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Why Vodafone Group plc, BAE Systems plc & Amec Foster Wheeler PLC Offer Amazing Value Today

Today I am looking at three London stocks I consider to be bona-fide, blue-chip bargains.

Vodafone Group

At face value Vodafone (LSE: VOD) may not be considered a true ‘bargain’ stock selection for value seekers. While it is true the mobile telecoms giant carries gigantic dividend yields — projected payments of 11.5p and 11.6p per share for the years to March 2016 and 2017 respectively produce yields of 5.5% and 5.6% — the business appears costly on a pure earnings basis.

The result of an anticipated 8% bottom-line fall in the present period results in a heady P/E ratio of 43.7 times, and although a 21% bounce is predicted for next year, Vodafone’s multiple still clocks in at a giant 34.3 times. The conventional benchmark that is widely considered ‘attractive’ value stands at 15 times prospective earnings.

Still, I believe Vodafone’s rapidly-improving earnings prospects more than justify these high valuations. Improving conditions in its critical European marketplaces — helped in no small part by the firm’s colossal organic investment and busy M&A activity — should continue to power its sales turnaround, while growing data demand across emerging regions like India cannot be underestimated. I reckon Vodafone is a brilliantly-priced long-term stock selection.

BAE Systems

With the business of war firmly back on the front pages, I reckon the sales picture over at BAE Systems (LSE: BA) is the strongest it has been for some time. The effect of Russian excursions in Ukraine and Syria is causing Western defence chiefs much apprehension, while the unrelenting march of ISIS, fears over Chinese expansionist measures, and fresh rhetoric from North Korea are also stoking fears of long-term geopolitical instability.

Such a backdrop naturally plays into the hands of weapons and security systems builders, and BAE looks poised to benefit from its top-tier supplier status with both US and UK armed forces. And the company’s cutting-edge technologies are also attracting rising demand from emerging regions, too, and BAE Systems clocked up £1.3bn worth of non-Western orders during January-June alone.

This increasingly-positive environment is expected to banish BAE Systems’ prolonged earnings bumpiness from next year onwards, with a 1% dip in 2015 expected to be followed by a 5% rise in 2016. These figures leave the weapons play dealing on P/E ratios of just 11.9 times and 11.3 times respectively. When you throw in projected dividends of 20.9p per share for 2015 and 21.6p for next year, yielding 4.6% and 4.7% correspondingly, I believe BAE Systems offers terrific value for money.

Amec Foster Wheeler

I reckon engineering giant Amec Foster Wheeler’s (LSE: AMEC) exposure to a wide variety of industries makes it a strong pick for bargain hunters. The company’s share price has endured a rocky ride since the summer as persistent emerging market fears — combined with subsequent demand concerns from the mining and energy sector solutions — have depressed investor appetite.

But the London-based company has flung its net far and wide, giving it terrific diversification in terms of both sector and geography, in turn removing an unhealthy reliance upon one segment. As a result Amec Foster Wheeler’s order book stood at a healthy £6.6bn as of the close of June, up £2.4bn from the same point last year.

The City currently expects Amec Foster Wheeler to report a 12% earnings decline in 2015, although this figure produces a P/E ratio of just 10.8 times, a figure I believe more than factors in headwinds from the oil and mining segments. And predictions of a 3% rise next year push the ratio to just 10.6 times. In addition, forecasts dividends of 42.9p per share for 2015 and 43.3p for next year create chunky yields of 5.4% and 5.5%.

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Royston Wild has no position in any shares mentioned. 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.