Here's Why I'd Sell Vodafone Group plc And Buy NEXT plc And BP plc

I used to be a fan of Vodafone (VOD), as it always looked like the mobile telecoms company most likely to get Europe connected up to fast wireless broadband. And when it sold off its stake in Verizon Wireless to Verizon Communications in 2013 for £1.04bn, it seemed it had the cash to do it.

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In fact, I added Vodafone to the Fool's Beginners Portfolio back in 2012, as it looked good value, but after the Verizon disposal and rumours of a takeover bid by AT&T, the shares have been trading at what I see as takeover levels -- which is too high for current fundamentals, in my view. I dumped Vodafone in December 2013, and I still think that was the right decision.

With the shares at 219p, we're still looking at a P/E of over 45 based on expectations for the year to March 2016, and that would only drop to 28.5 by 2018 after two years of forecast earnings growth -- still around twice the FTSE average. Predicted dividends of more than 5% wouldn't be anywhere near covered by earnings even then. I still think Vodafone will return to winning ways, but right now I see the shares as too expensive and I don't want any.

High street champion

Next(LSE: NXT), on the other hand, has been a favourite of mine for some time, and it remains so despite the company's warning that "2016 will be a challenging year with much uncertainty in the global economy". That came with full-year results this morning, and helped send the share price down 14% to 5,725p at the time of writing.

But Next is still raking in the cash in by the bucket load, and in the year to January 2016 the firm returned £568m to shareholders through dividends (ordinary plus special) and £151m through share buybacks. The 388p in dividends per share paid for the year (158p ordinary, 230p special) represents a total yield of 6.8%.

I'm normally very wary of fashion retailers, but Next has such a strong reputation for its buying expertise, and it sells decent clothing at decent prices, rather than riskier top-label clobber to the fickle end of the market. That, coupled with a likely P/E of around the FTSE average even if 2016 is a bit tough, and those better-than-6% dividends, makes Next a 'buy' for me.

Fill up with oil

And BP(LSE: BP), well, I don't see how it can possibly not be a strong 'buy' today, with the shares down 32% from their June 2014 peak to 350p. The fall is entirely due to the slump in oil prices, but the timescale of it has not taken BP by surprise -- chief executive Bob Dudley reckoned some time ago that we could be in a cheap oil spell for two or three years or more, but was happy that BP could ride it out just fine.

The price of a barrel has been hovering around $40 for a couple of weeks now, up from $30 levels in February, and if that trend continues then BP shares could be heading upwards sooner then expected. But even if it still takes a while longer, BP shares are still on a modest P/E of under 13 based on 2017 forecasts.

On top of that, there are dividend yields of 7.7% forecast for this year and next -- and BP reiterated its "commitment to sustaining our dividend and then growing free cash flow and shareholder distributions over the long term" at full-year results time earlier this month. I don't see why you wouldn't want some of that.

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Alan Oscroft 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.