Even with the recent stock market recovery, the crash back in March means there are still opportunities to pick up great companies with share prices offering investors good value. You may think so-called safe havens like gold are the way to go, but I prefer shares. Here are some I like.
Defensive qualities and a value share price
One of these is GlaxoSmithKline (LSE: GSK). Despite having products people need — medicines, everyday consumer goods — the shares trade on a P/E of only 13. That seems relatively cheap.
The shares also yield 4.7% with the divident payment having been held flat as GlaxoSmithKline pours cash into finding new blockbuster drugs. On this front, some progress is being made to offset the loss of patent protection for older drugs.
In January, CEO Emma Walmsley said GSK expects six drug approvals from the FDA in 2020. Other new treatments are growing strongly already. Shingles vaccine Shingrix has grown sales 79% in the last year to £647m.
In the short-term, the development of a successful treatment for Covid-19 could excite shareholders and send the share price soaring. Something to keep an eye on.
Longer-term, if by concentrating on its drug pipeline it can come close to replicating the success of rival AstraZeneca has recently achieved, then the share price could well lift off from where it currently is. Especially as both are now focusing heavily on oncology.
Offering great value but no dividend
Aviva (LSE: AV), like many other insurers, was bought to heel by pressure from the regulator and scrapped its dividend. I suspect this may have come as a relief to management as the yield was burdensome and the insurer needs cash to invest in growth, which has been sluggish.
Another benefit of the scrapped dividend is the group’s capital ratio. As of 13 March, it improved by 7 percentage points to 182%. A percentage that makes the business look in good financial shape.
Now, with the share price having been hit hard by Covid-19, there could be an opportunity for patient investors. On a ludicrously low P/E of four, the shares are dirt cheap.
Especially with the potential value that cutting costs and improving products and customer service through digitisation provide for the group going forward. Both of these should help boost the bottom line, as will the improved performance in the Canadian business.
A reliable company now offering great value
BAE Systems (LSE: BA) shares are trading on a P/E of 10. A very reasonable amount to pay for shares in a company that’s growing sales.
In the last full-year results, underlying sales rose 7% to £20.1bn. Sales rose 6% to £.3bn at the US Platforms and Services division. They were also up 7% to £4.4bn in the Electronic Systems division and, in Maritime, sales rose 5% to £3.1bn.
I’d like to see more growth from the Cyber & Intelligence division at BAE, where sales were flat. But, overall, I think the shares have growth opportunities, as a result of organic growth and smart acquisitions.
Defence spending isn’t going to go away. Coronavirus could have an impact, and could mean cost-cutting. For me, though, these shares still look a far better bet than gold in the long term.
