Has the S&P/ASX 200 Index (INDEXASX: ^AXJO) (ASX: XJO) reached its peak?
Just 6 weeks ago the index reached 5,950, the highest level since 2015, and a level not otherwise seen since before the GFC. Some companies like CSL Limited (ASX: CSL) and AGL Energy Ltd (ASX: AGL) have seen their share prices hit new all-time records.
Despite this, there's been a strong undercurrent of negativity seeping into some sectors. The number of pundits criticising banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) seems to climb daily.
Retail shares are totally out of favour:
What's more, a number of initial public offerings (IPOs) of new retail companies like Officeworks and Craveable brands (Red Rooster) have been pulled, with the sellers reportedly citing a lack of investor interest.
Investors may be right to be concerned, especially with the ongoing switch over of borrowers from interest-only to principle + interest loans, and the overall increase in bank mortgage rates, which is expected to leave less money in consumers' pockets. However, this should be seen as a good opportunity to look for companies with a competitive advantage, such as market dominance, captive customers, or similar.
Companies like Sydney Airport Limited (ASX: SYD) and Transurban Group (ASX: TCL) are strong prospects because of their infrastructure assets, although they are very popular with dividend investors for precisely this reason, and look expensive.
Instead consider software companies like Hansen Technologies Limited (ASX: HSN) and Gentrack Group Ltd (ASX: GTK), which enjoy high levels of recurring revenue and pricing power, because customers are highly dependent on their billing software.
