Why The Chinese Washout Makes BAE Systems plc, HSBC Holdings plc And Royal Mail PLC Spectacular Snips!

Today I am looking at three stocks every savvy bargain seeker should consider buying.

BAE Systems

Thanks to the massive risk aversion still washing across the world’s financial markets, arms builder BAE Systems (LSE: BA) has seen its share price take a pasting in recent weeks — the business has shed 6% of its value since the start of August alone. In my opinion this makes the defence giant a pukka-priced stock for both earnings and dividend chasers.

BAE Systems’ top-tier status with Western customers is allowing it to enjoy resplendent revenues expansion as economic growth improves, and the firm saw total sales advance 11% during January-June as a result, rising to £8.47bn. Against this backcloth the City expects BAE Systems to clock up marginal earnings growth in 2015 before recording a meaty 8% improvement the following year.

Consequently BAE Systems deals on P/E ratios of just 11.7 times and 11.1 times for 2015 and 2016 respectively, just above the bargain-basement mark of 10 times. On top of this, the weapons manufacturer is expected to obliterate the wider market with dividends of 20.8p per share for this year and 21.5p for 2016, figures that produce monster yields of 4.6% and 4.8%.

HSBC Holdings

As one would expect, HSBC’s (LSE: HSBA) massive dependence on China and South-East Asia has caused its share price to tank in recent weeks. ‘The World’s Local Bank’ has surrendered 15% on the London stock market during the past month, and while investors should of course pay heed to economic conditions in these territories, I believe the long-term potential of these regions remains undiminished.

HSBC saw pre-tax profits rise 10% during January-June, to $13.6bn, driven by its ongoing strength in Asia. And with the firm also slashing tens of thousands of jobs to cut the cost base, and selling off non-core assets to reduce drag — its Brazilian Banco Bradesco unit was the latest asset to go under the hammer last month — the bank is clearly becoming a much more earnings-efficient machine for the years ahead.

The number crunchers expect HSBC to see earnings climb 17% in 2015 and by a further 2% the following year, resulting in ultra-cheap P/E multiples of 10.1 times and 9.7 times respectively. And supported by a steadily-improving balance sheet — the firm’s CET1 ratio stands at a very-healthy 11.6% — dividends of 50 US cents per share for 2015 and 51 cents for next year are currently predicted, yielding a sector-smashing 6.3% and 6.5%.

Royal Mail

I am convinced that Royal Mail’s (LSE: RMG) stranglehold on the UK letters and parcels market makes it a standout selection for those seeking brilliant returns. Wider market concerns have weighed on the stock more recently, however, and the courier has fallen 7% since the start of August.

But I believe Royal Mail’s operations in a critical market make it one of the better defensive stocks currently available. The breakneck growth of internet shopping promises to keep parcels volumes ticking steadily higher, in my opinion, while investors should also be buoyed by ongoing success of the firm’s General Logistics Systems (GLS) division on the continent. Meanwhile, massive restructuring also promises to boost earnings growth in the coming years.

The cost of these measures is expected to push the bottom line 22% lower in the 12 months concluding March 2016, although a 5% bounceback is predicted for 2017. Consequently Royal Mail sports very decent P/E ratios of 12.3 times and 12 times for these years. And thanks to its solid revenues outlook and more efficient processes, dividends are expected to rise to 21.7p per share in 2016 and 22.6p in 2017, figures that yield a very handsome 4.7% and 4.9% correspondingly.

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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.