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3 Stocks Set To Smash The FTSE 100: British American Tobacco plc, BT Group plc & Glencore PLC

British American Tobacco

Results released today by British American Tobacco (LSE: BATS) (NYSE: BTI.US) are somewhat mixed, with the company announcing a decline in sales and profit in its reported results, but an increase when negative currency movements are excluded in the adjusted results.

Using the adjusted results, 2014 was clearly a robust year for the company in what was a difficult operating environment, with industry contraction being offset by improved pricing and improved market share for a number of British American Tobacco’s key brands.

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And, with the company increasing dividends per share by 4% and yielding 4.1% at the present time, it continues to be a very appealing income stock that looks set to offer a generous and reliable real terms increase in dividends moving forward. With interest rates set to stay low, this could help to improve investor sentiment and allow British American Tobacco to beat the FTSE 100, as it has done over the last one, five and ten year periods.

BT

Also having a track record of FTSE 100 outperformance is BT (LSE: BT-A) (NYSE: BT.US). Despite this, though, its shares still seem to offer good value for money relative to the wider index, since they trade on a price to earnings (P/E) ratio of just 14.5. This indicates that they could be subject to further upward reratings, since the FTSE 100 has a P/E ratio of around 16.

The catalyst for this looks set to be a dominance of the quad play market (landline, mobile, broadband and pay-tv from one supplier), with BT seemingly more successful at winning new customers than most of its rivals. In addition, its triennial pension valuation is now completed and this could allow investor sentiment to pick up moving forward – especially if, as expected, the company’s £12.5bn deal to buy EE comes off and its earnings gain a major boost. As such, BT has a great chance of beating the FTSE 100 over the medium to long term.

Glencore

Even though it has been a tough year for Glencore (LSE: GLEN), with lower commodity prices hurting its share price performance, it still has huge potential. Certainly, a deal to buy Rio Tinto may now be less likely after the iron ore miner’s CEO appeared to dismiss rumours that a takeover or merger could take place. However, even without the addition of Rio Tinto, Glencore has superb earnings growth prospects.

For example, it is forecast to increase its bottom line by 53% next year, which puts it on a price to earnings growth (PEG) ratio of just 0.2. This indicates that its shares could move sharply higher and, with such a large margin of safety included in Glencore’s share price, even if its results do disappoint slightly then its share price could still head northwards.

So, while it has underperformed the FTSE 100 in the last year, the future looks to be very bright for Glencore and it seems to be worth buying a slice of right now.

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Peter Stephens owns shares of British American Tobacco and Rio Tinto. 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.

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