2016 has been a volatile year in the markets due to various macroeconomic factors and events. I believe that these three shares have great potential and could boost portfolio returns this year.
US housing play
US equipment company Ashtead Group (LSE: AHT) is going from strength to strength at the moment. Although listed in London, much of its revenue and profit comes from the US building sector where the company operates its Sunbelt brand. Ashtead trades on a price to earnings ratio (P/E) of 14 and pays out a dividend yield of 1.4%.
While neither of those numbers are mightily impressive I still think Ashtead could reward investors. The company is seeing increased revenues and profits that are forecast to continue to grow further in the next few years. As the company operates in the USA and reports in British pounds, profits will be artificially boosted this year due to the fall of GBP against USD since the Brexit vote. This is possibly why the shares are up over 20% since the vote. I think this could easily continue and that a share price of 1,500p isn’t out of the question.
North Sea minnow
Hurricane Energy (LSE: HUR) has begun a transformational drilling campaign that will see two wells drilled on the Lancaster discovery. After successfully raising £52m through an equity placing, the company is aiming to prove up its fractured basement discovery in the waters to the west of the Shetland Islands. Founder and CEO Robert Trice is extremely encouraged by the placing and has stated that the second half of this year is pivotal for the company.
If the campaign is successful then the company will have an accurate volume estimation for Lancaster and I would expect a farm-out deal with very favourable terms for Hurricane.
All eyes are on Hurricane this summer and buying shares now could see huge returns. Drilling appraisal wells is much less risky than exploration but it’s still a high-risk game. Let’s hope for the sake of shareholders and the UK government that this new oil play is successful.
British housing shortage
The UK faces a serious shortage of housing over the next decade and Persimmon (LSE: PSN) is perfectly positioned to take advantage of this. Its shares look remarkably cheap at the moment with a P/E of 9.5 and a forward dividend yield of over 6%. This is slightly cheaper than the company’s industry peers.
After the EU Referendum, management repeated the aim of returning over £1.9 bn to investors over the next few years. The Brexit vote will obviously slow house sales and we may see a fall in house prices. However I think the sector still looks solid, the shortage of houses in the UK is set to continue and the government has extended the Help to Buy scheme. This means Persimmon is well positioned to continue to outperform.