2016 is off to a horrific start for investors in Prudential (LSE: PRU) with the diversified financial company posting a fall in its share price of 10% since the turn of the year. That’s largely because it’s focused on Asia for growth and with doubts surrounding the Chinese growth outlook being at the forefront of investors’ minds, market sentiment has taken a major hit this week.
A similar event occurred in August 2015 when concerns surrounding China caused the FTSE 100 to drop to below 6,000 points. Prudential’s share price fell by as much as 26% during the month of August due to fears regarding its long-term growth rate. Following that fall it quickly recovered and this time around it has the potential to do the same again.
Clearly, Prudential is somewhat dependent upon a strong Asian economy and with rising wealth and relatively low financial product penetration in the region, Prudential has huge potential to grow its bottom line in the coming years. With its shares trading on a price-to-earnings (P/E) ratio of just 11.5 and having posted five consecutive years of profit growth, it appears to be a highly enticing buy at the present time.
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European exposure – good or bad?
Meanwhile, Vodafone (LSE: VOD) also offers good value and encouraging long-term growth prospects. As with Prudential, it’s focused on a particular region, with Europe being the key growth area for Vodafone following the sale of its stake in Verizon Wireless and its acquisition spree in the single-currency zone.
This high degree of exposure to Europe has arguably held Vodafone back in recent years with its profit growth being rather disappointing. But in 2016 and 2017, it’s forecast to be a major plus for the telecoms company. That’s because Vodafone’s bottom line is expected to rise by 19% in the 2017 financial year and with the company also offering a yield of 5.3%, it appears to offer the perfect mix of growth and income. As such, investor sentiment looks set to pick up and push Vodafone’s share price higher following its 5% gain in the last three months.
Ready for take-off
Also having huge capital gain potential is British Airways owner IAG (LSE: IAG). It’s benefitting from an improving European economy, with the UK economy in particular helping it to return to profitability in recent years. And looking ahead, IAG is expected to post earnings growth of 36% in 2016. For a company with a P/E ratio of just 8, this indicates that further share price gains are very much on the cards following IAG’s rise of 21% in the last six months.
In addition, IAG is due to hike its dividend by almost 50% in 2016. While it currently yields just 2.9%, such a large jump in shareholder payouts indicates that IAG’s management is confident in its prospects, which has the potential to boost investor sentiment. Therefore, with a low oil price set to stay over the medium term and an improving economic outlook being on the cards for 2016 and beyond, buying IAG could prove to be a shrewd long-term move.
