With the FTSE 100 having fallen by over 8% during the last month, beating the returns on the index has become a priority for a number of UK investors.
Of course, doing so is easier said than done. However, with the FTSE 100 seemingly in freefall at present, one way of achieving this aim is to buy relatively stable companies that are likely to continue to deliver strong earnings growth – even if the Eurozone moves back into recession.
With that in mind, here are three companies that offer just that and, as a result, could beat the FTSE 100 over the medium to long term.
SABMiller
When it comes to past earnings growth, SABMiller’s (LSE: SAB) track record is superb. Indeed, it has increased the bottom line in every one of the last five years, with annual growth averaging 12%.
Furthermore, SABMiller is expected to increase earnings by 5% in the current year and by another 10% next year. The main attraction, though, is the certainty with which such growth prospects can be viewed, since SABMiller’s products sell whether the world economy is performing well or not.
As a result, its current valuation premium relative to the FTSE 100 could be expanded further. So, while a price to earnings (P/E) ratio of 20.3 may seem high, it has been much higher in the past and could return there if there is a ‘flight to safety’ by investors moving forward.
GlaxoSmithKline
Even if the Eurozone slips back into recession, GlaxoSmithKline’s (LSE: GSK) (NYSE: GSK.US) fortunes are more closely linked to its pipeline than to the macroeconomic outlook. On this front GlaxoSmithKline has huge potential and, since selling off its consumer businesses, is even more focused on developing key, blockbuster drugs that can generate increased sales and profits for the company.
With a yield of 6.1%, shares in GlaxoSmithKline offer highly attractive income prospects. Furthermore, on a P/E ratio of 14.2, they look great value compared to sector peers, too.
British American Tobacco
While tobacco stocks generally deliver stable growth, British American Tobacco (LSE: BATS) (NYSE: BTI.US) has the potential to grow its bottom line at a rapid rate. That’s because it arrived early on the e-cigarette scene and, as a result, has stolen a march on many of its key rivals.
Indeed, the e-cigarette market has bright prospects. It is estimated that they are far less harmful than cigarettes and, as a result, are being allowed to advertise much more freely than tobacco products would be. This could, of course, attract people back to smoking who have quit, or simply increase the number of overall smokers, since the health risks are arguably not as great.
Either way, it’s good news for British American Tobacco. Furthermore, with a yield of 4.3%, it could prove to be a strong income and growth play moving forward.