In this article I’m taking a look at whether Diageo plc (LON:DGE) (DGE.L), IQE plc (LON:IQE) (IQE.L), easyJet plc (LON:EZJ) (EZJ.L) and Royal Dutch Shell Plc (LON:RDSB) (RDSB.L) can deliver high returns. Could they be worth adding to my portfolio today?
Diageo remains one of my top picks in the Footsie. I feel it offers a good mix of defensive characteristics as well as growth potential.
The company has a solid track record of growth, but this could be boosted by its current margin enhancement programme. This could see Diageo become a more efficient business that is more easily able to innovate in future.
Shell’s free cash flow growth potential remains a key draw for me. It could be used to reduce debt or increase dividends; both of which could make the stock more investable.
The oil price continues to offer upside potential in my view. I feel that the supply surplus of recent years may not be present in the current year to the same extent, and gradual rises in demand could lead to improved performance for oil and gas stocks such as Shell.
easyJet has been able to deliver improving financial and operational performance during a difficult period for the airline industry. I feel this shows it may be a more defensive stock than some investors realise and may lead to improving profitability through the business cycle.
With easyJet having purchased Air Berlin, it seems to be in a strong position to deliver further growth in profitability. This could mean it can command a higher valuation further down the line.
IQE’s capital raising last year has put the company in a stronger position in my view. It means that it may be able to generate improving performance through accessing mass-market growth opportunities that were previously unavailable.
Sure, the IQE share price may be volatile. But even after a strong performance in recent years, I do not believe that it is particularly overvalued at the moment.