Lloyds Banking Group
With each passing week, the government moves closer to unloading its shares in Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US). Sky News recently reported that foreign investment firms were ‘masterminding’ an attempt to buy some of the government’s stake in the bank. One has to wonder where these masterminds were when Lloyds shares were trading for less than half of today’s price.
Before the financial crisis, Lloyds shares traded at several times book value. If the UK housing market and economy continue to recover, then Lloyds shares could enjoy a spectacular re-rating.
The shares trade on a 2014 P/E of 11.2. More information on any future return to paying dividends may appear in the bank’s forthcoming interim results.
Fears over the state of the Chinese economy have hit the price of industrial metals. Precious metals have also fallen sharply also, as investors rethink the value of gold and silver in a world without quantitative easing.
This combination of factors has proved especially damaging to Anglo American (LSE: AAL). In the last six months, analyst forecasts for Anglo American’s 2013 profits have been reduced by a third. In that time, the shares have fallen a similar amount.
This puts Anglo shares on a 2013 P/E of 10.6. The expected dividend amounts to a yield of 4.2%. While Anglo American may have led market advances previously, I’m not convinced that the shares are cheap enough to put in a strong rise if sentiment improves.
Legal & General
Insurance and fund management group Legal & General (LSE: LGEN) has always seen its share price buffetted by the wider market. When the FTSE 100 fell 11% in June, L&G shares dropped 13%. However, in the market’s 11% rise so far in 2013, Legal & General shares are 28% ahead.
Last year, L&G paid a dividend of 7.65p from 13.9p of earnings per share (EPS). In 2013, that dividend is expected to increase to 8.52p, equal to a yield of 4.5% at today’s price. EPS is forecast to rise to 15.4p, meaning a P/E of 12.3 for this year.
Further growth is expected next year. This suggests that L&G shares could be a rewarding purchase, whatever the wider market does.
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> David does not own shares in any of the companies mentioned.