Considerable future potential
Althoughthe declining oil price has caused severe problems for a number of oil producers, Shell (LSE: RDSB) (NYSE: RDS-B.US) is turning a huge challenge into a significant opportunity. In fact, Shells takeover of BG is just the first of many acquisitions that the oil major could engage in over the medium term.
Acombination of Shells excellent cash flow and moderately leveraged balance sheet, together with very low sector valuations, could providean excellent opportunity for Shell to improve its asset base and build a stronger long-term future for its bottom line.
And while Shells share price has itself fallen by 18% in the last year, it offers considerable future potential. Thats at least partly because it trades on a price to earnings (P/E) ratio of 16.2 and is forecast to increase its earnings by a third next year, which is far superior to the FTSE 100s mid-to-high single-digit growth prospects.
A potent mix
One of the challenges facing Barclays (LSE: BARC) (NYSE: BCS.US) is the sheer volume of regulatory allegations and fines that continue to assailthe banking sector. Butwhile they hurt investor sentiment and Barclays bottom line in the short run, they also provide an opportunity for long-term investors to buy in at a very enticing share price.
For example, Barclays currently trades on a price to book (P/B) ratio of just 0.65, which suggeststhat its shares are very cheap. And, while there could be turbulence in the UK economy due to potential political risk, as well as the possibility of further problems from Greece and the Eurozone, its unlikely that there will be significant write downs to Barclays asset base. As such, its lowly valuation seems very difficult to justify at the present time.
In addition, Barclays is forecast to yield as much as 4.3% next year, which indicates that its shares look set to offer a potent mix of income and value. This should be enough to allow them to beat the performance of the FTSE 100.
Exceptionally strong growth
Although Glencores (LSE: GLEN) potential bid for Rio Tinto seems increasingly less likely, with the Australian government saying that they would block such a move, Glencore continues to have significant potential on its own.
For starters, it has exceptionally strong growth prospects which have recently been revised up, with Glencore now expected to increase its bottom line by 10% this year and 56% next year. And, at a time when interest rates are set to stay low for some time, Glencores yield of 4% should help to boost investor sentiment in the company over the medium term.
Certainly, Glencore remains a relatively risky play, with the mining sector having the potential to experience even lower commodity prices in the short run. However, its P/E ratio appears to more than compensate for this risk, with a rating of 19.9 indicating that Glencore offers growth at a very reasonable price.
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Peter Stephens owns shares of Barclays, Rio Tinto, and Royal Dutch Shell. 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.
