If you've been investing in the share market for a while now, you've probably worked out that the "market" is very smart.
In fact, it's not easy to beat the consolidated wisdom of the market – all those differing opinions, when thrust into an auction system turn out to be pretty well on the money more often than not.
There are times however when a crowd mentality takes control and drives investors' views too far in one direction – this can occur across the whole market (bull and bear markets), a sector, or a specific company.
At any one time there are likely to be some companies which are on the nose with investors. While the negativity is often justified, this can also represent opportunity for savvy investors.
Here are three stocks which currently (as evidenced by their respective share price performances during calendar year 2016) are disliked by the market.
- iSentia Group Ltd (ASX: ISD) down 35%
- Mantra Group Ltd (ASX: MTR) down 28%
- Computershare Limited (ASX: CPU) down 23%
A Contrarian's delight
As I noted above, the "market" gets the pricing of companies roughly right a lot of the time.
In the above three instances however it could be argued that the market has become unduly negative and these stocks may have been oversold.
Based on analyst consensus estimates, iSentia is trading on a FY 2017 price-to-earnings (PE) ratio of roughly 17x. Considering iSentia's market-leading position within the Australian media intelligence market and the growth opportunity which the Asian region is presenting, this is arguably a compelling entry point into the stock despite the market apparently being less than enthusiastic about the group's full year results guidance.
Mantra's recent tumble was in part caused by investor concern that the rise of airbnb could cause a headwind for the group. Countering this headwind however is a tailwind of growing tourist numbers and acquisitive growth options like the recent purchase of Ala Moana.
Trading on a forecast PE of 18.8x, Mantra's quality assets are arguably favourably priced despite the airbnb threat.
Computershare is by far the biggest of the three companies here and while its expected growth rate may be lower, the defensive earnings base provided by Computershare's global registries businesses is appealing.
With a forecast PE of less than 12x, Computershare would definitely be a stock worth watching. (source: Reuters)
