Why You Can’t Afford To Miss These Big-Cap Bargains: HSBC Holdings plc, Persimmon plc And BAE Systems plc

Today I am looking at three London stocks providing plenty of whizz for your wonga.

HSBC Holdings

News of more crushing fines across the banking sector for forex manipulation has sapped investor appetite for HSBC (LSE: HSBA) (NYSE: HSBC.US), and shares were recently dealing 1.8% lower on Thursday. Global regulators are rapidly losing patience with having to mop up the industry’s previous misconduct, and Barclays was hit with a record £284m fine by the Financial Conduct Authority yesterday. With HSBC facing the ire of regulators due to the maverick operations of its Swiss unit, markets are wringing their hands over the potential repercussions.

These concerns are of course understandable, but I do not believe investors should lose sight of the vast potential over at “The World’s Local Bank.” HSBC’s pan-global presence gives it access to recovering Western markets, while its gargantuan footprint in Asia Pacific also promises to deliver juicy long-term gains. Indeed, City analysts expect these qualities to drive earnings 26% higher in 2015, and a 5% bounce is anticipated for next year.

Such projections create ultra-low P/E multiples of 11.2 times for 2015 and 10.8 times for 2016, just above the yardstick of 10 times that indicates outstanding value for money. On top of this, HSBC’s robust capital position is expected to underpin further dividend growth, with estimates payouts of 53 US cents for this year and 55 cents for 2016 producing chunky yields of 5.5% and 5.7% correspondingly.


Share prices in the country’s major housebuilders have experienced lift-off following the Conservative Party’s general election win this month. Industry giant Persimmon (LSE: PSN) has gained 16% alone in the two weeks since the poll booths closed, and I believe that the stock still offers great value for money as house prices look set to keep climbing and homes demand keeps continues to outstrip supply.

Accordingly the number crunchers expect Persimmon to punch earnings growth of 18% and 13% in 2015 and 2016 respectively, forecasts which create very attractive P/E ratios of 12.7 times and 11.1 times. And the construction firm’s excellent value is underlined by PEG readings of 0.7 for this year and 0.8 for 2016, comfortably below the bargain benchmark of 1.

In light of this robust earnings outlook, dividends are expected to spew forth at Persimmon, and a total payment of 98.4p per share is currently estimated for this year, producing a meaty 5.3% yield. And this leaps to 6% for 2016 amid expectations of a 111.5p payout.

BAE Systems

I believe that BAE Systems (LON: BA) is a terrific pick for both growth and income chasers owing to its industry-leading technologies spanning many defence sectors, not to mention the company’s top-tier status with the critical US and UK governments. Indeed, the arms colossus announced just today plans to invest £100m into its Govan and Scotstoun shipyards in Scotland, as part of preparations to construct the Royal Navy’s ‘Type 26’ frigate fleet.

After many years of persistent earnings weakness, the City expects BAE Systems to put behind it previous travails and a 2% bottom-line boost this year is anticipated to be followed by a 6% advance in 2016. Consequently the company changes hands on more-than-reasonable earnings multiples of 12.8 times for 2015 and 12 times for next year.

And BAE Systems’ ability to throw up boatloads of cash is anticipated to keep dividends surging at a rate of knots, too. A prospective payout of 20.9p per share for the current 12 months generates a handsome yield of 4.1%, while a dividend of 21.6p for next year drives the yield to 4.3%.

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Royston Wild has no position in any shares mentioned. 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.