3 Super-Significant FTSE 100 Shares: HSBC Holdings plc (HBC), Vodafone Group Plc (VOD)

LONDON — The FTSE 100 is a market-weighted index. This means that not every constituent makes the same contribution to its performance. The value to the FTSE 100 of each share is determined by its own market capitalization. This means that the FTSE 100′s largest company (Shell) has 190 times as much influence on the index as the smallest (Eurasian National Resources Company).

Here are my thoughts on the outlook for the shares of three FTSE 100 titans.

HSBC Holdings plcHSBC Holdings plc (ADR) (NYSE:HBC)
HSBC Holdings plc (ADR) (NYSE:HBC), the U.K.’s biggest bank, has proven far more resilient and less volatile than its listed peers Barclays PLC (ADR) (NYSE:BCS), Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), and Lloyds Banking Group PLC (ADR) (NYSE:LYG). This strength has long been rewarded with a premium rating to the rest. The result is a huge market cap and a large FTSE 100 weighting. HSBC accounts for 8.2% of the blue-chip index.

Despite this, HSBC shares are still cheap today. 2013 forecasts show an expected 11% increase in earnings per share and an 11.1% dividend hike. Despite this, the shares trade on a 2013 price-to-earnings (P/E) ratio of just 11.1 times forecasts. The shares are expected to yield 4.4% this year.

Royal Dutch Shell plc (ADR) (NYSE:RDS.B)
Due to a quirk of how the company is incorporated, two classes of Royal Dutch Shell plc (ADR) (NYSE:RDS.B) shares are in the FTSE 100. Adding the two together gives a total FTSE 100 weighting for the company of 9%. Shell has nine times the effect on the FTSE 100′s value than the average blue-chip share. A large amount of the FTSE’s future success depends on Shell.

Fortunately for tracker investors, Shell shares have plenty of potential to rise from here. The company currently trades on just 8.3 times EPS forecasts for 2013, with an expected dividend yield of 5%.

Vodafone Group Plc (ADR) (NASDAQ:VOD) (LSE:VOD)
At the height of the dot-com bubble at the turn of the century, Vodafone Group Plc (ADR) (NASDAQ:VOD) made up more than 10% of the FTSE 100. Today it is “just” 5.3%. That still makes Vodafone nearly four times as important to the index as its sector peer, BT.

I hold Vodafone shares because I think that they are significantly undervalued. At today’s price, they trade on a 2013 P/E of 11.3 and an expected dividend yield of 5.8%. The average FTSE 100 share is on a P/E of 16.4 and pays a dividend of 3.2%. Vodafone is a bargain behemoth.

The article 3 Super-Significant FTSE 100 Shares originally appeared on Fool.com and is written by David O’Hara.

David owns shares in Vodafone, Royal Bank of Scotland, and Lloyds but none of the other companies mentioned. The Motley Fool has recommended shares in Vodafone. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!