June saw the FTSE 100 put in a losing month for the first time in a year, with the index of top UK stocks dropping 368 points (5.6%) to end the month on 6,215 — and that’s quite a way back from the 13-year high of 6,876 points it set on 22 May.
Of course, in a month like that, there aren’t usually many top-flight shares rising — although across the various indices there was some interesting progress. Today we’ll take a look at five companies, including two from outside the FSTE 100, which ended June on a rise and which look like they might be good long-term prospects:
Optimism appears to be picking up for the bailed-out Lloyds Banking Group (LSE: LLOY), whose shares gained a modest 1p to close the month on 63p. That’s not much of a gain, but with confidence returning as the government moves closer to selling off the taxpayers’ stake, there may well be more significant gains to come.
The Lloyds price has doubled over the past 12 months, but the bank really is only just getting back into the black, with a pre-tax profit of around £3bn currently being forecast for the year to December 2013. That does put the shares on a price-to-earnings (P/E) ratio of 14, which is high for the sector, but it falls to under 11 on 2014 estimates.
And dividends should start getting back up next year, with a 2014 yield of 2.3% being forecast.
There’s a bit of life returning to the insurance sector, too, with shares in RSA Insurance Group (LSE: RSA) having also made a small gain during June. The price is up only 4p to 119p, but that puts the shares on a P/E based on this year’s forecasts of under 10 — and long-term, that looks like it could be a bargain rating to me.
The firm’s first-quarter update, released in May, told us of an “encouraging start” to the year, with premiums up 7% and net asset value up 5%. RSA has come off a few tough years, with 2011 the only one of the past five in which it managed to grow its earnings per share (EPS). But we now have two years of EPS growth forecast, with dividend yields of nearly 6% expected.
British Sky Broadcasting
The British Sky Broadcasting (LSE: BSY) share price has been tumbling since March, but it was one of the few in the FTSE top flight to gain during June — up 12p to 792p. The price has been hit by a move by BT to provide free sports channels to BT Broadband customers, but it does look like it could be a bit overdone to me.
BSkyB has enjoyed double-digit rises in EPS for three years in a row, and there’s another 13% expected for the year to June 2013 — we should have the results on 26 July. And there’s a dividend yield of around 3.6% expected.
With the shares on a forward P/E of 17, falling to 13 for next year, is this a good opportunity to bag a mix of growth and income? That’s for you to decide.
We’ll move to a smaller company now, the £450m AIM-listed Quindell Portfolio (LSE: QPP). Quindell provides software and related services to a number of industries, including insurance and telecoms, which doesn’t sound too controversial.
But the share price slumped in May, prompting the company to issue a statement denying rumours that it was facing a threat from short-selling. Since then, the price has recovered, gaining 3p during June — that might not sound a lot, but it’s a 35% rise to 11.5p.
The firm also closed June by telling us that the past three months have brought in “multiple significant new contract wins”.
IGas Energy (LSE: IGAS) is even smaller than Quindell, with a market cap of just half the value. But it had a great month, with its shares soaring by 26.5p (28%) to end June on 119.5p. The reason? A massive upgrade in the company’s estimated reserves of shale gas.
IGas has licences covering 300 square kilometres across the Northwest of England, and had previously been estimating total reserves of around nine trillion cubic feet. That has now been upped to somewhere between 15 and 172 trillion cubic feet, with a most-likely figure settling on around 100 trillion.
How much of that turns out to be commercially viable remains to be seen, and it’s typically only a small percentage, but we could be looking at a nice growth prospect here.
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> Alan does not own any shares mentioned in this article.