Can these stocks beat the FTSE 100? Aviva plc, Diageo plc, Saga PLC and Taylor Wimpey plc

Do these shares have the potential to outperform the FTSE 100? Aviva plc (LON:AV) (AV.L), Diageo plc (LON:DGE) (DGE.L), Saga PLC (LON:SAGA) (SAGA.L) and Taylor Wimpey plc (LON:TW) (TW.L)

Diageo plc
Diageo plc

The long-term prospects for FTSE 100 shares Aviva plc (LON:AV) (AV.L), Diageo plc (LON:DGE) (DGE.L), Saga PLC (LON:SAGA) (SAGA.L) and Taylor Wimpey plc (LON:TW) (TW.L) could be positive in my view.

Aviva has a P/E ratio of around 8, which suggests to me that it may be undervalued at the moment. It also has a dividend yield of over 6%, which indicates that it could offer income investing appeal.

Although the stock faces a period of uncertainty after the resignation of its CEO, I believe that it has the right strategy to generate improving EPS growth. With a diverse business model, I feel that Aviva could outperform the FTSE 100 in the long run.

Diageo’s financial prospects could improve over future years, with the company seeking to become increasingly efficient. This may enable it to focus on the brands where it has the greatest competitive advantage versus peers.

Although the prospect of a slowdown in China could hold back the Diageo share price in the short run, I’m optimistic about the outlook for emerging markets over the long term. With a variety of strong brands, the stock could deliver relatively high returns in my opinion.

Saga’s refreshed strategy could help it to overcome what remain highly competitive markets. The cost of customer acquisition has increased, and this situation may remain in place over the next couple of years judging by the company’s modest EPS growth forecasts.

With a P/E ratio of around 8.5, I feel that the Saga share price could offer good value for money. A strong position in key markets could help it to deliver improving EPS growth over the long run.

Taylor Wimpey’s financial outlook could be stronger than the stock market is expecting. The company’s update released this week showed that demand has remained stable, and that the company is meeting its financial objectives.

Although consumers may remain cautious during the Brexit process, a lack of supply of new homes could mean that housebuilders enjoy a continued tailwind. Since Help to Buy is expected to remain in place until 2023, I believe that Taylor Wimpey could outperform the FTSE 100 in future years. Its dividend yield of over 10% suggests to me that it may be undervalued at the moment.

About Robert Stephens 5430 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page