A lot of people claim it’s best out west in Australia, but building your portfolio based on geographical areas is unlikely to be a successful investment strategy. The best portfolios consist of a core of large-cap stocks held for as long as possible.
Of course there’s room for stocks that offer high growth potential too, and some of Western Australia’s best companies offer a nice mix of large-cap security and rewarding growth options. To ensure diversification investments should be made in different sectors. Here are a few of WA’s finest companies from the telecommunications, energy, consumer and industrial sectors.
Pride of the West is iiNet Limited (ASX: IIN), founded in a suburban garage in Perth in 1993, its grown into Australia’s second-largest DSL internet service provider, with its eyes firmly set on expanding into the eastern-seaboard. For the six months ending December 2013 its underlying net profit was up 19% to $31 million on revenue of $403 million.
It put on 16,000 net new broadband customers for the period with better sales momentum taking total customers to 926,000. After growing through multiple acquisitions its now focusing on organic growth and currently has around a 25% share of the lucrative NBN market.
Selling at $7.77 it trades on a forward price-earnings around 20 based on FY 2014 analyst consensus forecasts. Telecommunications and high-speed internet rival M2 Group Ltd (ASX: MTU) yesterday posted an underlying half-year profit of $43.8 million, up 38% on the prior period.
Headquartered in Perth is Woodside Petroleum Limited (ASX: WPL), it’s the largest operator of oil and gas projects in Australia and just posted a full-year net profit of $US 1.75 billion. Total dividends for the year were up 92% and with multiple growth projects in place this energy-giant looks a sound investment.
The stock has been described as something of a range trader’s playground over the last six months, moving unerringly between the $37-$39 range. Selling at $37.90 it trades on a forward price-earnings around 15 based on FY 2014 analyst consensus forecasts.
Another core stock for an investor’s portfolio is Wesfarmers Ltd (ASX: WES), originally the Western Australian farmers’ cooperative its grown into a retail, mining and agribusiness giant. It just delivered a half-year net profit of $1.43 billion on $31.85 billion of revenue. Coles and Bunnings are the jewels in its crown and supported profit growth of 11.2% on the prior period. Selling at $42.60 it trades on a forward price-earnings of 20 based on FY 2014 analyst consensus forecasts.
Investors looking for a value stock trading on a low price-earnings multiple could consider staffing, maintenance and facilities management group Programmed Maintenance Services Limited (ASX: PRG). It announced a net profit of $12.4 million for the first half of its financial year and has a significant presence in Western Australia it aims to broaden across the nation.
It generated around half of total annual revenues of $1.5 billion for FY 2013 from its property management division. This work involves facilities management such as cleaning, security and ground maintenance for public sector and private commercial properties. The success of the property division has offset the slowdown in engineering services and resources.
Selling at $2.79 it trades on a forward price-earnings of 10 based on FY 2014 analyst consensus forecasts and fully franked dividend yield around 5.7%.
Rival operator Transfield Services Limited (ASX: TSE) saw its shares up more than 17% yesterday after it was awarded a government contract to provide facility management services for asylum seekers. The Manus Island and Nauru contract is valued at a massive $1.22 billion.
iiNet’s reputation for good customer service in the mixed-world of internet service providers has evidently helped it put on customers, despite its service offerings being relatively more expensive than its competitors. Well managed and with plenty of potential it’s priced to perfection, but remains a reasonable investment based on its ability to keep delivering strong organic growth. Programmed shares have also been on a wild ride recently and it may be among the best of the West at current prices.
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Motley Fool contributor Tom Richardson owns shares in iiNet and M2 Group. You can find him on twitter @tommyr345