3 Screaming Buys: Tesco PLC, British American Tobacco plc And SSE PLC

These 3 stocks look set to deliver superb returns in the long run: Tesco PLC (LON: TSCO), British American Tobacco plc (LON: BATS) and SSE PLC (LON: SSE)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Tesco

Such has been the improvement in investor sentiment in Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) during recent months that its shares are now down just 12% over the last year. Considering how disastrous the period has been for its bottom line, that’s a very good result and provides evidence that investors can be very forgiving for stocks with turnaround potential.

And, looking ahead, Tesco is very much on course to turn its fortunes around. For example, next year it is forecast to return to earnings growth for the first time since the 2012 financial year and, following that rise, it is expected to increase its bottom line by a whopping 30% in financial year 2017. This puts Tesco on a price to earnings growth (PEG) ratio of just 0.6, which indicates that its share price strength in recent months could be just the beginning of a prolonged period of strong performance.

British American Tobacco

In the short term, British American Tobacco (LSE: BATS) (NYSE: BTI.US) may not seem like such an appealing stock to buy a slice of. That’s because the dual threat of increased regulations and greater illicit trade in cigarettes is causing volumes across the tobacco industry to fall. And, while price increases will offset much of this decline, it is likely to hold back investor sentiment in the short run.

However, British American Tobacco still has a very bright future. Notably, the e-cigarette space holds significant growth potential and could rejuvenate the industry’s top and bottom lines. And, in the meantime, British American Tobacco remains a top income stock, with it yielding 4.3% at the present time and being forecast to increase dividends per share by an impressive 2.9% next year.

SSE

The best time to buy any stock is when its near term future appears to be somewhat uncertain, but while it also has a bright long term future. That’s the current situation for SSE (LSE: SSE), with there being significant political risk in investing in the company right now, owing to the potential for an energy price freeze and new regulator under a Labour government.

As such, shares in SSE trade on a very appealing valuation with, for example, it having a price to earnings (P/E) ratio of just 13.8 (versus 16 for the FTSE 100). In addition, SSE offers a yield of 5.9%, which is not only stunning, but is also set to rise to 6% next year. As such, and while the short term may be challenging, SSE appears to be a great buying opportunity right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of SSE, British American Tobacco and Tesco. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »