FTSE 100 volatility has made me more interested in buying shares, and that’s why I’m focusing on the investment potential of Diageo plc (LON:DGE) (DGE.L), Rio Tinto plc (LON:RIO) (RIO.L), HSBC Holdings plc (LON:HSBA) (HSBA.L) and J Sainsbury plc (LON:SBRY) (SBRY.L). Could they be worth adding to my portfolio?
Diageo has a business model that is improving at the moment in my view. It is becoming more efficient while also seeking to maintain its strong position within key markets.
The company’s exposure to emerging markets could be a key growth catalyst in future years. Demand for consumer goods is forecast to rise in China, for instance, by around 7% per annum over the medium term. This could prompt a higher EPS growth rate and share price for Diageo.
Sainsbury’s may have exposure to only the UK, where consumer confidence has taken a dive in recent months. However, the company’s acquisition of Argos could lead to a stronger performance than the market is pricing in.
Sainsbury’s has a PE ratio of around 10, and this may underestimate the synergies and cross-selling opportunities that the acquisitions provides.
HSBC’s decision to focus a greater amount of its capital and resources on Asia could be a good move in the long run. Even in the short run it seems to be providing a growth catalyst, with demand for the bank’s services continuing to increase rapidly in the region.
With a dividend yield of over 5%, HSBC appears to be undervalued in my eyes. The company may be less efficient than many of its large-cap peers but could address this through a cost-cutting programme.
Rio Tinto’s balance sheet continues to appeal to me at a time when the prospects for commodity prices are uncertain. I feel that a relatively low level of leverage alongside strong cash flow could mean that the stock offers less risk than some of its peers.
With the prospects for the iron ore price being relatively bright, I feel that Rio Tinto could be a strong performer over the long term.