They say that in life, timing is everything. And, while this may be true, it could also be argued that timing plays an important part in investing, too.
For example, if you had invested at the top of the market in 2007, you would still be sitting on considerable losses since the ASX is still well below its previous high. Similarly, if you had bought shares in oil stocks when oil dipped below $50 per barrel then you may be sitting on a healthy profit at the present time.
Of course, attempting to time the purchase and sale of shares can be something of a minefield and, for long term investors, it generally makes sense to focus on the quality of a company and its future potential, as well as whether it offers good value for money. With this is mind, is now a sensible time to buy the following three companies? Or, are they set to post disappointing returns moving forward?
Rio Tinto Limited
Shares in Rio Tinto Limited (ASX: RIO) have outperformed the ASX by 8% in the last month, with investor sentiment in the company improving as China looks to stimulate its economy via interest rate cuts. And, with it being responsible for a sizeable chunk of global demand for iron ore (which accounts for most of Rio Tinto's profit), any upturn in the Chinese economy is likely to be great news for Rio Tinto.
Certainly, there is the potential for further price falls in iron ore in the short run. But, with Rio Tinto currently trading on a price to earnings (P/E) ratio of 11.4 versus 16.6 for the ASX, it appears to have a relatively wide margin of safety already incorporated in its share price. As such, now appears to be a great time to buy.
Coca-Cola Amatil Ltd
It's never easy to know when to buy a turnaround stock such as Coca-Cola Amatil Ltd (ASX: CCL), with the beverage company currently in the midst of implementing cost cuts and efficiencies as it seeks to improve its financial performance. As such, its short term performance may not be quite as impressive as investors in the company are currently hoping for, although it is forecast to return to post growth of 5.4% per annum during the next two years.
Encouragingly, Coca-Cola Amatil continues to offer a yield of 4.1% and, with dividends forecast to rise by 3.5% per annum during the next two years, its share price should gain support from increased demand among investors for stocks with upbeat income potential. As such, its long term future appears to be sound.
FlexiGroup Limited
With interest rates moving lower, now could be a great time to buy a slice of lender, FlexiGroup Limited (ASX: FXL). Clearly, demand for loans is likely to increase as the interest rate plunges and, looking ahead, FlexiGroup is set to post an annualised rise in its bottom line of 9.4% during the next two years.
Furthermore, investor sentiment in FlexiGroup could increase due to its dividend per share growth forecasts of 7.8% per annum over the next two years. This puts FlexiGroup on a forward yield of 5.7%, which is well ahead of the ASX's yield of 4.4%. And, with FlexiGroup having a P/E ratio of 11.4 versus 14.6 for the wider diversified financials sector to which it belongs, its shares could continue the run that has moved them 181% higher in the last five years.
