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Are BAE Systems plc, Prudential plc And Monitise Plc Set To Post Stellar Returns?

Unless the stock market has a two month bull-run, 2015 is set to go down as a hugely disappointing year for the FTSE 100. It has fallen by 3% since the turn of the year after having reached a record high of 7,100 points in April. Since then, though, a mix of concern surrounding China as well as a resources sector rout have caused investor sentiment to decline heavily.

However, a wide range of stocks have performed even worse than the FTSE 100 in 2015. For example, defence company BAE (LSE: BA) is down 6.5% year-to-date as investors continue to have little confidence in the short to medium term prospects for the global defence industry. And, while that may be well-placed, BAE has considerable medium to long term growth potential.

A key reason for this is, of course, an improving US economy. This means that the cutbacks being made across government spending are likely to moderate over the coming years, which is good news for defence companies such as BAE which rely on the world’s biggest military for a sizeable proportion of their orders.

Even looking ahead to next year, BAE’s financial performance is set to improve, with its bottom line forecast to rise by 5%. Clearly, this is not a particularly brisk pace of growth, but it is roughly in-line with the wider index and, with BAE trading on a price to earnings (P/E) ratio of only 11.7, it would be of little surprise for investor sentiment to pick up and push the company’s rating much higher.

Meanwhile, Prudential (LSE: PRU) has beaten the FTSE 100 in 2015, but is still up by a rather meagre 1% since the turn of the year. This, though, is somewhat understandable since concerns regarding Chinese growth rates have weighed heavily on Asia-focused stocks such as Prudential. And, with a new CEO at the helm, it is a time of relative uncertainty for the diversified financial business.

However, it is also a time of great opportunity, too. That’s because it is well-positioned to take advantage of the lack of financial product penetration in the Asian economy, with relatively few new middle-class people having a range of insurance, pension and saving products in place. This presents Prudential with an opportunity to deliver strong growth in future years and, with its shares trading on a price to earnings growth (PEG) ratio of just 1.3, it appears to offer excellent value for money.

For investors in mobile payment solutions company Monitise (LSE MONI), 2015 has been an awful year. The company has had multiple revenue warnings in recent months and, as a result of weakening investor sentiment, its shares have fallen by 89% since the turn of the year.

Looking ahead, it is difficult to make the case for strong growth in Monitise’s share price. It has been unable to generate a profit as yet and, even though it has developed a useful product and changed its strategy in terms of utilising a subscription-based model, it still remains firmly in the red. Furthermore, without Visa on board, its future appears to be less secure than it was in prior years.

So, while the mobile payment solutions space is an interesting place in which to invest, it may be best to watch Monitise rather than invest in it at the present time. That’s at least until its financial performance begins to provide evidence that it is a successful business as well as a successful product.

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