Now that the FTSE 100 has fallen substantiallyfrom its highs, there are plenty of shares thatare as cheap as they have been all year. So its time to go shopping for shares. If I were to buy shares right now, which would I buy? Here are my picks.
Royal Mail Group
Recently privatised postal company Royal Mail Group (LSE: RMG) has beenon a downward trendsince January of this year. It is now approaching its privatisation price of 330p. But I am just wondering whetherthe share pricehas nearly bottomed.
Check the fundamentals andwe seea strong dividend play with growth prospects.Next yearsP/E ratio is 11.5, with a dividend yield of 5%, and this falls to 10.0, with a dividend yield of 5.2%.
For a company thatis just adapting to the commercial world, which is likely to grow earnings over the coming years, and which has a high and rising dividend yield, this looks cheap. Although there is volatility, I suspect this a long-term investment thatyou should tuck away,whilst steadily harvesting those dividend cheques.
The strength of the housing recovery has surprised many. But if you analyse the statistics, all the ingredients are there: record low interest and mortgage rates, a growing economy with falling unemployment and rising employment, and a housing stock which has not kept pace with the rising population.
Thus, although in the medium term house price growth is likely to moderate, I see increasing house prices, alongsidemore house building,as a long-term trend which is just finding its stride. Thus businesses thathave a stake in the housing recovery, such as Barratt Developments (LSE: BDEV), are worth betting on at the moment. Of the housebuilders, Barratt is my pick as I expect house price growth in London to cool, with growth spreading tothe regions. Barratt, with developments across the country, would benefit from this.
The fundamentals are surprisingly cheap for what is now a growth company: a P/E ratio of 9.3 falling to 7.9, witha dividend yield of 3.6 rising to 4.5. This company is a strong buy.
Alongside these two blue chips, my final pick is a growth/small-cap play. Manygrowth companieshave been hit hard this year, so I guess it would be brave of me to pick a small cap. Yet falling share prices also means that there are many bargains at the moment.
One particular bargain Ive spotted is a company thatis growing rapidly, yet whose shares are currently selling at bargain-basement prices. The company is called Plus500 (LSE: PLUS).
This company runs a trading platform where you can trade currencies, shares, commoditiesand CFDs (basically derivatives). This trading platform is available in many countries around the world. It has provedimmensely popular, as the earnings per share progression shows:
2011: 9.65p 2012: 10.46p, 2013: 28.50p, 2014: 53.97p, 2015: 59.86p
As is often the case with small caps, the shares are volatile, but have fallen a lot recently, and this may have created a buying opportunity. The 2014 P/E ratio is 8.1, with a dividend yield of 7.4%, and the 2015 P/E ratio is 7.3, with a dividend yield of 8.2%. If you can see beyond the short-term noise, this couldprove to bea profitable long-term investment.
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Prabhat Sakyaowns shares in Barratt Developments and Plus500. 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.