LONDON — Data supplied by online stockbroker Selftrade shows that in January, these stocks were three of the most frequently sold. However, although other investors have been selling, I see clear value in all of these shares. I expect that in the coming months, investors who sold in January may experience an unpleasant bout of seller’s remorse.
Lloyds Banking Group PLC (NYSE:LYG)
Although shares in Lloyds Banking Group are up 6.8% so far this year, they have fallen by a similar amount since the middle of January.
Lloyds was the best-performing FTSE 100 share of 2012. It is inevitable that its rise would attract some profit takers.
But I believe the shares could still move significantly higher. Between July 2010 and March 2011, shares in Lloyds traded for more than 60 pence. This was followed by the PPI scandal, and Lloyds was forced to set aside billions in compensation. However, as Lloyds starts to move on, I expect that the shares could enjoy a significant rerating.
Royal Bank of Scotland Group plc (LSE:RBS)
Shares in Royal Bank of Scotland fell heavily last week. Some analysts moved to downgrade the bank amid fears that it would face a heavy fine for its involvement in the LIBOR scandal.
In recent weeks, the sector has been hit by a series of negative stories. In addition to LIBOR fines, there is the likelihood that RBS will have to announce a provision for interest rate-swap misselling. Add in some of the noises coming from the government on banking reform, and it’s easy to see why the shares have lost 10% in the last two weeks.
I think this misery might be creating an opportunity to buy RBS shares. Sentiment could turn quickly if RBS can post reassuring results on Feb. 28.
BP plc (NYSE:BP)
BP shares have had a great start to the year. Investors now believe that future fines for BP’s involvement in the Gulf of Mexico oil spill of 2010 may be less than was previously anticipated.
The expectation is that BP will report a big decline in profit for 2012. Nevertheless, that still leaves the shares on an attractive valuation. Using consensus forecasts for 2013, BP is on a price-to-earnings ratio of eight and offers a dividend yield of 5.7%. And there’s room for that yield to increase even further. Before the Gulf disaster, BP paid an annual dividend totalling $0.57. If the payout can get back to that level, then the shares would yield 7.8%.