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Do Tui AG, BHP Billiton plc And Aviva plc Deserve A Place In Your ISA?

Shares in travel operator TUI AG (LSE: TUI), which owns brands including Thomson and First Choice, rose by 4% in early trading this morning. In a trading statement, the group said that underlying earnings growth of at least 10% is expected for the current year.

TUI shares have fallen by more than 10% since January due to concerns about the impact of recent terror attacks. TUI said today that while bookings for holidays in Turkey remain “subdued”, overall demand is strong with UK bookings up 9% compared to last year.

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Today’s update seems to show that TUI has the ability to shift holiday capacity between locations in order to adapt to changing demand. This should put the group in a strong position to deliver continued growth. City analysts seem to agree and are forecasting earnings per share growth of 18% for the 2016/17 financial year.

The sell-off seen so far this year has left TUI shares trading on a forecast P/E of 12.5, with a prospective yield of 4.8%. In my view this looks quite cheap. I suspect TUI could be a good buy at current levels.

Strong stomach required for long-term profits

Shares in big miners such as BHP Billiton (LSE: BLT) have been very volatile this year. Gains and losses of 5%-10% in one day have been common. In just three months, BHP shares have hit a low of 571p, and a high of 897p.

However, I reckon that if you can ignore this short-term volatility, BHP could be a profitable long-term ISA buy. The main point to remember is that mining earnings are heavily cyclical. The time to buy is generally when earnings are low and the shares look expensive.

BHP’s earnings per share have now fallen from a 2011 peak of about $4 to a forecast level of $0.18 for the current year. A 150% increase to $0.45 is expected next year. This suggests to me that the market could be turning, and that now might be the right time to buy.

It may take several years to realise the full potential of this investment, but in the meantime BHP offers a forecast yield of 3.2%. I’m happy to bank my dividends and sit tight.

A first class performer going cheap?

Aviva (LSE: AV) chief executive Mark Wilson has delivered an impressive turnaround since he took charge of the insurer in 2013. The firm’s recent 2015 results showed a 20% increase in adjusted operating profit and an improvement in the insurer’s capital strength.

Shareholders were rewarded with a 15% increase in the dividend, which rose to 20.8p. Despite this, wider concerns about the outlook for the insurance sector have pushed Aviva shares down by 12% so far this year.

Consensus forecasts for Aviva’s 2016 earnings have now fallen from 54p per share a year ago to 49.7p per share today. If this decline continues then we could see further weakness in the share price.

However, I’m tempted to take a contrarian view here. Aviva shares currently trade on a forecast P/E of only 9 and offer a forecast yield of 5.1%. In my view, a reasonable amount of bad news is already reflected in the price. I’m happy to continue holding my shares, and may buy more.

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Roland Head owns shares of Aviva and BHP Billiton. 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.

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