With the ASX pushing up close to 6,000 points for the first time since 2007, many Aussie investors may feel that there is a lack of value in the market. That's understandable, since with shares near a seven-year high, it could be argued that they are due a pullback in the months ahead.
However, there is also reason to be optimistic regarding the future prospects for the ASX. That's because further interest rate cuts are set to take place and, perhaps more importantly, there are still a number of top quality shares that offer excellent value at the present time. And, if I had a spare $10k lying around, here are three companies that I would buy for the long term.
Woolworths Limited
In the short run, the future for margins at Woolworths Limited (ASX: WOW) appears to be rather challenging. After all, increased competition from no-frills operators and a struggling economy are likely to hurt the company's top and bottom lines and following a $500m investment by Woolworths in its pricing a supermarket price war appears to have arrived in Australia. As such, investor sentiment has weakened and sent the company's shares down by 4% in the last month.
However, this provides a great buying opportunity, since Woolworths now yields 4.8% (fully franked), has a dividend coverage ratio of 1.4 times and trades on a price to earnings (P/E) ratio of just 14.6, which is much lower than the ASX's rating of 16.7.
Coca-Cola Amatil Ltd
Following a challenging period, Coca-Cola Amatil Ltd (ASX: CCL) is firmly back on track, with its cost-saving programme now in full swing. The latest example of this is a five-year deal with IBM to use its pay-per-use cloud, which will help the company to deliver efficiencies of around $100m during the next three years.
Clearly, this focus on cost cutting is set to make an impact on the company's bottom line, with Coca-Cola Amatil's earnings forecast to increase at an annualised rate of 5.4% during the next two years. This is set to increase further, as the company is due to expand into fast-growing markets across Asia. And, with a dividend yield of 3.9% and a beta of just 0.56, Coca-Cola Amatil offers a potent mix of growth, stability and income.
FlexiGroup Limited
Over the last five years, FlexiGroup Limited (ASX: FLEX) has been able to increase its bottom line at an annualised rate of 14.7%. And, looking ahead, it is forecast to post annualised growth of 9.4% during the next two years, which makes its present valuation rather difficult to justify.
For example, it has a P/E ratio of just 11.8 and also offers a fully franked yield of 4.8%. And, with dividends being covered 1.7 times by profit, FlexiGroup's shareholder payouts are relatively sustainable, while its earnings growth outlook and valuation equate to a price to earnings growth (PEG) ratio of just 1.26. This is much lower than the ASX's PEG ratio of 2.42, while a beta of 1.53 indicates that further interest rate cuts could give FlexiGroup a major boost moving forward.
Of course, finding the best stocks for the long term is a tough ask – especially when work and other commitments limit the amount of time you can spend trawling through the index for them.
