MENU

3 ASX stocks you’d love to buy, but shouldn’t

The direction of the stock market has been easy to predict over the past year or so. Fueled by large gains in large-cap stocks like QBE Insurance (ASX: QBE) and Amcor (ASX: AMC), the S&P/ASX 200 has jumped 20%.

Dart-throwing monkeys have made money in this market. Even I have. I suspect you have too, and hopefully lots of it. This rising tide has lifted all boats.

Enjoy it whilst you can, for the stock market is rarely in such a hospitable mood. It won’t always be this easy to make such good money.

Climbing The Wall

They say the stock market climbs a wall of worry. There are always reasons as to why it might crash. Today, we can point to the rising unemployment, a budget deficit, and the ongoing concerns about the Chinese economy. And that’s just for starters.

Yet the market continues on its inexorable upward trajectory. Whilst we are naturally fearful of the next crash, history tells us crashes are few and far between. Experience tells us crashes are almost impossible to predict.

If you live your life being worried about the next stock market crash, you likely will never be a truly successful investor.

You’ll constantly be sitting on the sidelines, waiting, waiting, and waiting. And when the right moment does come along, moments like we had last year, and the year before, and the year before, you’ll inevitably sit on your hands, waiting for the market to fall even further.

Companies You’d Love To Buy, But Shouldn’t

All that said, it always pays to be a cautious investor. The best way to do that is to concentrate on buying good companies at cheap prices. Sadly, it’s easier said than done, because good companies usually trade at premium prices. For example…

Domino’s Pizza (ASX: DMP)

InvoCare (ASX: IVC)

CSL Limited (ASX: CSL)

You can pay up and buy companies like these, but beware you’ll have a relatively low margin of safety should things go wrong, either with the economy or the individual company. In effect, a lot of future growth is already priced into the share prices of these quality companies.

3 Companies You Can Buy Today

But investors shouldn’t despair, for there are still a number of decent companies trading at fair prices. For example…

Macquarie Group (ASX: MQG)

Telstra (ASX: TLS)

Myer (ASX: MYR)

Investing in these large, somewhat boring stalwarts is not going to turn you into an instant millionaire, but in an uncertain economy and potentially rocky stock market, they should stand you in good stead.

The icing on the cake are the juicy dividend yields on offer, particularly with Telstra and Myer. Those sorts of returns, albeit with a higher level of risk, knock the socks off the 2.5% on offer for savings accounts.

No Risk, No Reward

There are never any guarantees when it comes to investing. Your best laid plans can and will come awry. But if you concentrate on getting the basics right, you should be able to generate positive returns over the long-term.

If I’ve whet your appetite for dividend paying stocks, consider The Motley Fool’s favourite dividend stock for 2013-2014. It’s featured in our brand-new, free research report, including a full investment analysis. Simply click here for your free copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.