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What to buy, sell and hold right now

Investing in stocks requires us to carefully consider the merits of the company for future growth whenever we make a decision to buy or sell. Finding a good stock to buy can be harder than deciding whether or not to sell because, after all, we should already know everything about the stocks in our portfolio. That way if we hear something on radio, TV or see something on the internet that may affect our stock, we can quickly revaluate our position.

Here are a few stocks I think should be on your buy, sell, and hold lists (note, these are my opinions and do not represent official Motley Fool recommendations).

What to buy

Despite rising over 10% this past month, Leighton Holdings (ASX: LEI) still remains a buy at current prices. As many blue chip stocks have risen higher and higher in the past 12 months, Leighton has been left behind — perhaps investors are concerned about its large mining services business. Nevertheless, I see the company growing well over the next few years, and combined with a 4.7% dividend, it’s too good to pass up.

Cochlear (ASX: COH) is another stock that is a well-deserved buy. It has struggled this past year since it decreased its profit guidance in the wake of weaker sales of its implantable hearing devices. This was due to many customers awaiting the new model, the Nucleus 6. Although Cochlear is facing increased competition, particularly from cheap imitations, it remains the dominant force in a very lucrative industry and now the new model is released it is primed to reward investors.

Hold

These two stocks are neither buys nor sells at current prices but that doesn’t detract from their ability to return solid growth and dividends to investors over the long term. ANZ (ASX: ANZ) and Seek (ASX: SEK) are two great companies in their own right, but with current P/E ratios of 13.5 and 27.5, they’re fairly priced and unless investors can find a cheaper entry point, there is better value to be found elsewhere.

Sell

Rio Tinto (ASX: RIO) is overpriced. For the amount of uncertainty ahead, it is not deserving of its current price. Its operating margin (currently around 35%) has only been lower in the wake of the GFC. Net profit fell drastically in the past six months as management has scrambled to sell poorly performing assets, a legacy of its former leadership. Return on equity is dropping, whilst the only two things going up (apart from its share price) are debt and the payout ratio, which proves management is concerned about the stock price in the near term. Watching from the sidelines for a better entry point might save you some money and minimise your chances for loss.

For many investors this next ‘sell’ probably comes as no surprise. Trading on over 15 times earnings and a price to book ratio of 2.6, Commonwealth Bank (ASX: CBA) could be a ticking time bomb for those investors looking to grab on to some high dividend yields. Don’t get me wrong, Commonwealth is one of the greatest Australian businesses and has rewarded shareholders very well over the past 10 years. However at current prices and for the next 5-10 years, there are better stocks available on the market. In this Fool’s opinion, Commonwealth may struggle to outperform even the index in the medium term.

One stock we think continues to provide investors with real value and pays a great dividend is still available today. Discover The Motley Fool’s favourite income idea for 2013-2014 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.”

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Motley Fool contributor Owen Raskiewicz owns shares in Cochlear and ANZ.

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