Shares in the FTSE 100 company are down 5% year-to-date against a tough political and economic backdrop in South Africa, but I reckon the stock has been oversold as a major restructuring could help its shares push into higher ground.

Managed separation

The group is going through a “managed separation” which will see it split along its four underlying businesses: asset management, wealth management, insurance and banking. This strategy has the potential to unlock value for shareholders, as the value of its individual business units could be significantly more than the company as a whole.

With its shares trading at just 9.1 times its expected underlying earnings this year, a conglomerate discount seems to explain the valuation gap between itself and sector peers. What’s more, asset realisations allow the group to sell of its more highly-valued asset management business, locking in high prices in order to recycle capital to invest in its core emerging markets business.

Breaking up could bring long-term benefits too, as having standalone units enables each business to focus on what’s best for itself without being troubled about the broader impact on the larger group. The removal of central operational and debt costs is also expected to deliver annualised cost savings of £31m.

Meanwhile, City analysts may previously have been too pessimistic about Old Mutual’s near-term growth prospects as they’ve hastily revised their expectations upwards in recent months. The current consensus analysts’ forecast for underlying earnings per share in 2017 is 21.5p, up from 20.1p a year ago.

Dividend growth

Shares in infrastructure group John Laing Group (LSE: JLG) haven’t fared much better. After the company announced a £25.5m writedown on its long-troubled Greater Manchester Waste project in August, shares in the company have since lost more than 15% of their value.

The writedown was bigger than many analysts had previously expected, meaning the company would expect to earn a much smaller profit from the investment than it had earlier forecast. But although the Manchester project is one of its biggest single investments, representing roughly 8% of its investment portfolio at the end of 2016, it is only one of many.

Taken together, the company said its portfolio was performing “in line with expectations”. As such, the firm’s net asset value (NAV) has continued to trend upwards, with a 2.5% gain in the six months to the end of June, demonstrating its still-attractive outlook for long-term value creation.

Looking ahead, further growth seems likely as the global need for infrastructure is growing fast and governments are increasingly turning to the private sector for investment. Reassuringly, John Laing has a strong pipeline of investment opportunities in place, with commitments to date of £340m, well ahead of its original guidance for 2017 of approximately £200m.

But despite the upbeat outlook, John Laing currently trades at a forward P/E of just 7.6.

The post 2 low P/E stocks I’d buy and hold for the next 10 years appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Further growth potential

Prudential posted record operating profits this week, with full-year pre-tax profits up 7% to £4.3bn. As expected, Asia is the company’s main growth engine. Operating profits there continues to grow at a fast clip, as IFRS profits from Asia gained 28% to £1.6bn last year, thanks to robust new business growth and the weak pound.

These latest results validate the company’s pivot towards Asia. Its delivery of year-on-year double-digit growth in Asia provides evidence of its sound strategy and growth plan. Prudential now earns 35% of its profits there, with the region accounting for more than half of its new business sales.

There’s also further growth potential from Asia’s growing middle class, who are investing more money in life insurance products to secure a comfortable retirement. Insurance penetration remains relatively low in Asia and there is considerable scope for catch-up growth.

Low valuations

Despite the attractive growth outlook, shares in Prudential only trade in line with its slower-growing UK and European peers, with a forward P/E ratio of 12.1 and price-to-embedded value of 1.16x. By contrast, its Asian life insurance peers trade at around 1.8 times embedded value, with an average forward P/E ratio of just over 17.

This makes Prudential shares seems seriously undervalued, as the insurer has consistently generated outsized long-term growth, profitability and cash flow than many of its peers — Prudential’s valuation should take into account of its consistently strong track record.

The market capitalisation for the insurer could potentially be worth £8bn more if its valuation multiples were to converge with its faster growing Asian peers to better reflect its geographical and product mix. That would give us a potential upside of nearly 18%, and value its shares at 2,070p.

Sell-side analysts

And I’m not the only one optimistic on the company. Prudential is favoured by many sell-side analysts — out of the 17 recommendations, 11 are ‘strong buys’, one is a ‘buy’, four are ‘holds’ and only one is a ‘strong sell’. Additionally, City brokers UBS and Morgan Stanley reiterated their ‘buy’ ratings in recent days, and have raised their price targets for Pru’s shares to 2,000p and 2,095p, respectively.

Many analysts also expect Prudential is well-placed to return more cash to shareholders as it is generating robust cash flows and has a strong capital position. The group has already announced a 12% increase in its dividend this week, but more could yet be to come, as its Solvency II coverage ratio improved to 201% — up from 193% last year.

Downside risks

Investing in the Pru is not without its risks though. The group’s recent growth is unbalanced, with the performance of its UK and asset management arm M&G continuing to drag on earnings. There are also growing concerns that a clampdown on capital outflows by Chinese regulators could hurt sales this year.

But, looking forward, I expect any slowdown to be mild and temporary and continue to expect the company to deliver steady earnings and dividend growth over the next few years.

The post How Prudential plc could be worth £8bn more appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Struggling bank?

Royal Bank of Scotland (LSE: RBS) had a tough time in the latest European banking stress tests, which suggested its capital buffer could almost halve in the event of a severe economic downturn. That’s likely to delay the bank’s resumption of dividends, which is already not expected before the end of 2017 (and then, only a 1% yield is forecast). The test only had a modest effect on the share price, which is down just 2.6% today at 184p — and it seems to have stabilised at around 25% down on its pre-referendum level.

Eyes will now be turned towards first-half results due on 5 August, and to any comments on the bank’s dividend plans and its full-year outlook. Analysts currently have a 60% drop in EPS pencilled-in for this year, but they’re expecting a 50% recovery next year — though the earnings consensus has deteriorated significantly in the last month.

RBS might surprise us, but I’m not expecting to see any good reason to buy the shares. We’re looking at a forward P/E of 17, dropping to a bit over 11 next year, and that doesn’t look like bargain territory to me.

Insurance bargain

Legal & General (LSE: LGEN) is a depressed share that I much prefer the look of after the insurance sector was sent plunging along with the banks in the wake of the Brexit decision. The shares plummeted after the vote, though the firm’s quick assurance that its planing was based on a 50-50 Brexit probability has helped secure a bit of a recovery — at 206p today, Legal & General shares are down 13% since the referendum.

We’re now looking at a forward P/E of 10 for this year, dropping to 9.6% for 2017 based on analysts’ forecasts — and those forecasts have remained upbeat in the past month. Dividend predictions suggest yields of 7% and 7.4% for the two years, with cover by earnings looking adequate at this stage — though if necessary, there’s room for a capital-preserving cut while still leaving yields at attractive levels.

First-half results should be with us on 9 August, when we should hopefully get some considered thoughts on the insurer’s likely post-Brexit position.

Oily troubles

On 18 August we’re due first-half results from Premier Oil (LSE: PMO), after July’s operations update told us that full-year production is expected to be “at or above the upper end of earlier guidance” of 65,000-70,000 barrels of oil equivalent per day. The integration of the firm’s acquired E.ON UK assets has completed, so some guidance as to the effect on the bottom line will be welcomed too.

But perhaps the most pressing issue is the state of Premier Oil’s finances, with net debt having stood at a pretty massive $2.24bn at the end of December 2015. The most recent update on the firm’s ongoing discussions with major lenders, on 1 August, told us that a further one-month delay in its financial covenant test has been agreed while debt arrangement discussions continue. It’s the second time in two months that the test has been delayed a month, presumably in the hope of getting a new debt package in place first.

A good investment? It’s risky, but I’m happy to hold.

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Top insurer?

The insurance sector has been hit along with the banks, as people have fled en masse from anything vaguely financial. As a result, we’ve seen shares in Aviva (LSE: AV) lose 14% since 23 June, to 382p today. That price fall has left Aviva shares valued at just 8.3 times forecast earnings for 2016, with EPS expected to double. And after a more modest predicted earnings rise in 2017, the P/E multiple would drop to just 7.7.

But that’s fair for a company expected to be devastated by the UK’s withdrawal from the EU, right? Well, Aviva was one of the very first to update us on its outlook immediately after the vote, saying “Aviva has conducted extensive analysis of the possible implications of a vote to leave the EU and considers it will have no significant operational impact on the company“!

With Aviva’s turnaround progress of the past few years bearing fruit, cash flow improving, and with the firm saying it has “one of the strongest and most resilient balance sheets in the UK insurance sector,” those dividend yields of 6.1% this year and 6.9% next look very attractive to me. I’d be buying if I didn’t already have some.

Housing crunch

The share price falls for housebuilders seem a little more justified, as weaker European investment in the UK property market, especially in the commercial sector, is likely to soften overall demand and perhaps weaken profits. As a result, Persimmon (LSE: PSN) shares are down 25% since the referendum, to 1,596p, although over five years they’re still up 237% and have been paying handsome dividends.

Persimmon’s business is in domestic housebuilding, and the strong demand and chronic supply shortage isn’t going to disappear any time soon. Sure, house price growth slowed and new buyer enquiries fell in the month before the vote, but that kind of uncertainty ahead of such a momentous event isn’t at all surprising.

And Persimmon’s latest update was positive, the forward P/E has dropped as low as 8.5, and there are 7% dividend yields on the cards. Looks good to me.

Airline casualty

Budget airlines could certainly suffer if we lose our access to the EU’s open skies, and the 26% price fall for easyJet (LSE: EZJ) shares as a result is perhaps not so surprising. But after June’s passenger statistics showed yet another rise over the previous year, is the fall overdone?

Although the weakening pound will surely hit the number of passengers heading from the UK to European destinations, it should do the opposite for people flying in the other direction, and with slightly more than half its business done in Europe, easyJet should at least not suffer on that score.

The fall has sent the shares’ P/E as low as 8.8 for this year and 8.1 next, and with dividend yields of 5.3% and 5.8% penciled-in, I see the fall as overkill and I rate easyJet shares as cheap now.

The post Should you buy Aviva plc, Persimmon plc and easyJet plc while they’re still cheap? appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Aviva. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Cash from insurance

Standard Life (LSE: SL) shares had endured a rough 12 months before picking up a bit, but immediately fell back when the referendum result was known. At 299p, the shares are down 13% since the day of the vote — and the price is now only 11 times forecast earnings for this year, dropping to 10 times based on 2017 predictions.

Standard Life’s punishment is understandable, as the company has been reshaping itself into more of an investment manager, and downturns in the investment climate should be expected to knock it back a bit.

But we’re looking at forecasts for a near doubling of earnings this year, which leaves room for a modest downgrade while still looking good. And the jewel in the crown is its dividend, with a yield of 6.6% on the cards for this year, rising to 7.1% next. Cover by earnings could be better, but I see Standard Life as a tempting income target now.

Housing crash

The crunch that’s hit housebuilders is worse than I’d have expected in the circumstances, and we’re looking at a 29% fall in Taylor Wimpey (LSE: TW) shares, to 136p. Now, that fall isn’t entirely irrational, as anything that puts a dent in foreign investment in UK property (particularly in London) is going to hurt — and on top of that, there’s always been a cyclical nature to the sector, which has been on a bull run for a few years now.

It’s also arguable that today’s low P/E valuation, which values Taylor Wimpey shares at just 7.8 times forecast earnings, is justified on the grounds that the sector’s strong rise surely has to stop some time. I’m just not seeing it.

The dividend predicted for this year would yield a massive 8%, and it would be reasonably well-covered by earnings. Even if property prices themselves should fall, housebuilders should still enjoy decent margins as their land-replenishment costs should fall too — and we’re still faced with a significant housing shortage, which leaving the EU isn’t going to stop.

Which bank?

Then we come to the bank that everyone loves to hate, HSBC Holdings (LSE: HSBA). HSBC has been a pariah among its peers in recent years, as its focus on China and the Asian region has left it exposed to the slowdown that’s happening there. In a little over three years, HSBC shares have fallen by 41% to today’s 470p.

But now, suddenly, it’s exposure to the UK and Europe that everyone is shunning, and HSBC is being seen through more appreciative eyes. Though the shares did fall in the days after the referendum, they’ve recovered and are actually 3.5% up since the fateful day.

Part of the attraction is HSBC’s dividends which, if they come in according to forecasts, would provide a yield of 7.1% this year. Granted, cover wouldn’t be great, but if HSBC is past its worst then we could be looking at a solid long-term income provider — after all, even through its shaky period of the last few years, HSBC has kept on handing over the cash.

The post Are dividends from Standard Life plc (6.6%), Taylor Wimpey plc (8%) and HSBC Holdings plc (7.1%) now simply unmissable? appeared first on The Twelfth Magpie.

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Joseph Dickerson of Jefferies has suggested that Barclays’ “exposure to investment banking and corporate banking” present it with the greatest risk of the sector, while Bernstein Research believes that banking fees could fall by more than 30%, going so far as to suggest that if we leave the EU Barclays might even need to raise more capital. Bearish predictions suggest we could see as much as a 40% fall in Barclays shares, with Lloyds Banking Group and Royal Bank of Scotland shares dropping by 35% and 25% respectively.

It’s easy to see what the markets think too, as Barclays shares have pretty much followed the Brexit polls — When the ‘leave’ campaign looked like it was gaining the upper hand, the shares dropped to 158p, but now the momentum has turned the other way in recent days, they’re back up to 181p.

Insurance down the pan too?

Something almost identical has happened to Aviva (LSE: AV) too, with Aviva shares falling to 396p last Thursday, a week before the referendum, after the polls reported a surge in favour of leaving. And again, they’re back up again since the ‘remain’ camp has been staging a comeback — Aviva shares are at 440p as I write.

Although the banks are often held up as the companies most likely to suffer if London’s financial firms lose their unfettered access to the EU single market, insurance companies would almost certainly face the same difficulties — especially ones like Aviva, which does around half of its business in the EU.

Writing in the Evening Standard back in April, Aviva boss Mark Wilson came out in favour of staying in the EU, addressing possibly the most important issue in the process, negotiating new trade agreements:

“How long would that take? Seven years? That would be typical. A decade? Do we really want a decade of uncertainty? Because uncertainty is kryptonite to business“.

Those are words to heed.

Consumer products need free markets

Then we come to consumer goods giant Reckitt Benckiser (LSE: RB), which garnered only about 8% of its 2015 turnover here in the UK. EU trading is massive business for Reckitt, and its major US segment is also brokered via EU trade agreements. Should we leave the EU, Reckitt Benckiser would be in the same boat as Unilever, whose bosses have written to employees to tell them that “Unilever in the UK […] would be negatively impacted if the UK were to leave the European Union“.

What do we see if we look at Reckitt Benckiser shares? The same pattern again — with the shares sliding to 6,595p when the Brexiteers looked like they had the upper hand, recovering to 6,791p as the ‘remainers’ have come back.

Whichever shares you look at, it seems clear that the institutional investors don’t want to have to face that Brexit kryptonite, and it seems obvious to me that shares will fall sharply  were we to vote ‘leave’. In fact, only today, UBS has warned that we could see a 20% fall in the FTSE 100 within days of a ‘leave’ vote, which would knock a staggering £350bn off the value of shares.

The post Brexit could seriously harm Barclays plc, Aviva plc & Reckitt Benckiser Group plc appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Aviva and Lloyds Banking Group. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Barclays and Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Undervalued insurance

The insurance sector still seems to be inexplicably in the dumps after the financial crisis, and I reckon there are plenty of bargains to be had. Aviva (LSE: AV) remains my favourite, even though the share price has stubbornly stagnated since I bought some — despite a recent rally, it’s still down 13% over the past 12 months, at 450p.

And that’s a year in which the company has seen its restructuring strategy coming to fruition. At results time in March, chief executive Mark Wilson said that

“With a Solvency II ratio of 180% and a surplus of £9.7 billion, our balance sheet is one of the strongest and most resilient in the UK market. Over the last four years, we have tripled our economic capital surplus“.

Forecasts suggest a doubling in EPS this year to put the shares on a P/E of under 10, dropping to under nine on 2017 forecasts, and dividend yields of 5.4% and 6.1% are expected for this year and next. I think Aviva could double your money (and mine) in two or three years — providing we don’t leave the EU and plunge into a fresh economic crisis.

A great track record

One approach is to examine our past growth stars and look for ones that are likely to continue, and I think the obvious one is ARM Holdings (LSE: ARM). The designer of the chips that power iPhones and all manner of other devices has seen its shares soar by a stunning 1,025% since the end of 2008, as smartphone mania has taken hold.

For years I’ve been saying that the mobile computing revolution is still in its infancy, and that’s still true today — I doubt we’re seeing even 5% of the processor usage that we’ll have in another 10 years. There’s no guarantee that ARM will still dominate, of course, but while demand for its designs is still climbing and analysts are still forecasting double-digit rises in annual earnings, I can see a lot more share price growth to come.

Oh, and the stagnation of the past couple of years has put ARM shares, at 977p, on a P/E of 25 based on 2017 forecasts — their cheapest for a good few years.

Mining recovery?

Could a recovery in the downtrodden mining sector do the trick for you? It might surprise you to see that I’m considering Anglo American (LSE: AAL) as a candidate for doubling. The South Africa based miner has, after all, suffered from its own internal problems, in addition to the slump in metal and mineral prices, and as a result the share price has lost 80% since the end of 2010.

But since this year’s low on 20 January, we’ve seen a 180% rise to 636p, nearly trebling your money if you managed to get in at the right time. Can it continue?

Well, the prices of some of Anglo’s products have been recovering nicely of late, and analysts are predicting a bottoming in the firm’s declining earnings this year — there’s a 37% EPS rise forecast for 2017, which would put the shares on a P/E of 15.5.

Sustained rises will probably still be needed to keep Anglo’s shares rising, but I can’t help feeling we’ll be looking back at early 2016 as the moment of maximum pessimism and the perfect time to buy.

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Alan Oscroft owns shares of Aviva. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Doing the right thing

Barclays (LSE: BARC) surprised many by slashing its dividend by more than 50%, and it’s set to yield only around 2% this year and next with the shares priced at 174p. But after a bit more thought, it seems like just the right thing to do — with new boss Jes Staley having just taken over, he can sweep much cleaner with his new broom than an incumbent could.

Barclays has now reduced its liquidity risk to pretty much zero, I’d say, and with its aim of getting cash rewards back on track as soon as possible, I can see a glowing future for income investors with Barclays.

In the meantime, while the 9% EPS drop expected this year would put Barclays shares on a P/E of only a little over 11, the 49% recovery pencilled in for 2017 would drop that to just 7.5 — only around half the long-term FTSE 100 average. To me that says the shares are undervalued by around 50% right now, so what might it take for a doubling? I reckon any results that suggest those 2017 forecasts might be on the money could trigger an upwards re-rating.

Dirt cheap insurance

Old Mutual (LSE: OML) has been plodding along nicely, paying out almost half of its earnings per share in dividends, and provided shareholders with a 5% yield in 2015. Forecasts suggest the dividend will drop a little to 4.5% this year before perking back up to 5% next as EPS looks set to yo-yo slightly.

But despite the company’s decent performance, Old Mutual shares have gained only 13% over the past five years (albeit with a further 25% from dividends). That leaves the shares on a forward P/E for this year of only 9.5, dropping to 8.7 based on 2017 forecasts. Old Mutual’s home in South Africa and its exposure to emerging markets have no doubt exacerbated the share price fall, but I see the fear as greatly overdone.

I don’t think Old Mutual shares are on quite a 50% undervaluation right now, but we might only need a modest improvement in the world’s economic outlook for a price hike — and I can see a doubling within the next few years as a realistic hope.

More from housing?

Am I really suggesting a share that has gained 380% in the past four years is set for another doubling? The recovery in housebuilder shares boosted the sector magnificently, but since September last year it’s gone off the boil, and Barratt Developments (LSE: BDEV) is down 16% to 561p. That puts Barratt shares on a P/E of only around 9 based on forecasts for the year to June 2017 — and that’s with the company’s cash-return plans predicted to provide a total yield of 6.7% that year.

Fear of a slowdown, or even a downturn, in house prices has tempered investors’ appetite for Barratt, but it looks seriously overdone to me. Barratt spent a lot of its cash during the slump buying up land at knock-down prices and is set very nicely for profitable trading for a good few years no matter what happens to property prices.

If Barratt shares doubled again in another five years, I wouldn’t be at all surprised.

The post Which will double the quickest, Barclays plc, Old Mutual plc or Barratt Developments plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

When you see a company that was struggling and had to cut its over-stretched dividend, but then went on to turn itself around and strengthen its balance sheet in impressive fashion, while building its dividends up again to yield 4% last year, you might think investors would be keen to buy the shares.

Well, that’s what insurer Aviva (LSE: AV) has been through. But no, its shares have fallen 20% over the past 12 months, to 424p, and are now on a forward P/E of just nine based on forecasts for 2016, dropping to only around 8.3 should 2017 forecasts prove accurate. And that dividend? There’s a further recovery on the cards this year, with the City’s analysts suggesting a yield of 5.6% and growing to 6.3% on 2017 forecasts.

What might convince the sceptics and get Aviva shares heading back upwards? I think it’s going to take an actual sustained earnings recovery rather than just forecasts, but if interim results due in August show that a forecast doubling of EPS is realistic, that’s when we might see some movement.

Very cheap bank

Barclays (LSE: BARC) shares took a tumble when the bank announced it was to slash its 2016 dividend by more than half, and at 165p they’re down 36% over 12 months. Many saw the move as an unexpected disaster, but the timing makes it seem anything but to me. New boss Jes Staley has been in charge only since December, and that makes it much easier for him to take more drastic action than an incumbent boss and not be seen as the bad guy… it’s other people’s mistakes he’s fixing, not his own.

Dividends are only going to provide yields of around 2% this year and next (and if Barclays shares should recover any of their lost ground during that time, the yield would drop even lower). At a time when other banks, like Lloyds Banking Group, are ramping up their dividends, a lot of income investors will have deserted Barclays.

But that’s put Barclays shares on a P/E of 7.3 based on 2017 forecasts, and that seems almost criminally cheap to me. Those who buy now could do very nicely over the next few years, although it might take a restart to the firm’s dividend rises to get investors back on board.

Oil recovery

Finally, if now isn’t the time to buy BP (LSE: BP) shares, I don’t know when will be. The price of oil is slowly coming back, and at $48 a barrel as I write it’s closing in on the $50 level and is more then 50% up from its low point in January. But BP shares have gained only 4% so far in 2016, to 367p, and are down 21% over 12 months.

BP has said all along that it expected cheap oil to last several years, and has made it clear that it really isn’t too worried about it. The company is in a sound enough financial shape without the debt problems that some smaller firms face, and has made a point of maintaining its dividend — we’re expecting a 7.4% yield this year!

What would set BP shares back on an upward path? Simple, I think, just a rising oil price. How long it takes is still anybody’s guess, but every dollar over 50 could gear up nicely for the future of BP shares.

The post Are Aviva plc, Barclays plc and BP plc the FTSE 100’s biggest bargains right now? appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Aviva and Lloyds Banking Group. The Motley Fool UK has recommended Barclays and BP. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

I’d say a solid FTSE 100 growth share should definitely be among your candidates, and they don’t get much more solid than ARM Holdings (LSE: ARM). ARM’s chip designs power iPhones and all manner of other mobile computing devices, and sales have been rocketing for years — there were 4bn ARM-designed chips shipped in Q4 2015 alone!

That’s led to an explosive growth in the ARM share price, which has more than six-bagged in the past 10 years. Do you think maybe the growth might be over now? I don’t.

ARM shares have actually fallen by 22%, to 931p, over the past 12 months, and that’s put them on a forward P/E of just 27, falling to 24 on 2017 forecasts — and that’s the cheapest ARM shares have been for years.

Bearing in mind that the growth of mobile computing is still in its infancy, and that ARM has a progressive dividend policy that easily outstrips inflation, 2016 could be a great year to add ARM to your ISA portfolio.

Safety too

Then as a contrast, how about something super safe like insurer Prudential (LSE: PRU)? Prudential is well named, as its management style has always put security first — when other insurers were having to cut their dividends to help strengthen their balance sheets during the financial crisis, Prudential didn’t even blink as it never came close to overstretching itself.

Prudential has been paying pretty average dividends of around 3%, but they’re typically covered around 2.5 to 3 times by earnings per share, and the company’s progressive dividend policy has seen them regularly lifted ahead of inflation.

So you’ll almost certainly get dividends every year that easily beat interest from a cash ISA, but there’s a very attractive addition to that — over the past five years, Prudential shares have risen by 87%, while the FTSE 100 has struggled just to keep its head above zero.

The Pru’s share price has actually fallen back along with the market over the past year, to 1,443p, and a 12% fall has put them on a forward P/E of 11.5. I think that’s a steal.

Recovery?

A long-term ISA will surely benefit from exposure to the mining sector, as metals and minerals are never going to go out of fashion for long. What better time than at what could well be the bottom of the recent downward slide in commodities prices, and what better company to go for than Rio Tinto (LSE: RIO)?

Rio Tinto shares are down 45% over five years, after hefty falls in earnings on the back of sliding prices for iron, copper, aluminium and all the rest of the precious dirt it unearths. But since the start of 2016, iron is up again, copper is recovering, oil and precious metals are picking up… and Rio Tinto shares have put on 52% since 20 January, to 2,331p.

In the meantime, Rio Tinto has tightened up its costs and capital expenditure, and looks like a significantly leaner and more efficient company going into the next five years.

The post 3 Great Shares For A New ISA: Prudential plc, ARM Holdings plc And Rio Tinto plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.