Over the past three months, shares of Telstra Corporation Ltd (ASX: TLS), Woolworths Limited (ASX: WOW) and Computershare Limited (ASX: CPU) have been discounted by the market.
So it begs the question: After falling 2.2%, 6% and 7%, respectively, could now be the time to buy into these three dominant Australian businesses?
Telstra
As Australia's largest telecommunications company, there's a lot to like about Telstra. Against a backdrop of rising data usage, cloud computing, analytics and machine-to-machine computing, Telstra appears to have some of the most favourable long-term tailwinds of any blue chip ASX company.
However, that potential is no secret, and despite falling slightly in recent months, Telstra's share price is still up 100% since this time five years ago. With management forecasting broadly flat profit growth in the next year, Telstra shares appear fairly valued at their current price of $6.19.
Woolworths
While Telstra shares have been shooting the lights out, Woolworths shares have been shunned by investors. Up just 2.6% from this time five years ago, Woolworths' key management team are now being pressured to react to competitive threats from key rival, Coles, as well as foreign giants Aldi and Costco.
However, if Woolworths can stem the falling margins within its supermarkets business and resurrect the prospects of its struggling Masters home improvement business; recent share price weakness could be a sound buying opportunity.
Computershare
Computershare is a leading global share registry services business, providing a range of functions for publicly listed companies and their shareholders in more than 20 countries. In recent times, a strong US dollar has hurt Computershare's profit. Given that the company reports in US dollars and 56% of its revenue come from outside the USA, its reportable profit margins have been falling in recent years.
As an aside, based on my calculations, Computershare's return on invested capital over the past three years has been unable to surpass its cost of capital – which isn't good.
However, there could be light at the end of the tunnel for Computershare. Indeed, if the USA and the UK begin raising official interest rates in coming years, Computershare will see a nice boost to its profit. That's because it invests approximately 64% of the $US5.6 billion of its clients' dividend money (which it administers on their behalf) in interest rate sensitive investments in the UK and the USA, combined.
Buy, Hold or Sell?
At today's prices, I think Telstra is a hold, and Woolworths is only a buy if you're confident it can continue to compete profitably for many years in the increasingly competitive supermarket space. Finally, I think if you can buy Computershare shares below $10, they'd be a great buy.
