Forget Bitcoin! I think buying the HSBC share price could be a better way to get rich
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While the growth potential of Bitcoin may make it an appealing investment opportunity to some individuals, there are a number of FTSE 100 and FTSE 250 shares that could offer superior risk/reward ratios. Among them is HSBC (LSE: HSBA), which could benefit from the growth prospects across a variety of regions over the coming years.
Since the stock has a relatively low valuation and dividend investing potential, it could be worth buying alongside another growth share that reported a disappointing trading update on Thursday.
Uncertain future
The company in question is metrology specialist Renishaw (LSE: RSW). It reported that the difficult trading conditions experienced in the first half of its financial year have continued in recent months. A slowdown in demand in Asia for its encoder products and from large end-user manufacturers of consumer electronic products has been the cause of this.
These trading conditions are expected to continue throughout the remainder of the year. It now expects revenue and adjusted pre-tax profit to be below previous guidance, which has caused the company’s stock price to decline by as much as 15% following the update.
While disappointing, Renishaw’s share price fall could present a buying opportunity. The stock now trades on a price-to-earnings (P/E) ratio of around 21, which suggests that it could be relatively attractive given its long-term growth potential. While further volatility could be ahead for its share price, the company has a sound track record of high growth, which could allow it to generate impressive share price returns in the long run.
Growth potential
As mentioned, HSBC appears to offer an improving financial outlook. The company is forecast to post a rise in earnings of around 5% in the current year. This is at least partly due to the strategy being employed by the business, with it investing heavily in growth opportunities in markets where it could enjoy growing demand for its services in the long run.
Alongside this, the bank is seeking to become increasingly efficient. This will take time, but recent updates have suggested that it is making progress in removing unnecessary costs from the business.
With HSBC trading on a P/E ratio of around 10.5, it appears to offer a wide margin of safety at the present time. Fears surrounding the prospects for the world economy, and particularly China, seem to be weighing on investor sentiment to a large degree. This situation could persist over the near term, but forecasts for the wider Asian economy continue to be relatively upbeat. They show that increasing wages and wealth levels could lead to rising demand for a variety of banking products.
Therefore, while still a relatively unpopular share, HSBC could offer an impressive long-term outlook. A dividend yield of 6.4% which is covered 1.5 times by profit indicates that it may offer an impressive income investing outlook.
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Peter Stephens owns shares of HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings and Renishaw. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.