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Is this a perfect opportunity to buy Westfield?

Shares in many of Australia’s largest companies have delivered investors with substantial gains over the last 12 months, whilst many have also distributed some very generous dividends.

For instance, shareholders of NAB (ASX: NAB) have recognised an outstanding 43% (that’s not even including dividends) in that time whilst each of its primary competitors – namely Westpac (ASX: WBC), ANZ (ASX: ANZ) and Commonwealth Bank (ASX: CBA) – have also delivered gains between 29% and 31%. Each have heavily outperformed the S&P/ASX 200’s (Index: ^AXJO) (ASX: XJO) return of 18% in that time.

However, not all of Australia’s blue chip companies have experienced the same strength. Take shopping centre giant Westfield Group (ASX: WDC) as a perfect example.

After having climbed to a high of $12.55, Westfield’s shares have now fallen back to $10.40 – which is actually 4c lower than what they were trading for at this time last year. This has happened despite more than $2 billion worth of share buybacks since February 2012.

The company

Westfield operates over 90 stores spread over Australia, New Zealand, the US and the UK and continues to explore options of re-entering the Brazil market when an opportunity arises.

However, following the global financial crisis as well as with the rapidly growing online retail sector, the company recognised the need to strengthen its balance sheet by divesting from non-core assets and redevelop its more profitable centres. This has been highlighted by various news sources over the last month or so regarding its redevelopment plans in the UK – particularly with its Westfield London and its Croydon centres.

The opportunity

Whilst the company’s strategy aims to improve the sustainability of its long-term operations, it seems as though investors are more firmly focused on the short-term impacts the various sales and acquisitions, as well as the spending on redevelopments, will have on Westfield’s profitability.

Justifiably, some investors would be concerned about the future of the brick-and-mortar retail sector, but there will always be a need for shopping centres. For instance, they offer a place for people to socialise or see movies, dine out at restaurants or buy items without having to wait for delivery.

As such, at today’s price Westfield appears to be undervalued and underappreciated by investors who have instead trended towards Australia’s other large companies. As the company continues to strengthen its balance sheet and increase its shareholder returns, now could be an excellent time to add Westfield to your shopping list.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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