Sometimes, its difficult to find high-quality companies trading at attractive valuations. Indeed, during bull markets it can be especially tough, as valuations become rather excessive.
However, with the FTSE 100 still being at roughly the same price level as it was fourteen years ago, there seems to be a number of high-quality companies trading at low prices. Here are three examples that could transform your portfolio returns over the medium term.
With a large exposure to Asia, HSBC (LSE: HSBA) (NYSE: HSBC.US) seems to be well positioned to benefit from an economic tailwind. Thats because demand for new loans should increase as the Asian economy develops towards a more consumer-based model over the long run.
However, even in the short run, HSBC has huge potential. For example, it is expected to increase earnings per share (EPS) by 6% in the current year and by 7% next year. This rate of growth may not be quite as impressive as some of its UK-listed banking peers but, when you consider that HSBC has remained profitable throughout the credit crunch, steady, resilient earnings start to become much more attractive.
With shares in HSBC trading on a price to earnings (P/E) ratio of just 12.1, they seem to offer good value as well as upbeat growth prospects.
Although sentiment surrounding GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) remains weak due to allegations of bribery, the long term still looks very bright for the pharmaceutical major. Thats because its pipeline of drugs is well diversified and has huge potential when it comes to gaining approval for key, blockbuster drugs.
Despite these strong prospects, shares in GlaxoSmithKline still offer great value right now. For example, they trade on a P/E of 15.2. While this is above the FTSE 100s rating of 13.6, its well below many of its pharmaceutical peers, where P/Es of 20+ are commonplace.
Allied to great value is a top notch yield of 5.6%, which makes GlaxoSmithKline a strong income as well as value (and growth) play.
When it comes to growth potential, Santander (LSE: BNC) has it in bucket loads. For example, earnings are forecast to increase by 23% in the current year and by a further 22% next year. This is a stunning rate of growth and means that, with shares in Santander trading on a P/E ratio of 15.8, the bank offers growth at a reasonable price via a price to earnings growth (PEG) ratio of 0.6.
Furthermore, Santander yields 6.5% and, as of next year, dividends per share are expected to be covered by profit. This puts Santander on a much stronger financial footing moving forward and means that its shares could boost your portfolio returns.
However, HSBC, GlaxoSmithKline and Santander aren’t the only companies that could do so. In fact, we’ve written a free and without obligation guide to Where We Think The Smart Money Is Headed.
The guide is simple, straightforward and could make a positive contribution to the future performance of your portfolio. As such, it’s well-worth a read and could make 2014 and beyond an even more prosperous period for your investments.
Click here for your free and without obligation copy of the guide.
Peter Stephens owns shares of GlaxoSmithKline and HSBC Holdings. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.