Stocks can cop a beating from any number of factors that good investors consider 'noise'. Whether it's macro events like interest rates or the economy or topical issues like China, it's meaningless if the company's fundamental outlook remains the same.
Still, media outlets tend to go into a frenzy over a sector or trend for many months, prompting investors to panic, pushing down the prices of some good companies. Here are five stocks to bet on despite the market.
Myer (ASX: MYR) and Harvey Norman (ASX: HVN) operate in the seemingly 'high risk' brick and mortar retail space. Currently, it appears consumers have taken flight and have scared off short-sighted investors in their wake. That has created an opportunity for savvy investors. Myer's pricing fundamentals remain healthy and should reward shareholders with a dividend over 7.1% fully franked. Harvey Norman may appear slightly pricey on first glance, but the company is welcoming a lower AUD and has a number of strong business divisions, including furniture and home appliances, that continue to outperform the market.
Metcash (ASX: MTS) is another unloved retail stock, but for different reasons. The company's management, valuation and return remain great but investors are worried about its two bigger rivals, Coles and Woolworths. However, in its most recent full-year results, the company impressed the market with a massive increase in NPAT and continues to pay a dividend of 7.7% fully franked.
Perhaps the only industry less-loved than retail is mining services (and justifiably so) but there may still be some value in the space. Finding stocks that may have been punished despite having strong balance sheets and solid prospects in the medium to long term, presents opportunities for those willing to accept more risk.
Leighton Holdings (ASX: LEI) is not only a mining contractor but operates under a number of names, including Thiess, John Holland, Leighton Asia, India and Offshore and Leighton properties. Currently the company has a market capital of $5.6 billion, operates at a P/E of 10 and pays a 5.4% dividend.
Lastly, Ausdrill (ASX: ASL) offers 19 integrated mining services businesses to Australia and Africa. Currently its African division accounts for approximately 34% of revenues. The point of difference for Ausdrill is its ability to be a one-stop shop for miners and its strong niche in the market, providing drill and blast to contract services in the gold mining industry.
However, the company is not immune to the slowdown in mining. This has forced its shares down 65% in past year and although this Fool believes it may have been overdone, it comes with considerable risks. At current prices shareholders could expect a full year dividend around 11% fully franked. Morningstar is predicting EPS to be remain between 33-34 cents per share until 2015; currently it trades for $1.10.
Foolish takeaway
Buying stocks can be a risky pastime but meticulous research will mitigate the potential for losses. Evaluations based purely on fundamentals like P/E ratios or dividends haven proven time and again to be a costly exercise, after all, historical financials only tell part of the story.
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Motley Fool contributor Owen Raszkiewicz owns shares in Ausdrill, Myer, Leighton Holdings and Metcash.
