As I outlined in a previous article you can find here, through the power of compounding your money you can build yourself a million dollar portfolio from relatively meagre beginnings.
In the example I used, a 7% return per annum for 40 years was required. While growth stocks may appear to be the obvious choice for achieving high rates of return, value stocks are an equally valid way to build wealth and given the pricing of stocks at the moment, it is arguably more prudent than ever to focus on value.
Here are three stocks which all have value attributes and could be "cheap" additions to a portfolio.
Seven Group Holdings Ltd (ASX: SVW) – with a diversified asset base encompassing a shareholding in media company Seven West Media Ltd (ASX: SWM) and investments in industrial services businesses including Caterpillar, Seven Group should continue to perform reasonably well. Some analysts would appear to agree; consensus data provided by Morningstar shows earnings are set to rise in FY 2015 above the FY 2014 forecast. Based on the FY 2015 forecast, Seven Group is trading on a price-to-earnings (PE) ratio of 10.6 and a fully franked dividend yield of 5.1%.
Caltex Australia Limited (ASX: CTX) is currently in the process of streamlining its business. The company offers investors exposure to the defensive retailing sector of fuel supply and sales. Consensus numbers show that earnings are forecast to rise over 50% from FY 2013 to FY 2015. Based on FY 2015 figures, the stock is trading on a PE of 16.1 and a fully franked yield of 3.2%, which looks appealing considering the earnings growth rate and defensive qualities of the business.
Monadelphous Group Limited (ASX: MND) – much like Seven Group, leading engineering group Monadelphous has been squeezed by the slowdown in the resources sector. While earnings are forecast to continue to decline into FY 2015, if an uptick in infrastructure spending does occur as predicted, then the FY 2015 PE and fully franked yield of 12.1 and 7% respectively could make now an appealing entry point.
