4 Blue Chips to Lead UK Stocks Higher


If re-rated by the market, these cheap blue chips will have a dramatic impact on the FTSE-100, writes David O'Hara of The Motley Fool UK.

The FTSE-100 is a market cap-weighted index. This means that the price changes of large companies such as Vodafone (London: VOD) and Royal Dutch Shell (London: RDS.B) have a bigger effect than smaller blue chips such as G4S or Pennon.

In the coming year, this could have a huge impact on the blue-chip index. That's because, in my opinion, four of the FTSE-100's five largest companies are very cheap right now. Apart from the depths of bear markets, I cannot recall a time when so many of the UK's largest companies have all been so attractively priced at the same time.

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1. Royal Dutch Shell
Shares in Shell currently trade within a few percent of their low for the year. In the last 12 months, shares in Shell have fallen 7.5%. That's almost a mirror of the FTSE-100's performance: the FTSE has increased 7.2% in the same period.

Although Shell's share price has disappointed, its yield is far higher than average.