With the local stock market hovering near a seven-year high, it has become increasingly difficult to know which stocks present as reasonable value. That task is made even harder by the high level of uncertainty creeping back into the economy which could impact future production and overall economic growth.
This is especially true when it comes to the nation's blue-chip stocks, many of which are trading at lofty and never-before-seen prices. Here are three of the market's most intriguing stocks right now and my thoughts on whether they're a buy, hold or sell.
Medibank Private
After what was one of Australia's most highly anticipated initial public offerings (IPO) in decades, Medibank Private Ltd (ASX: MPL) floated its shares on the ASX in November last year in a move that reaped the government approximately $5.7 billion. While retail investors who took part in the IPO claimed their shares at $2, the stock soared as high as $2.59 shortly after.
However, the shares have retreated since the health insurer failed to live up to the market's expectations relating to its management costs and efficiency measures. While the insurer appears to be capable of improving on both fronts, it will prove difficult to do so in the time frame the market appears to have set.
Granted, there is room for improvements to be made which could lead to profit and share price growth, but from its current price, it is difficult to see it delivering market smashing returns anytime soon. As such, investors may want to hold onto the stock they already own, but avoid adding to their stake for now.
Coca-Cola Amatil
Shares of Coca-Cola Amatil Ltd (ASX: CCL) have been on a tear lately, the stock has piled on a remarkable 32% since early October to be trading at $10.80.
After numerous profit downgrades caused by declining sales and volumes, management of Australia's largest non-alcoholic beverage manufacturer finally look to have hit its straps to turn the sinking ship around. Marketing and product development will once again become key focuses, as will growth in the promising Indonesian market.
While the issues facing the business will have no quick fix, management has stated that no further downside is expected beyond the last financial year. Meanwhile, earnings per share are expected to return to growth which should also result in stronger dividends in the coming years, which is great news for income investors. While an investment in Coca-Cola Amatil is by no means risk free, it's certainly one to consider buying today.
Commonwealth Bank of Australia
Over the last three years, Commonwealth Bank of Australia (ASX:CBA) has skyrocketed just over 85%, compared to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which has risen just over 37%. While that is a remarkable effort by any measure, it is especially so considering the bank's sheer size.
Each of Australia's Big Four banks have enjoyed an extended period of record profits as a result of low bad debt charges, combined with significant loan growth thanks to falling interest rates. Investors have been particularly attracted to its generous fully franked dividend and have bid the stock to dizzying heights just to gain access to those semi-annual payments.
Should interest rates fall further, Commonwealth Bank could certainly have further to climb. However, from these levels, it is extremely difficult to see how the stock could generate long-term market-beating returns. With strong headwinds facing the sector and the Australian economy as a whole, it seems the best course of action could be to take your profit on the bank and put the proceeds to work elsewhere.