The recent volatility in the Australian equity market has presented some exciting opportunities for investors who are willing to buy and hold for the long term. Stocks that looked over-priced several months ago, are now appearing in the "buy zone".
After an interesting reporting season, here are four stocks I think could be excellent long term investments:
1. Retail Food Group Limited (ASX: RFG) – The share price of Retail Food Group has been pummelled over the last week and is now trading near its 52-week lows. After delivering a record profit result in FY15, the company is also forecasting a 20% increase in earnings in FY16 that will be driven by new store openings and additional contributions from recent acquisitions. The shares are now trading on a price to earnings (P/E) ratio of around 13 and investors can expect to receive a fully franked dividend yield of nearly 5%.
2. REA Group Limited (ASX: REA) – Shares in Australia's premier property listing company are once again trading below $40 and this appears to be a pretty good buying opportunity. REA Group delivered earnings per share growth of 24% when it released its full year results and the company is confident of further growth over the coming year. REA Group has been able to capture the majority of eyeballs when it comes to property listings in Australia and is the clear market leader in the sector. Although the shares are still trading at a P/E ratio of around 26, I think the shares will be worth considerably more over the next five years, as the company expands its footprint into the much larger international market.
3. Capitol Health Ltd (ASX: CAJ) – Capitol Health is Victoria's largest non-hospital-based diagnostic imaging operator and has been one of the best performing healthcare stocks over the past five years. The company has been expanding rapidly through acquisitions and this has helped the company to produce record revenues and underlying earnings in FY15. Pleasingly for investors, Capitol Health is looking to expand out of Victoria and has recently undertaken an acquisition in Sydney that will provide a growing platform for growth in NSW. The underlying fundamentals of the diagnostic imaging sector remain robust and the trend for preventative diagnosis is positive. Investors who have a time horizon of two of more years should see the current dip in the share price as a buying opportunity.
4. Australia and New Zealand Banking Group (ASX: ANZ) – The slowing of the Australian economy will definitely have an impact on the big four banks' earnings over the next year but I believe the current share price of ANZ is offering excellent value to investors. At around $27 a share, investors will receive a fully franked dividend yield of nearly 6.7% – that's around 9.6% grossed up! With interest rates set to remain at historically low levels for the short-to-medium term, I believe ANZ will trade well above $30 once the market gets over the current period of volatility as investors look for high quality / high-yield stocks to beat the paltry returns from term deposits.
The market might look like it's crashing but there are some great opportunities appearing for patient investors. One stock that is hard to go past is The Motley Fool's fully franked dividend stock for 2016!
