LONDON — You don’t need to be investing for long to understand that some shares are a wilder ride than others. There is a statistical measure for this: the “beta.” This encapsulates how volatile a share has been compared with the index.
Here are the FTSE 100’s 10 largest high-beta shares.
| Company | Price (pence) | Beta | Yield (forecast, %) | P/E (forecast) | Market Cap (million pound) |
|---|---|---|---|---|---|
| Lloyds Banking Group PLC (LON:LLOY) | 61 | 2.2 | 0.0 | 13.5 | 43,595 |
| Barclays PLC (LON:BARC) | 298 | 2.5 | 2.5 | 8.1 | 38,293 |
| Royal Bank of Scotland Group plc (LSE:RBS) | 316 | 2.6 | 0.0 | 14.4 | 35,430 |
| Anglo American plc (LON:AAL) | 1426 | 1.8 | 3.8 | 11.1 | 19,875 |
| Legal & General Group Plc (LON:LGEN) | 171 | 1.8 | 5.0 | 11.1 | 10,106 |
| Antofagasta plc (LON:ANTO) | 904 | 1.8 | 2.7 | 13.1 | 8,912 |
| ITV plc (LON:ITV) | 137 | 1.8 | 2.4 | 13.4 | 5,379 |
| GKN plc (LON:GKN) | 302 | 2.3 | 2.6 | 11.3 | 4,933 |
| The Weir Group PLC (LON:WEIR) | 2162 | 1.7 | 1.9 | 14.2 | 4,607 |
| Vedanta Resources plc (LON:VED) | 1212 | 2.7 | 3.1 | 10.0 | 3,230 |
I expect that each of the five shares below will continue exaggerating the market’s movements and produce big gains if the bull market resumes.
After starting the year at 262 pence, Barclays PLC (LON:BARC) shares rose to a high of 333 pence when the FTSE 100 peaked in May. Since then, the shares have dropped back to 297 pence.
It is often argued that Barclays PLC (LON:BARC) shares are a geared play on the success of the market. Price movement so far this year would seem to bear this out. However, Barclays PLC (LON:BARC) could generate big returns for shareholders even in a lackluster market.
That is because, at less than 300 pence, Barclays PLC (LON:BARC) shares are very cheap. Barclays PLC (LON:BARC) is forecast to make 36.6 pence of EPS (earnings per share) in 2013. That puts the shares on a 2013 P/E of 8.1. The average FTSE 100 stock trades on a P/E of 13.6. Earnings and dividends are forecast to rise further this year and next.
Royal Bank of Scotland Group plc (LSE:RBS)
The market was shocked recently by the announcement of Royal Bank of Scotland Group plc (LSE:RBS) boss Stephen Hester’s planned departure. Before the news broke, the shares traded at 326 pence. Two days later, they closed at 315 pence.
Hester has been key to the bank’s rehabilitation. As a shareholder in Royal Bank of Scotland Group plc (LSE:RBS), I am very disappointed to be losing his talents. Now, Royal Bank of Scotland Group plc (LSE:RBS) needs to find another experienced bank boss that the market has confidence in. You don’t find those on Craigslist…
Shareholders will be hoping that the conduct of the board and government does not prevent Royal Bank of Scotland Group plc (LSE:RBS) finding a capable banker that is willing to take the job.
Royal Bank of Scotland Group plc (LSE:RBS) is forecast to make 31.4 pence of EPS in 2014. That equates to a 2014 P/E of just 10.1.
Lloyds Banking Group PLC (LON:LLOY) shares have remained at around their peak despite recent market falls. On Friday, the shares closed at 61.3 pence, hardly moved from their recent two year high of 63 pence.
Lloyds Banking Group PLC (LON:LLOY) is much closer to privatization than RBS. Its business is also considered less dependent on investment banking revenues than Barclays. Perhaps as a result, its shares trade at a higher rating.
Lloyds Banking Group PLC (LON:LLOY) shares are today available at 13.5 times forecasts for 2013, falling to 10.4 times the expected number for 2014. As its balance sheet improves, Lloyds Banking Group PLC (LON:LLOY) also looks increasingly likely to begin paying shareholder dividends.
Unlike RBS and Barclays, Lloyds Banking Group PLC (LON:LLOY) shares are trading at a premium to the company’s net tangible asset value.
The Weir Group PLC (LON:WEIR)
Glasgow-based Weir Group provides engineering services to the mining, oil and gas, and power industries. Customers in these sectors have little control of the price that they receive for their product. As a result, The Weir Group PLC (LON:WEIR) is supplying to a customer base that must trade its way through market boom and bust. This impacts market perceptions of The Weir Group PLC (LON:WEIR)‘s own prospects. The result is a high-beta share price.
A quick look at The Weir Group PLC (LON:WEIR)’s five-year record suggests that the market may not be giving the company due credit. The Weir Group PLC (LON:WEIR) is one of those exceptional companies that has managed to grow sales, profits, and dividends year on year for the last five years.
More growth is expected in the next two years, leaving the shares on a 2014 P/E of 12.9.
Shares in Legal & General Group Plc (LON:LGEN) have lost 10% since the recent market peak. The company owns a substantial investment management business. As such, the market often bids up the Legal & General Group Plc (LON:LGEN) share price during market rises and rushes to sell when the FTSE steps back.
That seems unfair, given the company’s robust track record. Even in the depth of the financial crisis, Legal & General Group Plc (LON:LGEN) continued to pay a dividend. Only in 2008 did the company record a material decline in earnings.
At 171 pence, Legal & General Group Plc (LON:LGEN) is selling at 11.1 times broker forecasts for 2013. Further growth is expected the next year, pushing that P/E down to 10.4. A dividend of 8.5 pence per share is forecast this year, meaning a prospective yield of 5%.
The article 10 FTSE 100 Shares to Soar in a Market Revival originally appeared on Fool.com is written by David O’Hara.
David O’Hara owns shares in Lloyds Banking Group, Barclays, and Royal Bank of Scotland but none of the other companies mentioned. The Motley Fool recommends Weir Group.
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