Are Ansell Limited and Bega Cheese Ltd bargain opportunities?

Ansell Limited (ASX:ANN) and Bega Cheese Ltd (ASX:BGA) have been beaten down in 2016. At the current share price I think they could be great buys.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It has not been a happy year for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which is down just a little under 7% year-to-date.

Whilst nobody wants to see the index drop like this, it does mean there are a good number of potential bargains floating around that investors could snap up.

There are two shares in particular which have dropped so far this year they make the index look like it's performing well. These potential bargains are as follows:

Ansell Limited (ASX: ANN)

When Ansell downgraded its full year earnings outlook the market did not react well. A sell-off ensued and the shares remain down over 19% for the year.

Ansell is one of the world's leading manufacturers of protective gloves and condoms. Its products require regular replenishment and command a steady demand. These defensive characteristics make it a great share for most portfolios.

This is especially the case now following the sell-off of its shares. They are priced at 12 times estimated FY 2016 earnings, which is far below its normal trading range in the last 10 years.

Management expects a stronger second-half to the fiscal year. If it delivers on this then I would expect to see the share price bounce back strongly.

Bega Cheese Ltd (ASX: BGA)

Bega Cheese is another company which has lost 19% of its value in 2016. Much of this decline is attributable to the fact that it lost a major contract with supermarket giant Coles.

Coles – owned by Wesfarmers Ltd (ASX: WES) – agreed a five-year deal with Bega Cheese to produce its home brand cheese products in January 2012. But it will now replace Bega Cheese with Murray Goulburn from January 2017.

This large decline in the share price is a buying opportunity in my opinion, especially with its link up with Blackmores Limited (ASX: BKL). Not only are these two high-growth companies attempting to profit from the insatiable Chinese demand for infant formula, but they also have their eyes on other areas of the market.

It was announced recently that the pair have plans to release a range of health food products into the enormous Chinese consumer market. China has a wealthy and ageing population which could make this a profitable move.

Despite the 19% drop the shares are still a little on the expensive side at 32 times estimated FY 2016 earnings. But if the company can make a success of these joint ventures with Blackmores, then I am sure the premium investors would pay will prove to be more than worth it.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »