc (LON: LLOY), Brooks Macdonald Group plc (LON: BRK) and Arbuthnot Banking Group plc (LON: ARBB) right now?

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Since its 2016 low of 56p, Lloyds (LSE: LLOY) has risen by a hugely impressive 25%. While similar gains in the next three months may not be achievable, the bank has considerable long-term capital gain potential.

A key reason for this is its strategy. Lloyds has worked hard to shed inefficient assets, cut costs and become financially stronger in recent years and while the process of change has been painful, it has resulted in a bank that’s much stronger and has superior growth prospects than many of its peers. And with Lloyds close to full health, the government’s share sale is now on the near-term agenda.

With Lloyds trading on a price-to-earnings (P/E) ratio of just 9.2, it seems to offer significant upside potential. Although its shares may prove to be volatile in the short run and could therefore fall back somewhat, for long-term investors such a high quality bank may not be on offer at such a low price indefinitely. As such, Lloyds appears to be a once-in-a-lifetime buy at the present time.

Bright prospects

Also offering upbeat growth potential is banking sector peer Arbuthnot (LSE: ARBB). Its share price has risen by 8% in the last three months and while some of this is due to improved sentiment towards the wider banking sector, it could also be due to the impressive forecasts that Arbuthnot has for the next two financial years.

For example, Arbuthnot’s pre-tax profit in 2017 is expected to be twice as high as it was in 2015 and with the bank’s shares trading on a forward P/E ratio of only 12, the market doesn’t yet appear to have priced-in such strong growth. Furthermore, with Arbuthnot having a forward yield of 2.3% and yet being expected to pay out just 28% of profit as a dividend next year, its prospects as an income stock remain very bright. And while right now may not be a once-in-a-lifetime opportunity to buy a slice of Arbuthnot, it still nevertheless could turn out to be a strong long term performer.

Capital gains ahead?

Meanwhile, the last year has been incredibly volatile for investors in Brooks Macdonald (LSE: BRK). The asset manager’s share price has been akin to a rollercoaster, with it up by as much as 24% as global stock markets have fluctuated wildly. Although further volatility seems very likely, for long-term investors such a situation could present an opportunity to buy a slice of the business at a more attractive price.

While Brooks Macdonald is forecast to record a fall in its earnings of 1% this year, it’s expected to bounce back with growth of 18% next year. And with its shares trading on a price-to-earnings growth (PEG) ratio of just 0.9, they appear to offer significant upside potential. Although this may not constitute a once-in-a-lifetime buying opportunity, the prospect of significant capital gains is clear.

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.

Peter Stephens owns shares of Lloyds Banking Group. The Motley Fool UK has no position in any of the shares mentioned. 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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