Australia – What to Buy?

Among investors, cash levels remain high. Those who gritted their teeth last year and trusted the dividend yield numbers are in most cases sitting on strong gains over the last 6 months – and the better than 19% total return for the Australia 200 Index over the same period has many investors wondering what to buy.

However, the Index is trading at 18 month highs, inducing caution. The estimated index Price to Earnings ratio around 18x also sounds a warning. On the flipside, the estimated index dividend yield around 4.4% still compares well to cash deposit rates. While some stock outlooks may attract even at elevated market levels, its likely many investors are drawing up their “shopping list” of stocks to buy on any pullback.

The following lists ARE NOT recommendations. Investors are individuals, and have different time frames, risk appetites and investment approaches. The lists are intended to provide a starting point for further investigation.

The Blue Chips

Those seeking safety in size tend to stick with the largest stocks. These are the ten stocks that most influence the Australia 200 Index:

20130107 blue chips

Note how many of these are trading at P/Es well below the market average.

Most Beaten Up

These stocks are trading well below their 2012 average price. While there are good reasons for this in most cases, these are the sort of stocks “value” investors may examine:

20130107 beaten up

Best Performers

These stocks are furthest above their 2012 average price, the sort of stocks “momentum” investors have on their radar:

20130107 above avg

Note again the number of companies on this list with lower than average P/Es.

Low P/E Stocks

Low P/Es can be an indication that investors think company earnings are about to fall, due to either company specific or industry factors. If feared events do not occur, these can become “value” stocks:

20130107 low pe

About michaelmccarthycmc

Chief Market Strategist - CMC Markets and Stockbroking Regular on ABC, BBC, Bloomberg, Channel TEN, CNBC, SBS and SKY
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4 Responses to Australia – What to Buy?

  1. MALCOLM says:

    HI MICHAEL. INTERESTING DATA ANALYSIS. THANKS

  2. stan myring says:

    HI MICHAEL, APPRECIATE YOUR REVIEW, KEEP THEM COMING.THANKS, STAN

  3. larry woldenberg says:

    Good to look at. Thanks for the info. Larry

  4. Ron Richards says:

    Today I’ve been planning what to do with some idle cash. I was comforted that my pending placement was encompassed in your positive comments. Always good to know a professional holds similar ideas. Thanks I’ll sleep easier tonight.

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