Im often asked what shares a beginner should go for, and I always answer the same way solid shares that should perform well over decades, with somediversification. Here are three that have been down in the dumps that I reckon are coming back strongly.
Oil forever
Oil is back up to around $55 per barrel today. Thats way down on its pre-slump peak, but its making a lot of companies look very profitable again. BP (LSE: BP) is forecast to more than double its earnings per share (EPS) in 2017, and that should hopefully be the start of a solid upwards run. On current predictions, BPs P/E ratio would drop as low as 12.5 in 2018, and thats below the FTSE 100s long-term average of around 14. And BP looks set to pay out dividend yields of 6% or so, which is way better than average.
BPs share price has climbed by 53% in the past 12 months, to around 502p, but surely its done badly during the downturn? Well, actually, over five years the shares have gained a modest 8%, but on top of that youd have had around another 27% in dividends (which would have compounded even further had you reinvested the cash when the shares were cheap).
If BP can net you a 35% gain, or more, during the toughest of times, dont you think it could pep up your portfolio over the next decade and more? I do.
Solid insurance
My second pick is also good on dividends. Its Aviva (LSE: AV), and analysts are expecting yields of better than 5%. Theshares suffered during the financial crisis, and the company was forced to offload muchof its bloat and slash its dividend.
But since then, ithas turned itself round and become a pretty lean and cash-efficient operation. At the halfway stage in 2016, chief executive Mark Wilson said:Avivas strong financial position and diversity mean we are well insulated from external events We remain confident in our ability to deliver on our key commitments to grow earnings, cash and dividends.
Forecasts put the shares on a low P/E of under 10, dividends are rising, the company boasts a powerfulsolvency ratio of 174%, and it reckons Brexit will have no real impact on it. That sounds good to me.
Big pharma
Turning to another recovery, I bring you pharmaceuticals giant AstraZeneca (LSE: AZN). In this case the calamity came from the expiry of some key drug patents and the resulting increased competition from generic alternatives. That hit profits and since May 2014 weve seen the share price fall by nearly 39% to 4,573p though its still up 20% over five years and dividends have been strong.
The driver of change for AstraZeneca is Pascal Soriot, who tool the helm in 2012 with a plan to offload lots of non-core business, focus on what the firm does best, and get its drug development pipeline up to top speed. That was always going to take time and were likely to see earnings drop again this year.
But theres a return to EPS growth on the cards for 2018 with a 12% rise predicted. And I reckon when we actually see that happen, the shares should move upwards. I think now is a great time to put away some AstraZeneca shares for the years ahead.
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Alan Oscroft owns shares of Aviva. The Motley Fool UK has recommended AstraZeneca and BP. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.