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Why BAE Systems plc, J Sainsbury plc And Old Mutual plc Are 3 Of My Top Stocks

BAE

Although this week’s results from BAE (LSE: BA) (NASDAQOTH: BAESY.US) did not cause the company’s share price to move significantly higher, they could prove to be the start of a much improved period for the defence company. That’s because BAE stated in the results that it believed the worst was over in terms of spending cuts in its key US market and, as a result, its bottom line could resume an upward trajectory moving forward.

In fact, BAE is forecast to post earnings growth of 6% in each of the next two years, which is roughly in line with the expected growth rate of the wider market. Despite this, BAE continues to trade at a significant discount to the FTSE 100, with it having a price to earnings (P/E) ratio of 13.1 versus around 15.9 for the wider index.

As such, BAE could see its rating move upwards as investors begin to price in a potentially more prosperous period for the company, which makes now a great time to buy a slice of it.

Sainsbury’s

Under new CEO, Mike Coupe, Sainsbury’s (LSE: SBRY) (NASDAQOTH: JSAIY.US) seems to be making the necessary changes to its business to ensure that it delivers improved performance moving forward. This is refreshing, since an internal appointment often seeks to simply continue to operate in the same way as under the previous CEO. And, with Sainsbury’s now focused on improving margins and not just on its top line, its profitability could begin to stabilise and grow over the next couple of years.

In the meantime, Sainsbury’s continues to offer an excellent yield, with its shares currently paying out 4.1%. Furthermore, dividends are very well-covered at over 2 times, which should give investors in the company confidence that its income prospects are relatively upbeat. As such, it could prove to be a great turnaround story and seems to be worth buying right now.

Old Mutual

Investor sentiment in Old Mutual (LSE: OML) has been very strong thus far in 2015, with the South Africa-focused insurer seeing its share price rise by 15% since the turn of the year. Despite this, it still trades on a lowly P/E ratio of just 13.1 and, with its bottom line forecast to rise by 17% this year and by a further 11% in the following year, it could be all set for an upward rerating in the months ahead.

Certainly, its focus on South Africa means that it is less well diversified than many of its sector peers. But, with such a considerable margin of safety included in its share price, this seems to be more than factored in. And, with Old Mutual having a yield of 4.5% at the present time, it seems to offer a top notch income as well as the aforementioned growth and value potential. As a result, it seems to be a logical purchase at the present time.

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Peter Stephens owns shares of BAE Systems, Old Mutual, and Sainsbury (J). 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.