Your ISA allowance will expire within hours. If you’re looking to invest tax-efficiently in a stocks and shares ISA, here are three FTSE 100 companies I would buy today.
Barclays
Barclays (LSE: BARC) (NYSE: BCS.US) is 25% cheaper than it was at the start of this year. If you’ve been looking for a buying opportunity, this is probably it. Barclays hasn’t been this cheap for more than 18 months.
There is a good reason it has fallen. Investors were aggravated by the recent 32% drop in underlying profits to £5.2 billion, while activists were insulted by chief executive Antony Jenkins’ decision to hike the investment banker bonus pot by 10% to £2.4 billion regardless, while announcing plans to lay off 12,000 lower paid staff.
With earnings per share expected to grow a whopping 67% this year, Barclays is forecast to trade at a tempting 8.8 times earnings by December. The yield is rising too. The share price is up 6% in the week since I tipped it. You don’t want to hang around much longer, or this opportunity could evaporate.
Rolls-Royce Holdings
After 10 years of smooth returns, Rolls-Royce Holdings (LSE: RR) (NASDAQOTH: RYCEY.US) recently issued its first profits warning in 10 years. Investors were shocked to discover there would be no growth in sales or profits this year, and the stock crashed 14% on the day. The City hates nasty surprises, and chief executive John Rishton was condemned for his failure to issue due warning.
Rolls-Royce has since slipped into gear, cheering investors by winning a contract with All Nippon Airways (ANA) to supply Trent 1,000 engines to power 25 Boeing 787 Dreamliner aircraft. It followed this by securing a $50 million one-year contract to support the US Marines Corps fleet of KC-130J air-to-air refuelling tankers.
I suspect recent problems were just a bump in the road, and Rolls-Royce will continue to power ahead. Over the last five years, it has returned 230%. This could be a rare chance to buy a great British company at a reduced price, but only if you’re fast. The share price is already up 6% in the last month, recovering almost half its lost gains.
Royal Dutch Shell
Investors in Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) have grown accustomed to false starts, but I still have faith that it can reverse its recent underperformance.
New chief executive Ben van Beurden has been showing his mettle with his plans to cut investment to boost financial performance and capital efficiency, and has been rewarded by a string of broker upgrades and outperform ratings.
The share price is also revving up, rising 10% in the last six months. Yet the valuation remains affordable, trading at a forecast 11.8 times earnings for December. Better still, there’s the yield, currently 4.6%. That is three times as much as you can get on a best-buy cash ISA.
Royal Dutch Shell is expected to post a 30% rise in earnings per share this calendar year. Fill up your tank now, before its share price accelerates further.
