With so many companies included in the S&P/ASX 200 (ASX: XJO) (^AXJO) and even more outside of the index, it's near impossible for retail investors to accurately value each company. Many analysts will use stock screeners or filters to sort the trash from the treasure but they cannot be relied upon.
If you don't have access to an accurate stock filter, let's take a look at these five well-known companies and see what they have in store for retail investors.
Rio Tinto Limited (ASX: RIO) is Australia's biggest producer of our most lucrative export, iron ore. Although it is frequently considered a "diversified" miner over 90% of earnings are derived from the steelmaking ingredient. Rio is currently in the process of ramping up production at its Pilbara mines to around 360 million tonnes per annum by 2018. However as the price of iron ore is largely dependent on Chinese economic growth, investors will have to be bullish on it as well as Rio's ability to keep down costs and debt. Nevertheless bullish resources investors are likely finding significant value in Rio's current share price.
Commonwealth Bank of Australia (ASX: CBA) is our biggest bank and most heavily leveraged to the Australian property market. Recently it was named: "The most expensive bank in the world by almost every measure" by UBS analysts. Since then its share price has risen further. At $76 per share, investors who choose to buy in at current prices will not be getting a bargain.
Silver Lake Resources Limited (ASX: SLR) is one of Australia's biggest gold miners with operations in Western Australia. The company has a good cost base and rapidly increasing production, but was recently forced into a capital raising to fund the transfer of its Murchison operations to care and maintenance. Despite its recent downwards trending share price, investors could find value in it at current levels. However it should be considered a mostly speculative investment.
Senex Energy Ltd (ASX: SXY) is a junior gas producer and explorer in the Cooper Basin. After recently completing a successful drilling program, Senex looks likely to continue growing production and earnings in coming years. Its current share price of $0.71 is also extremely reasonable given it has no debt. At current prices, Senex is worthy of your watchlist and your research.
M2 Group Ltd (ASX: MTU) is the owner of Dodo, Eftel, Primus and Commander. In recent years it has relied on acquisitions and tailwinds in the telecommunications sector to drive earnings but has recently shifted its focus to organic growth. The integration of its numerous brands has created synergies within the group and management could possibly be looking at acquisitions to expand on the company's growing electricity and gas business in the near future. M2 Group deserves a second look.
Foolish takeaway
Trying to find your way through the stockmarket can be daunting and at times difficult. To be successful it's important to look past the 'usual suspects' and find companies which have bright futures ahead. Dig through annual reports and ASX announcements and understand the company in-and-out before committing your hard-earned cash to the management teams at their helm. Of these five companies, Senex Energy and M2 Group represent the best long-term value for shareholders.
