Up 30%+ in just 12 months! These FTSE 100 stocks are top buys to consider
BAE Systems
Confidence in the defence sector remains sky high as NATO countries increase military spending. According to an IG customer survey, defence shares will be the strongest-performing sector over the next six months.
Interestingly, 55% of those asked think it will be the best-performing industry in the period, too. That pushed AI off top spot (45% of respondents).
With enthusiasm for the sector ramping up, I think investing in one of the Footsie's famous defence shares is worth considering. BAE Systems (LSE:BA.) is one that demands attention after a recent price pullback.
BAE shares are up roughly 39% over the last year, but fell on Wednesday (30 July) after a poor reception to H1 results, extending recent weakness. It dropped after announcing a fall in the order backlog, from record levels of £77.8bn in December to £75.4bn in June.
Contract awards can be lumpy, and, as we've just seen, this is a threat to defence companies' share prices. Given lasting supply chain issues, too, BAE shares aren't without risk.
Yet, I also believe the outlook here is hugely positive on balance, and so it's also worth serious consideration. Indeed, the firm also upgraded its full-year sales and profits guidance as customer demand continues flying. It did the same thing last summer.
BAE now expects sales to grow between 8% and 10% this year. Underlying earnings before interest and tax (EBIT) growth is projected at 9%-11%.
Okay, the defence giant's shares don't come cheap following the last year's price gains. They trade on a forward price-to-earnings (P/E) ratio of 23.8 times, far above the 10-year average of 13.9 times.
But I believe this elevated valuation fairly reflects BAE's much-improved earnings outlook. It's a top stock to take a close look at.
HSBC
Investors seeking classic value might want to give HSBC (LSE:HSBA) serious consideration as well. I myself hold shares in the FTSE firm, and after its recent price decline I'm tempted to increase my holdings.
It trades on a forward-looking P/E ratio of 9.3 times. And the bank's corresponding dividend yield is a substantial 5.4%.
HSBC shares are up approximately 36% over the last 12 months, but dropped on Wednesday. It announced Q2 profit before tax of $6.3bn, down 29% year on year and missing forecasts. It also declared a $2.1bn impairment charge related to its stake in China's Bank of Communications.
Pressure in its core Asian marketplace remains a danger as trade tariffs dent economic growth. But the long-term outlook remains strong, with rising populations and increasing personal incomes driving banking product demand.
Encouragingly, HSBC is pivoting closer to these high-growth regions by selling weaker-performing assets in other parts of the world. And it's targeting especially lucrative areas like wealth management to build future profits upon.
And, in the meantime, HSBC is targeting cost savings of $3bn to support the bottom line and provide ammunition for further investment. I think it remains too cheap to ignore.
The post Up 30%+ in just 12 months! These FTSE 100 stocks are top buys to consider appeared first on The Motley Fool UK.
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HSBC Holdings is an advertising partner of Motley Fool Money. Royston Wild has positions in HSBC Holdings. The Motley Fool UK has recommended BAE Systems and HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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