I’m always on the lookout for shares that have the capacity to outperform the FTSE 100, which is why I’m focusing on the prospects of Tesco PLC (LON:TSCO) (TSCO.L), Vodafone Group plc (LON:VOD) (VOD.L), National Grid plc (LON:NG) (NG.L), BHP Billiton plc (LON:BLT) (BLT.L) and Persimmon plc (LON:PSN) (PSN.L).
Tesco’s recent update showed that it continues to make progress with its strategy. The company has been able to deliver impressive sales growth in spite of difficult trading conditions. With the potential for margin growth over the medium term as well as synergies from the Booker deal, the stock could post gains in my view. Although competition may be fierce in the supermarket sector, Tesco looks set to post share price growth to my mind.
Vodafone’s dividend yield has the potential to push its share price higher in my opinion. At a time when inflation is moving higher, investors may become more attracted to higher-yielding stocks. With Vodafone also having what appears to be a resilient and stable business model, it could also be viewed as a defensive share. However, with 20% EPS growth forecast this year, it also offers high growth prospects.
National Grid remains one of my top dividend picks at the moment. Its 5% dividend yield is still one of the highest in the FTSE 100. While there may be risks ahead from the prospects of nationalisation and regulatory change, National Grid seems to have a relatively stable business model. It has proven resilient in the past to economic change and this could make it popular as Brexit talks continue this year.
BHP Billiton’s diversity could help to improve its overall risk to reward ratio. The company has a number of operations concerning different commodities. This means that should the price of one commodity fall, it may be offset by firmer performance elsewhere. With BHP Billiton having a relatively low cost base, the company seems to have a competitive advantage which could help it to perform well in the long run.
Persimmon is one of my top picks in the housebuilding sector. The company has been able to significantly improve its balance sheet in recent years, with it now having a strong net cash position. This could help it to perform well through the property cycle. With interest rates set to remain low, stamp duty having been abolished for first-time buyers and the Help to Buy scheme having been extended, Persimmon appears to be enjoying strong trading conditions which could continue over the medium term.