On Tuesday (1st July) the New ISA came into existence. The New ISA has a limit of £15,000, which is a substantial increase from the £11,880 allowed in the previous Stocks & Shares ISA. So it only seems appropriate to discuss five shares that could prove to be winning investments over the medium term.
BP
After a number of difficult years following the Deepwater Horizon tragedy in 2010, BP (LSE: BP) has steadily reversed much of the share price fall. Indeed, at current levels it appears to offer investors great value for money, with shares in the company trading on a price to earnings (P/E) ratio of just 10.7. This compares favourably to the FTSE 100 P/E of 13.9 and, in addition, BP offers investors a yield of 4.6%. Certainly, bottom-line growth may prove elusive, but there could be scope for an increase in the P/E ratio to make up for it.
GlaxoSmithKline
Despite being in the news of late for all the wrong reasons, GlaxoSmithKline (LSE: GSK) continues to offer a compelling medium term investment case. Its drug pipeline offers a potent mixture of diversity and exceptional peak sales potential, while shares in the company offer a yield of 5.2%. In addition, GlaxoSmithKline’s dividends per share are set to grow by 2.8% next year, while earnings per share (EPS) are forecast to be 9% higher next year. The best bit is that due to the front-page developments in China, shares in GlaxoSmithKline trade on a P/E of just 15.2, which compares favourably to most of its sector peers.
Vodafone
Although Vodafone (LSE: VOD) may no longer be the most stable of companies due to its significant exposure to the Eurozone (where the economy continues to offer only anaemic levels of growth), the company has significant long term potential. That’s because its strategy of buying undervalued assets is a sound one and, while investors are waiting for them to come good, Vodafone rewards them with a current dividend yield of 5.8%, which is above and beyond the FTSE 100 yield of 3.4%.
National Grid
With question marks being raised regarding whether consumers can afford to pay their share of the cost to update the UK’s ageing infrastructure, it is not wholly unlikely that National Grid (LSE: NG) may have to increase its capital expenditure. However, this shouldn’t be too much of a problem, as a £3.2 billion rights issue in 2010 left the company in better financial shape. As ever a strong yield of 5.1% makes National Grid a very appealing income play.
British American Tobacco
Although the sustainability of continual price rises in response to falling cigarette volumes has been brought into question recently, British American Tobacco (LSE: BATS) could be a major winner from the E-Cigarette revolution. That’s because it has taken the development seriously from the outset and has its own brand, Vype, through which to benefit from increased sales in what is already a $1 billion industry. In the meantime, a yield of 4.1% remains attractive.