ANZ, Leighton Holdings Limited, M2 Group Ltd, Transurban Group: Are they a buy?

These businesses look likely to reward shareholders in the long-run, but could they be better priced?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Great businesses are worth paying up for. Companies which can pay a stable dividend, drive earnings per share year-in year-out and have management with a predisposition towards growing shareholder wealth over the long term are great investments.

These next four stocks are good businesses but are they worth their high share prices?

Australia and New Zealand Banking Group (ASX:ANZ) is the best ‘big four’ bank on the ASX. But that doesn’t automatically make it a buy. As seasoned investors know, to invest successfully requires us to consider only two prices. The price we pay and the price we sell.

In my opinion, ANZ is currently a hold. The reasoning behind my rating is it’s priced on potential and, indirectly, the interest rate environment. There are many fancy reasons with pages of financial jargon which explain why interest rates impact stocks, dividends, and the market, but for simplicity it comes down to the price difference between fixed income securities and dividends paid.

Although ANZ has tremendous potential in Asia – a distinct growth strategy amongst the big four – it’ll be a slow and steady path to success, and at over 14 times earnings with a book value of 1.95, it’s too high to be a bargain.

Leighton Holdings Limited (ASX: LEI) has been a contentious subject in recent months (years). After cost overruns on huge projects such as Brisbane’s Airport Link and Victoria’s desalination plant, Leighton had negative press coverage which included alleged corruption amongst management figures. In recent times Leighton had to contend with rising debt and slowing resources investment.

However, with a stellar profit over $500 million in its most recent report, Leighton continues to impress shareholders and is proving it’s on the right track moving forward. My biggest concern is the group’s major shareholder, Hochtief, who now own 60% of the company. The number has been creeping higher and higher every quarter. However at the company level, Leighton continues to win contracts and is on track to profits of nearly $600 million in FY14. It currently yields 5.8% and I rate it as a buy.

M2 Group Ltd (ASX: MTU) is the owner of Dodo, eftel and Primus telecom. It, like its competitors, has benefited from rising demand for the internet and general tech offerings from retail and business customers. Dodo and Primus continue to offer fixed internet services which are on-par or superior to its competitors.

Although it has already undergone years of rapid consolidation and profit growth, the future is just as exciting as the past for M2’s shareholders as it moves into an organic growth model and adds new offerings to its arsenal including electricity, gas and insurance. I recently connected my gas and electricity with Dodo and the service was great. Having a greater technology offering and a rapidly growing utility business provides further upside potential for this top dividend and growth stock. I rate it as a buy.

For stable but growing earnings, it’s hard to go past companies which offer monopolistic-like dominance. Transurban Group (ASX:TCL) is the owner of toll roads throughout Australia and the USA. It trades on high multiples and may be deserving of the price-tag, but an investment would require you to be as bullish as me. Over the past 10 years, its total annual shareholder return (not including dividends) is 11.3%. I believe it is priced for perfection but long-term investors will unearth considerable value as it continues to grow its total number of roads and pays a higher dividend. Transurban is a long-term buy.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »