The Woolworths Limited (ASX: WOW) share price is around fair value, in my opinion, while further down the market Gentrack Group Ltd (ASX: GTK) shares appear good value today.
Woolworths
Woolworths shares have rallied strongly over the past year, following what was a tumultuous few years for Australia's premier supermarket chain.
As it fell from almost $38 per share to below $21 per share, Woolworths' management was shaken up, it sold out of its Home Improvement business – including Masters — and its profit margins narrowed. Its dividend was also cut.
But following its recent rally back to $26, I think the company's shares are around fair value. Indeed, while it offers very modest growth potential and a 3% dividend yield, there are risks going forward. The ongoing growth of online shopping and competition from Aldi and Coles — owned by Wesfarmers Ltd (ASX: WES) — are obvious threats.
1 small cap dividend share I'd buy first
Fortunately, with over 2,000 other shares listed on the ASX, I'm in no rush to buy Woolworths shares. Further, with a three-to-five year (or longer) investment horizon, I think there are far better investment opportunities available right now.
One small cap company I have on my watchlist is Gentrack Group.
Gentrack is a $340 million software business specialising in solutions for airports and energy utilities. The company recently expanded its footprint in the UK with the acquisition of Junifer Systems, a highly complementary business.
Pleasingly, the company pays a 2.8% dividend and, in my opinion, offers room for long-term growth. Both of these features make it a compelling investment idea.
Foolish Takeaway
Gentrack Group might be considered a 'higher risk' idea because it is a smaller company than Woolworths. However, what's important in investing is buying good companies at prices that 'make sense' and holding for the long-term.
Being impatient and buying shares of companies that are not good value, we increase the odds of losing money, in my opinion.
Patience doesn't lose us money.
