Earnings season is nearly complete, and many analysts believe that investors have been given little reason to want to buy more stocks based on the results of many companies.
Whilst many small-cap stocks have failed to impress investors, many results released by blue chip companies have also failed to spark the economy. For instance, reports by miners BHP Billiton and Rio Tinto did little to ease concerns regarding a slow-down in the mining sector, with BHP delivering a 31% fall in full-year profits and Rio’s half-year profit falling 71%. Likewise, even when Commonwealth Bank announced a record profit of $7.68 billion for the year, investors were warned that such a high profit would be extremely difficult to repeat, which caused the bank’s shares to fall.
But, as Fools (note, the capital ‘F’), we look at the long-term potential of companies and choose to ignore short-term effects. Although it is disappointing when a company fails to please shareholders, it also offers us an opportunity to pick up stocks at a cheaper premium to hold onto for the next 5 or 10 years. Here are three companies to consider.
The first cab off the ranks is Coca-Cola Amatil (ASX: CCL) – the manufacturer and distributor of some of the most popular brands in the world. A high Australian dollar and difficult trading conditions in the grocery channel caused earnings for the first half to fall 6.9%, a better than expected result. However, the company also announced that it expected earnings for the full year to fall by 4%, after having previously advised it expected earnings to be flat.
This news took the fizz out of the shares, with shares now trading for $12.12. As trading conditions improve however, investors can expect this company to once again continue to deliver consistent returns.
Speaking of difficulties in the grocery channel, shares in Metcash (ASX: MTS) have plummeted over the last few months to where they now sit at $3.15 per share. Shareholders in Metcash, owner of the IGA brand, have watched their stocks plunge 26% since May. Although the company is competing in a tough market – against behemoths Woolworths and Wesfarmers – it is a strong company with an excellent management team. Other than its current low price, the icing on the cake for Metcash is the outstanding dividend it offers. Currently, it maintains a fully franked dividend yield of 8.9%, which is significantly higher than the market’s average.
Mortgage Choice (ASX: MOC) is another idea for your portfolio. While the stock has soared 68% over the last 12 months, the shares have fallen back to $2.42 after hitting a high of $2.77 earlier in the month. With interest rates currently sitting at a record low, this company is set to benefit from increased demand for mortgages as confidence is restored into the economy.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.