The Motley Fool

3 potentially cheap large-cap stocks to beef up your portfolio

Stocks become cheap when companies hit a rough patch and the market moves on to other stocks with better short-term outlooks. Here are three large-cap stocks that are at what may be considered cheap prices.

1)  BHP Billiton Limited (ASX: BHP)

Iron ore prices are sliding down to about $100/tonne and the market seems unsure about what to make of the miner’s direction. However, the company is reducing costs, increasing ore production and is expanding its oil and gas business in the resource rich Eagle Ford shale oil region in the US.

Profit margins could be affected by lower commodity costs, but earnings can still rise with higher sales volumes. Investors have to look at the longer-term as Chinese iron ore demand stabilises.

2)  Suncorp Group Ltd (ASX: SUN)

The insurer and banker is streamlining its business and has also gathered extra capital to handle excess claims from any natural disaster that may arise. Its banking division is improving earnings and higher insurance premiums will bring in more revenue.

The company said that it has more than enough to cover its conservative operating targets and could possibly conduct a capital return to shareholders in the near term.

3)  Santos Limited (ASX: STO)

Different from BHP and Suncorp, Santos isn’t coming off of a weak period, but moving into a much stronger one. The cheap aspect of its share price is that future earnings are going to be much more than they are now.

It’s involved in the GLNG project in Queensland with international energy producers PETRONAS and Total.  The project will produce first LNG around mid-2015 with more production facilities coming online afterwards.

Santos’ earnings are expected to have a step-change up. With strong earnings projected for a number of years afterwards, current share prices may turn out to be cheap in comparison.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.