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I’m hoping to have some funds to invest in my Self-Invested personal Pension (SIPP) or Stocks and Shares ISA this month. So I’m building a list of FTSE 100 shares to consider buying when the money hits my account.
The three on my radar have already enjoyed stunning share price gains over the last three months: Babcock International (LSE:BAB), HSBC (LSE:HSBA) and National Grid (LSE:NG.). Each has delivered outperformed the broader FTSE index (+6%) during the past three months. I’m expecting them to keep heading higher.
But what makes them such brilliant potential buys for me?
Sector-beating value
With a 9% gain, Babcock International’s been the best-performing FTSE 100 or FTSE 250 defence stock during the past three months. I’m not surprised it’s attracted a frenzy of buying activity.
Even after these gains, it remains one of the UK defence industry’s greatest bargains. Its forward price-to-earnings (P/E) ratio is 20.7 times.
Compare that with, say, FTSE 100 peers BAE Systems (22.5) and Rolls-Royce (37.9). Additionally, the broader global defence industry carries a forward P/E of 37. Babcock’s low valuation leaves scope for further price gains in my view.
That said, this is a share I’d chiefly buy for its exceptional long-term prospects. Defence budgets are rocketing, and Babcock’s strong partnership with the Ministry of Defence give it significant opportunities for growth.
Be mindful though that supply chain issues remain a threat in the near term.
Another FTSE bargain
HSBC’s also outperformed the broader Footsie over a three-month horizon, rising 12%. And like Babcock, it still offers terrific value for money.
Its forward P/E ratio is 10 times. This makes it cheaper than UK-focused banks like Lloyds (13.1), which — in my opinion — have far inferior growth prospects.
HSBC’s share price also has a price-to-earnings growth (PEG) ratio of 0.9, below the value benchmark of one.
Like any bank, it faces extreme competitive pressures. Yet HSBC’s enormous (and rising) Asian market operation still gives it incredible opportunities to grow profits. I especially like its pivot towards high-value areas like wealth management — growth here is through the roof as regional incomes soar.
To cap things off, HSBC shares also carry a 5.1% prospective dividend yield.
Powering up
Since early September, National Grid shares have soared 13% in value. That’s more than double the FTSE 100 average.
The company’s risen as hopes of sustained interest rate cuts have risen. The threat of rate pressures remain, given stubbornly high inflation which may sap Bank of England appetite for reduction. But the outlook is improving on this front.
I’m considering National Grid shares to capitalise on the accelerating energy transition. The firm will double infrastructure investment to £60bn over the next five years in areas like renewable energy connections. In the nearer term, I like the fact its defensive operations provide protection from current uncertainty in the UK and global economies.
National Grid’s another FTSE 100 share offering great value today. Its PEG ratio is below one for each of the next two financial years (0.5 and 0.7). Its forward dividend yield is also a market-beating 4.2%.
