As I recently wrote here, I do not believe Australia and New Zealand Banking Group (ASX: ANZ) shares are in the buy zone.
Indeed, at their current price over $32 they'd have to drop 22% for me to consider them 'fair value'.
However, given my fair value estimate is approximately $25 per share, I'd wouldn't buy ANZ shares until their price dropped well below that level – around $20 I'd start to get excited.
2 alternatives to ANZ
I'm bearish on the big banks because I do not believe the slowdown in the domestic economy is priced in their shares. Moreover, given how cyclical their earnings can be, investors need only be patient because before too long their shares will likely be dumped by myopic investors.
However, if you – like me – don't want to sit around waiting for a share to drop in price, there are two much smaller dividend stock ideas on the ASX which appear to have moved back into a much more compelling valuation range.
The first is Cash Converters International Ltd (ASX: CCV). Cashies is Australia's largest pawnbroker, and along with its competitor below, is believed to control a combined 75% of the payday loan market.
Cash Converters has had a rough time in recent years. It has been plagued by a class action, ASIC industry review and media scrutiny. Then there was the distasteful capital raising. Still, every stock is a buy at some price and at their current market price of 73.5 cents, Cashies shares appear a worthwhile investment for those willing to overlook management's prior indiscretions.
Rival payday lender, Money3 Corporation Limited (ASX: MNY), who is also pushing into automotive financing, is equally as compelling an opportunity today. Despite recently posting some strong results, and boasting a positive growth outlook, Money3 shares have underperformed the market this year – falling 18% over the past six months. Another competitor, Thorn Group Ltd (ASX: TGA), also fell hard over the same period.
Is it time to buy Money3 and Cash Converters?
If you can overlook the intense regulation of the payday loans market, then it could be time to start running the ruler over the companies who make up the largest chunk of it.
Although Cash Converters arguably looks better value, armed with a fully franked dividend yield of 5%, I'd probably buy Money3 shares first – which boast a fully franked yield around 4%.
However, given the upcoming ASIC review and a pending funding decision by Westpac Banking Corp (ASX: WBC), conservative investors may wish to keep both companies on their watchlists, for now.
