3 Hated Shares That Could Bounce Higher

Updated

Data supplied by online stockbroker Selftrade shows that in January, these stocks were three of the most frequently sold.

Although other investors have been selling, I see clear value in all of these shares. I expect that in the coming months, investors that sold in January may experience an unpleasant bout of seller's remorse.

Lloyds Banking Group

Although shares in Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US) are up 6.8% so far this year, they have fallen by a similar amount since the middle of January.

Lloyds was the best performing FTSE 100 share of 2012. It is inevitable that its rise would attract some profit takers.

I believe that the shares could still move significantly higher. Between July 2010 and March 2011, shares in Lloyds traded for over 60p. This was followed by the PPI scandal and Lloyds was forced to set aside billions in compensation.

However, as Lloyds starts to move on from PPI, I expect that the shares could enjoy a significant re-rating.

Royal Bank of Scotland

Shares in Royal Bank of Scotland (LSE: RBS) fell heavily last week. Some analysts moved to downgrade the bank amid fears that the bank would face a heavy fine for its involvement in the LIBOR scandal.

In recent weeks, the sector has been hit by a series of negative stories. In addition to LIBOR fines, there is the likelihood that RBS will have to announce a provision for interest rate swap miselling. Add in some of the noises coming from the government on banking reform and it is easy to see why the shares have lost 10% in the last two weeks.

I think that this misery might be creating an opportunity to buy RBS shares. Sentiment could turn quickly if RBS can post reassuring results on 28 February.

BP

BP (LSE: BP) (NYSE: BP.US) shares have had a great start to the year. Investors now believe that future fines for BP's involvement in the Gulf of Mexico oil spill of 2010 may be less than was previously anticipated.

The expectation is that BP will report a big decline in profits for 2012. Nevertheless, that still leaves the shares on an attractive valuation. Using consensus forecasts for 2013, BP is on a price-to-earnings ratio of 8 and offers a dividend yield of 5.7%.

There is room for that yield to increase even further. Before the Gulf disaster, BP paid an annual dividend totalling $0.57. If the payout can get back to that level, then the shares would yield 7.8%.

Despite the market's rise in 2013, BP is not the only great income opportunity remaining. Analysts here at the Motley Fool have scoured the European large-cap markets to find big dividend payers that could reward an investment. They have prepared a comprehensive, detailed report on what they believe is one of the very best opportunities available today. The report is entirely free and discusses a share that comes with a 5.7% dividend and has 21% of share price upside to target. Just click here to get the report delivered to your inbox and learn more about this share today.

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