While stock markets may appear to be relatively high at the moment, there continues to be growth and value opportunities on offer. Certainly, they may be less common than they were when the FTSE 100 was trading at under 6,000 points. But with the prospects for the world economy upbeat, there appears to be scope to generate impressive returns over a sustained period.
With that in mind, here are two shares that could improve your portfolio returns. Over time, they have the potential to deliver high returns, which could help you to reach seven-figure status.
Low valuation
Reporting on Monday was oil and gas company Cairn Energy (LSE: CNE). It released an update regarding its ongoing arbitration with the Indian government, with all of the written submissions by both sides having been made. The final arbitration hearings will take place for two weeks commencing on 20 August. In the meantime, the Indian Income Tax Department has continued to enforce its retrospective tax claim. Dividends have been seized, while part of the company’s shareholding has also been realised, according to the update.
Clearly, the near term could be relatively volatile for Cairn Energy. However, the stock market appears to have factored in its uncertain outlook. It’s forecast to grow its bottom line by 56% next year, with shares trading on a price-to-earnings growth (PEG) ratio of just 0.3. As a result, it could offer a wide margin of safety.
That’s especially the case since the oil price may move higher during the second half of the year. Supply disruption from Iran, due to US sanctions, could cause an imbalance between demand and supply. As a result, the prospects for the wider oil and gas industry could be positive.
Improving performance
Also having the potential to benefit from a rising oil price is diversified resources company BHP Billiton (LSE: BLT). It provides investors with exposure to a wide range of commodities, and this could help to boost its risk/reward appeal for the long term.
Clearly, the company has benefitted from an improving outlook for commodity prices in recent years. This trend could continue over the medium term, with Chinese and US GDP growth forecast to remain robust over the next couple of years. And with the stock having a price-to-earnings (P/E) ratio of around 15.5, it seems to offer good value for money given its diversity and financial strength.
Furthermore, BHP Billiton has a dividend yield of around 4.5% at the present time. This is expected to be covered around 1.6 times by profit in the current year. This suggests that it’s sustainable, and could experience strong growth should trading conditions remain favourable. As such, and while resources shares are likely to remain volatile, the prospects for the company from a total return perspective appear to be encouraging.
