Despite heavy volatility being experienced recently, the ASX is still hovering around the 6,000 point mark at a multi-year high, whereby most companies have begun to look somewhat expensive and in many cases overpriced.
Low interest rates are driving the valuations of some of Australia's most popular stocks sky-high (look no further than the Big Four banks), with everyday investors left to wonder which stocks are actually worth their valuable time, and money.
Luckily, there are still a number of companies trading on the ASX right now which still look ripe at their current prices – first, you just need to know where to look!
Early last month, my colleague Sean O'Neill penned an excellent article naming three stocks which he would buy if he had $10,000 to invest. I thought it was such a great idea that I decided to share with you the three companies that I would buy if I had the same capital to spend.
Notably, one of the companies that he mentioned was Australia's supermarket behemoth Woolworths Limited (ASX: WOW), and I couldn't agree more with his conviction.
Woolworths' shares have come under considerable selling pressure over the last 12 months and are now hovering around their lowest price since late 2012. Although investors are justifiably concerned about the company's immediate future, Woolworths has proven its ability to consistently generate long-term market-smashing returns, and I strongly believe that will continue well into the future.
As noted by Sean, Woolworths shares are also considerably cheaper than those of its primary rival Wesfarmers Ltd (ASX: WES), while they also boast a defensive earnings stream which is important at a time when economic uncertainty is on the rise. Throw in its 4.8% fully franked dividend yield, and Woolworths is an exceptional buy today.
While the other two companies that Sean highlighted in his piece represent fine businesses, I believe Collection House Limited (ASX: CLH) and Greencross Limited (ASX: GXL) are even greater buys today.
Collection House is a business unknown to most investors. It specialises in receivables management (debt collection to you and I) and has built an impressive track record for revenue and earnings growth.
With a market capitalisation of just over $300 million, Collection House is trading on a projected price-earnings ratio of just 13.6 times (which is reasonable considering its growth prospects), while it is also tipped to yield 3.9% this financial year, fully franked.
Greencross is another excellent business that has come under considerable selling pressure in recent months. The shares are currently changing hands for $7.86, which is a 27% discount to their 52-week high achieved in August.
The company is Australia's leading provider of veterinary services and is expanding its share of the market by acquiring smaller businesses. It has demonstrated fantastic revenue and earnings growth, a trend which I expect will continue over the coming years as it targets 20% market dominance (up from roughly 8% today).
What these stocks can't offer you…
Of these companies, Woolworths and Collection House both possess strong defensive qualities whilst also offering compelling, fully franked dividend yields in an otherwise low interest rate environment. While they are also capable of delivering considerable growth, Greencross could deliver even greater capital gains to investors who buy the stock today.
What these companies don't provide however, is exposure to Australia's growing technology sector which could generate enormous profits over the years to come.
