I believe that BAE Systems (LSE: BA) is a great selection for novice investors to begin building their shares portfolios.
The defence sector’s big player has long been a reliable deliverer of bumper shareholder gains. History has taught us that mankind’s desire to wage war is timeless. And while earnings at BAE Systems have been volatile of late thanks to lumpy contract timings, mended Western arms budgets and striding emerging market budgets should put paid to these problems looking ahead.
The City certainly shares this view, and BAE Systems is expected to experience steady bottom-line growth through to the end of next year at least. Indeed, expansion of 9% and 6% is chalked in for 2017 and 2018 respectively.
And these projections make BAE Systems a great value bet, in my opinion, with P/E ratios of 14.4 times for this year and 13.6 times for 2018 coming in below the FTSE 100 forward average of 15 times.
BAE Systems provides a chunky dividend too, its progressive payout programme yielding 3.6% for 2017 and 3.7% for the following period.
Phone in a fortune
But BAE Systems isn’t the only splendid all-rounder for investors to choose from, with telecoms Goliath Vodafone (LSE: VOD) also on course to deliver spectacular earnings and dividend growth.
Improving economic conditions, not to mention the impact of huge organic investment in 3G and 4G in recent years, is helping to power revenues in Europe higher again following years of top-line difficulties.
And Vodafone is enjoying exceptional success in emerging territories too, with rising wealth levels powering demand for Vodafone’s services. Vodafone added 7.2m customers to its books across Africa, Asia and the Middle East during April-September alone, helping revenues in this regions surge 7.4% from a year earlier.
Vodafone’s brilliant geographic reach makes it one of the greatest growth stocks out there, in my opinion, a point underlined by current broker projections. The number crunchers expect earnings expansion of 15% in the period to March 2017 to speed up to 24% in the following period, driving a P/E ratio of 36.3 times to a much-better 29.3 times.
And Vodafone is also a hit for income chasers, the firm sporting a yield of 5.9% through to the close of fiscal 2018.
Manufacturing marvel
With aeroplane and automobile build rates expected to explode in the years ahead, I believe diversified engineer GKN (LSE: GKN) is also poised to provide splendid investment returns.
While GKN has noted some slowdown in its core markets of late, the Redditch firm is able to ride out the worst of these problems through its position as a top-tier supplier to the world’s OEMs, not to mention its expertise in robust niche markets like the premium car segment.
As a consequence GKN is predicted to keep earnings rising with a 13% bounce in 2017, resulting in a bargain-basement P/E ratio of 10.4 times. And predictions of a further 5% rise next year drive the multiple to a mere 10 times. I reckon these readings represent a steal for a stock of GKN’s obvious quality.