While the FTSE 100 may be at a record high, I think there could be capital growth potential for GlaxoSmithKline plc (LON:GSK) (GSK.L), Royal Dutch Shell Plc (LON:RDSB) (RDSB.L), Next plc (LON:NXT) (NXT.L), Royal Mail PLC (LON:RMG) (RMG.L) and Berkeley Group Holdings PLC (LON:BKG) (BKG.L).
In the case of GlaxoSmithKline, the company appears to have a sound pipeline which could catalyse its EPS in future. It is now focusing on a smaller number of potential treatments, which could improve on its risk to reward ratio. GlaxoSmithKline has a dividend yield of 5.9%, which suggests to me that it offers good value for money. Therefore, I believe its share price could move 20%+ higher.
Next also seems to be cheap at the moment to my mind. It has a P/E of 10, which is understandable in one sense since the company faces an uncertain future. Negative real wage growth could cause consumers to delay spending and this may lead to reduced sales for the business. However, it has a good track record of outperforming its sector and this makes me optimistic about the Next share price.
Shell has gained 12% in the last 3 months as the price of oil has surpassed $60 per barrel for the first time in 2 years. It still has a 6% dividend yield, and this could suggest it has 20%+ upside potential. The company is due to report higher FCF over the medium term, and this could lead to even higher dividends in my view. Within what I deem to be an appealing sector, Shell is my favourite investment opportunity.
Royal Mail may struggle in the short term. The threat of employee action and a difficult outlook for the UK economy could keep its share price pegged back to some extent. However, with a solid international operation and a dividend yield of 6.3%, it seems to be cheap on a relative basis. Further evidence of this can be seen in Royal Mail’s P/E of 10, which appears to be relatively low in my view.
Berkeley Group is probably one of my top picks in the housebuilding sector. Its focus on prime properties could help it to perform well in the long run, since it may be able to benefit from a weaker pound. Berkeley Group has a P/E of around 11 and a generous dividend. This suggests to me that even though its near term outlook may be uncertain, it could deliver strong share price growth in the long run.