3 FTSE 100-Beaters: HSBC Holdings plc, BAE Systems plc And SSE PLC


Even though HSBC (LSE: HSBA) (NYSE: HSBC.US) has remained profitable throughout the financial crisis and has a very bright future ahead of it, Britain’s largest bank continues to trade on a very low valuation. For example, it has a price to book (P/B) ratio of just 0.85 which, when you consider that it has remained profitable throughout the financial crisis and has vast exposure to what could become the most lucrative region for banking in the world (Asia), seems hugely attractive.

Furthermore, HSBC has very impressive growth prospects. For example, it is expected to post bottom line growth of 24% in the current year, followed by growth of 5% next year. This means that its profit in 2016 could be almost a third higher than in 2014 and, when combined with such a low valuation, means that HSBC could beat the FTSE 100‘s performance over the medium to long term.


The last five years have been hugely challenging for BAE (LSE: BA) (NASDAQOTH: BEASY.US), with much of the developed world cutting back on defence spending as austerity measures have been the policy of the day. As such, the company’s profit has fallen in three of the last five years but, even so, BAE’s shares have outperformed the FTSE 100 by 16%.

And, looking ahead, there could be much more to come. That’s because defence spending is set to rise considerably over the medium to long term and, with BAE having a very lucrative position as a leader in the industry, it could prove to be a major beneficiary. Furthermore, with shares in BAE currently trading on a price to earnings (P/E) ratio of 13.7 (versus 16 for the FTSE 100), it has considerable scope for an upward rerating in future.


While SSE (LSE: SSE) does come with a significant amount of political risk, owing to how a new government could change the regulation of domestic energy supply, its current share price appears to include a significant margin of safety. As such, it could prove to be an excellent performer – especially if regulations regarding the industry are more diluted than are currently being priced in.

Evidence of SSE’s excellent value for money can be seen in its yield, which currently stands at a whopping 5.9%. And, with SSE trading on a P/E ratio of just 12.9, it has considerable scope for an upward rerating which should allow it to comfortably outperform the FTSE 100 over the medium to long term.

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Peter Stephens owns shares of BAE Systems, HSBC Holdings, and SSE. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.