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3 Stocks To Buy On St. Leger Day: BP plc, BAE Systems plc & Lloyds Banking Group PLC

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With the FTSE 100 being at roughly the same level as it was in May, the old stock market saying ‘sell in May and don’t come back until St. Leger’s Day’ seems to have been proven correct in 2014. Now that St. Leger Day is almost upon us, here are three stocks that could be worth buying right now.

BP

The last few years have been hugely challenging for BP (LSE: BP) as it has gradually recovered from the Deepwater Horizon oil spill in 2010. The future could also be volatile, with BP’s stake in Russian oil company, Rosneft, meaning that further Russian sanctions could hurt BP’s bottom line.

However, the market seems to be adequately pricing in this risk, with shares in the company currently trading on a price to earnings (P/E) ratio of just 10. That’s 28% lower than the FTSE 100’s P/E ratio of 13.8 and highlights the upside potential in terms of an upward rating revision.

Furthermore, BP continues to offer a highly lucrative dividend yield. Shares in the oil major currently yield 4.9% and, moreover, dividends per share are expected to increase by an impressive 5.3% next year. With a low valuation and great income prospects, it appears as though the potential for a fallout from further Russian sanctions is a risk worth taking for investors.

BAE

As with BP, BAE (LSE: BA) is trading at a highly attractive price. Shares in the defence company currently have a P/E ratio of just 12.4 and currently yield a very impressive 4.4%. However, there’s much more to BAE than a low price and high dividend yield.

Indeed, the company is performing remarkably well despite severe cutbacks to military spending across the developed world, with US sequestration having a big impact on the wider defence sector. As such, BAE’s expected growth in earnings of 4% next year is surprisingly upbeat despite tough market conditions, which shows that the company’s earnings profile is perhaps more resilient than many investors may at first realise.

Although the short term could be a case of damage limitation, BAE is financially sound, well run and has a great long term future. Now could be a good time to buy while shares are favourably priced.

Lloyds

Much has been made of Lloyds’ (LSE: LLOY) disappointing share price performance in 2014, with shares in the bank being down 4% year to date. However, the bank has huge potential as an investment.

For example, it is forecast to return to profitability in the current year and to back this up with growth of 6% in earnings next year. This should allow it to recommence the payment of dividends, with senior management targeting a payout ratio of around 65% over the medium term. This, combined with strong growth prospects, could make shares in Lloyds a hot income ticket.

Despite this, Lloyds trades on a P/E ratio that screams value. While the FTSE 100’s P/E is 13.8, Lloyds has a P/E of just 9.7, which shows that an upward adjustment to its rating could prove to be a very sound bet.

Your Portfolio

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Peter Stephens owns shares of BAE Systems, BP, and 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.