Can Lloyds Banking Group PLC, Paragon Group Of Companies PLC And Aberdeen Asset Management plc Still Rise By 20%+ This Year?

Are these 3 stocks on the cusp of major turnarounds? Lloyds Banking Group PLC (LON: LLOY), Paragon Group Of Companies PLC (LON: PAG) and Aberdeen Asset Management plc (LON: ADN).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Lloyds (LSE: LLOY) have fallen in value by 7% since the turn of the year. However, it’s still possible for them to turn this deficit around and end the year 20% higher than the price at which they started the year.

A key reason for this is Lloyds’ valuation. The part-nationalised bank has a price-to-earnings (P/E) ratio of just 8.8 and this indicates that an upward share price movement of even 50% isn’t unrealistic over the medium term. Clearly, investor sentiment in Lloyds is relatively weak at the present time, but with the bank having a sound strategy which has included making asset disposals, cutting costs and producing a more efficient operation, Lloyds has excellent growth potential.

Furthermore, its income prospects are also very bright. Lloyds has a yield of around 6.6% and although its dividends are perhaps less stable than those of some of its index peers, such a high yield indicates that Lloyds’ share price could move higher. That’s especially the case since interest rate rises are set to be slow and may cause dividend stocks to remain in vogue through the remainder of 2016.

Tough times ahead?

Also falling in value since the turn of the year have been shares in Paragon (LSE: PAG), with the buy-to-let specialist recording a decline of 14% year-to-date. Clearly, this is disappointing and a reason for this is likely to be concern surrounding the outlook for the buy-to-let market. With a 3% surcharge now in place for additional properties and the tax changes that will end mortgage interest relief for higher rate earners, buy-to-let could be at the beginning of a tough period.

Add to this the gradual rise in interest rates set to take place over the coming years and Paragon’s potential to gain 20% this year appears to be slim. So, while Paragon trades on a price-to-earnings-growth (PEG) ratio of just 0.7 and is a high quality business, its operating environment appears to be highly uncertain. Therefore, it may be best to watch rather than buy Paragon right now.

Meanwhile, Aberdeen Asset Management (LSE: AND) has had a rather volatile 2016 thus far. At one point its shares were down by as much as 27% as fears surrounding China took hold and hurt investor sentiment in the emerging markets specialist. However, after a stunning recovery in the last two months, Aberdeen is now up by 6% year-to-date.

Looking ahead, this recovery could continue. Part of the reason for that is Aberdeen’s high yield, which currently stands at 6.3%. As mentioned, high yields could remain popular this year and with Aberdeen having raised dividends on a per share basis in each of the last five years, it appears to be a sound income play. Plus, with investor sentiment towards the emerging world now stabilising, it would be of little surprise for Aberdeen to become more appealing to investors who are feeling more ‘risk-on’ than they were earlier this year.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Aberdeen Asset Management and Lloyds Banking Group. The Motley Fool UK has recommended Aberdeen Asset Management. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »