LONDON -- As the FTSE 100 is up over 5% so far this year, I wondered which companies investors have been loading up on. I contacted online stockbroker Selftrade, who supplied a list of the 10 blue-chip companies that have been subject of the most buy trades since the New Year.
| Company | Price (pence) | P/E (2013, forecast) | Yield (%, 2013 forecast) | Market cap (millions of pounds) |
|---|---|---|---|---|
| Lloyds Banking (LLOY -0.16%) | 52 | 13.9 | 0.4 | 37,470 |
| Vodafone (VOD 0.93%) | 165 | 10.5 | 6.1 | 79,800 |
| Barclays (BARC 1.01%) | 295 | 7.9 | 2.4 | 36,400 |
| BG Group | 1149 | 12.6 | 1.6 | 38,080 |
| BP (BP 0.49%) | 464 | 7.7 | 5.8 | 87,460 |
| Aviva (AV 0.55%) | 370 | 7.8 | 6.6 | 10,940 |
| GlaxoSmithKline | 1419 | 11.9 | 5.5 | 69,240 |
| Royal Bank Of Scotland | 359 | 13.3 | 0.0 | 41,590 |
| Legal & General | 150.5 | 10.0 | 5.4 | 8,970 |
| Sainsbury (J) | 328 | 11.1 | 5.1 | 6,200 |
I thought that five of these looked particularly interesting.
Lloyds Banking Group (Lloyds)
Apparently, the New Year is the time when shoppers look to tighten their belts and rein in spending. It may come as a surprise, therefore, to learn that the best-performing blue chip of 2012 has been the most sought-after share of 2013.
Clearly, it is not just Selftrade's customers that have been buying Lloyds. Shares in the bank have risen 8.5% so far this year. It would be very unusual for a blue-chip share like Lloyds to rise that much without new managed fund buying.
Lloyds' rally has run out of steam in recent weeks. However, I think there is potential for further rises when investors digest Lloyds' next results.
Vodafone
Shares in blue-chip titan Vodafone are up 6% in 2013. That's a significant rise. The shares fell 15% in a miserable 2012.
The shares jumped earlier in the month following media reports that raised the prospect of Vodafone receiving a bid for its U.S. operations, Verizon Wireless.
Vodafone is one of the FTSE 100's dividend titans. In 2012, the company paid out more in dividends than any other FTSE 100 member. The chunky dividend yield is my main reason for owning the shares. This year, I expect the company to pay out dividends totalling 9.81 pence -- that equates to a yield of 6.1%. I fully expect the dividend to increase next year.
Vodafone is currently in the middle of a 1.5 billion-pound share buyback. This could lead to a short-term spike in the company's share price.
Barclays
Barclays shares are nearly double the price they were when former CEO Bob Diamond departed in 2012. Though the rise has been huge, I think that further increases could be in store.
That's because on today's share price, Barclays is still vastly undervalued in comparison with the average FTSE 100 share. Today, Barclays shares trade on a 2013 price-to-earnings (P/E) ratio of just 7.9. The average for a U.K. blue chip is 16.4. The income from Barclays stock is less: 2.4% versus the market's average 3.3%.
Barclays' miserable rating might make sense if profits were sinking. Yet the 2013 earnings per share (EPS) forecast is 5% ahead of what the bank is expected to report for 2012.
Provided the eurozone can stay on track, I see substantial upside from the shares in 2013 alone.
BP
With each passing week, the Gulf of Mexico disaster fades a little bit more in investors' memories. BP shares jumped at the start of the year following a settlement between disaster rig partner Transocean and U.S. authorities. BP investors cheered this news as it raises the possibility that BP's share of any further punishments may be less.
Despite the rise, the shares still look cheap. BP is expected to increase its dividend 35% on last year's payout. Another 12% is forecast for 2013. This puts the shares on a 2013 yield of 5.8%.
I expect that by 2014, most of the speculation around the shares will focus on BP's new Russian partnership with state energy company Rosneft.
Aviva
Aviva is a well-known company with a big dividend yield. Provided that remains so, it will always have a big following among the customers of a stockbroker like Selftrade.
The more discerning among these will be analysing the likelihood of Aviva maintaining (and increasing) its dividend. Analysts currently expect that Aviva will announce earnings per share for 2012 of 48.4 pence. It looks likely that the dividend for the whole year will be 26.0 pence, the same as in the previous year.
Worryingly, Aviva's interest costs are more than its annual dividend payments. For 2011, the company paid out 506 million pounds of dividends and 708 million pounds on debt interest. Aviva's new chief executive has been in the role since the New Year. Of all the yields in the FTSE 100, it is Aviva's that concerns me most.
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