Big is beautiful. Cheap is attractive. Put them together and you may have a winning stock combination. For good companies, many times it's the case that investors have to wait for a lull in business growth to snare a good buy. The market may be unsure about how a company will grow. When it can't figure that out easily or quickly, the market moves on to easier prey.
Here are two large-cap stocks that are currently in that kind of "crossroads" situation and may be offering an attractive investing opportunity.
— Wesfarmers Ltd (ASX: WES) is the $48.9 billion conglomerate that holds a cross-section of Australian retail businesses like Bunnings Warehouse, Coles supermarkets, Officeworks, Target and Kmart. Similar to Woolworths Limited (ASX: WOW), the big retailer has experienced a slowdown in revenue and earnings growth from a weaker general economy and increasing competition.
However, Wesfarmers has sold off its insurance businesses and has built up surplus funds potentially to be used for acquisitions. Some indications are for a move into financial services, possibly personal loans and more credit card business. Financial year 2015 could be one of change for the retail giant, but investors have a "wait-and-see" attitude. Analysts are looking for double-digit earnings growth over the next two years. Together with the stock's 4.6% fully franked yield, Wesfarmers is not too badly priced. It could be a chance to start a position while all is quiet on the business expansion front.
— In the tech and telecom space, TPG Telecom Ltd (ASX: TPM) is a steady achiever that is providing high-speed broadband service like the national broadband network (NBN). The telecom has the plan and existing network infrastructure to do the job, but has been hit with some issues over federal government regulation concerning competing directly with the National Broadband Network Company.
TPG Telecom has pulled back from the service to regroup and work out a way to address the issues. Investors have pulled back as well, letting the stock slide about 16% down since mid-November. Long-term investors could see this as an opportunity to catch a rising company going sideways during a perhaps temporary setback. Earnings growth forecasts are still in the high double digits.
