With reporting season over, and armed with the Value.able mantra, how are you uncovering the very best stocks worthy of your attention?
Lifebuoy soap was once marketed as Floating Above the Rest. Are there any companies post reporting season doing the same?
While many of my peers believe 2012 could be a very difficult year for investors, there are currently a selection of companies that appear to be both high quality and trading at prices offering a rational safety margin compared to our estimates of their intrinsic value.
Each reporting season we present a short-list of companies worthy of careful analysis. This reporting season is no different. As always, the list is not exhaustive. You are free to agree, disagree or append the list. Indeed, I encourage you to do so. For debate often brings A1 ideas.
I decided to look for Large Caps, Mid Caps, Small Caps, Micro Caps and Nano Caps with an A1 or A2 Quality Score across all sectors and industry groups.
I’m also interested in companies for which there are analyst forecasts for at least one year ahead and whose current market price offers a safety margin of more than 10 per cent.
From over 2080 listed companies, 17 meet the criteria.
An attractive and sustainable Return on Equity is also important, so let’s seek out companies whose ROE is greater than 20 per cent in the most recent financial year, have a forecast dividend yield of more than four per cent and whose intrinsic value that is forecast to rise at least six per cent per annum.
Nine companies trading at a discount to intrinsic value that may be worthy of your attention.
Here they are: Seymour Whyte (ASX:SWL), Nick Scali (NCK), Codan (CDA), M2 Telecommunications (MTU), Credit Corp (CCP), Global Construction Services (GCS), Breville Group (BBG), GR Engineering (GNG) and Flight Centre (FLT).
If we were in a bull market, I suspect a stampede to get ‘set’ may ensue, without proper research. With the luxury of a market where the tide may still be going out, you may just have the indulgence of time to conduct plenty of research. Regardless, independent research is essential. As is seeking personal, professional financial advice.
So, what have you been researching? Go ahead and list your “Top 5″. We’ll put together a worthy riposte.
Alternatively, put forward your A1 suggestions and we’ll compile a list of intrinsic valuations and Skaffold® Quality Ratings for the next blog post.
Finally, keep in mind that I cannot predict where the share prices for these companies are headed. They could all halve, or worse. And remember, seek and take personal professional advice.
Posted by Roger Montgomery and his A1 team, fund managers and creators of the next-generation A1 stock market service, 8 September 2011.