While not everyone is happy about the Tory election win, it seems as though many investors most certainly are. In fact, the FTSE 100 surged by around 2.2% on the day following the election and, looking ahead, further gains seem to be a distinct possibility, with some stocks set to benefit more than others. With that in mind, here are four companies that could benefit hugely from a Tory majority government, but is now the right time to buy them?
Lloyds
While the Conservatives have sought to profit from an improving banking sector via policies such as a higher banking levy, the general view is that they are more pro-business than Labour. This, then, is good news for Lloyds (LSE: LLOY) (NYSE: LYG.US) since it means that the sale of the rump of the government’s stake in the bank should go ahead without too many problems. Certainly, there may be scope for a sale to the general public but, looking ahead, Lloyds should be returned to public ownership (in terms of having no government stake) during the current parliament.
This should help sentiment at Lloyds to improve significantly, since it shows that the bank is able to stand on its own and deliver impressive levels of profitability. In turn, this should improve investor sentiment and, with Lloyds having a price to earnings (P/E) ratio of just 10.6, there is tremendous scope for an upward rerating.
Foxtons
A big gainer from the election result is set to be London estate agent, Foxtons (LSE: FOXT). Although the outlook for the prime London property market remains somewhat uncertain, with sky-high valuations and a change to stamp duty making the capital less appealing for buyers, the lack of a Labour mansion tax should help to improve sentiment in the sector moving forward.
Evidence of the improved prospects for Foxtons can be seen in its share price, which was up as much as 10% on Friday following the election. Still, with it trading on a P/E ratio of 20.3, it may struggle to outperform the wider index in future, even though its financial performance looks set to improve following the election.
Bovis
One housing-related company that is worth buying, though, is Bovis (LSE: BVS). It should benefit from the Conservatives’ focus on improving access to mortgages rather than on drastically increasing the number of houses being built. This is good news for Bovis, since it means that there could be less regulation and also that the price of houses remains relatively stable.
Of course, shares in Bovis have risen by 27% in the last year, but despite this they remain very good value at the present time. For example, they trade on a P/E ratio of less than 10 and yield 4% from a dividend that is covered 2.5 times by profit, meaning that it is highly sustainable.
ASOS
Online fashion retailer, ASOS (LSE: ASC), looks set to benefit from a Conservative majority as a result of improved consumer confidence in the UK. Certainly, Labour may have done a great job of managing the economy had they won the election, but there were concerns among the public (as highlighted in the opinion polls regarding who would manage the economy better) that this would not be the case. As such, consumer spending should be given a boost in the short run as UK consumers look ahead to a perceived bright future for the UK economy.
Despite this, ASOS remains very generously valued. For example, it has a P/E ratio of 87 and, even though its bottom line is forecast to rise by 25% next year, even such a strong rate of growth does not appear to justify such a high valuation – especially while its international operations are delivering margins that are not as high as the company had hoped for.