Three stocks on special
Whether it's wine, cars or overseas trips, everyone likes a bargain. Only in the sharemarket are rising prices seen as a good thing, a sign that it's time to buy.
We think that's rubbish. If you want to be a successful investor you need to hunt for bargains in the sharemarket much as you do in the supermarket. And right now, the volatility and panic is creating lots of stocks on special. Here are just three.
Whilst low interest rates have seen investors rushing for juicy yields, ASX has been 'ever the bridesmaid'. Just look at the figures. In the past five years, CBA has risen 53%, Telstra has gained 91% and Sydney Airport has soared 106%. ASX, meanwhile, has ticked up just 4%.
Investors are brushing it off due to the threat of competition in equities trading from Chi-X and potentially in clearing, too. But there were few signs of any genuine risk to ASX's business. In fact, this is a powerful monopoly enjoying its market dominance, which is why ASX is one of our four top income stocks.
South32 is a different kettle of fish. Not only was it granted the smallest, least valuable bits of the BHP empire, its share price has more than halved since it first listed at $2.13 in May 2015.
You don't need to be bullish about commodities or mining to find this stock attractive. Industry profitability is clearly declining and will be doing so for years, but universal neglect is creating bargains.
South32 has a fine balance sheet, strong cash flows, promising dividends and increasing returns on capital. Moreover, it's trading at less than half its net tangible asset backing.
Our third pick is GBST Holdings, a locally-based software business providing software and services to the financial services industry in Australia, the UK and, to a lesser extent, Asia.
GBST is well placed to benefit from long-term shifts in the distribution of wealth products, particularly in the UK. With a refocus on selling new products to existing customers, GBST has excellent long-term growth and cash generation prospects. Best of all, like a packet of Tim Tams on special, it's cheap.
Disclosure: The Intelligent Investor Separately Managed Accounts own some of the shares mentioned in this article. Staff, including the author, may own many of the stocks mentioned.