With the US market hitting another new high again overnight and the Aussie market climbing higher too; it could be time for investors to reassess if the stocks in their portfolio have become overvalued. Moving to cash can be a dangerous decision if the market keeps rallying, which means switching into more attractively priced stocks can be a shrewd move as this can still provide upside and defence against the downside.
Here are four stocks which might still offer investors value in an otherwise expensive market.
Brambles Limited (ASX: BXB) is now free of its document management business having demerged from Recall Holdings Ltd (ASX: REC) late last year. This means Brambles' management can now focus 100% on growing the pooling business. The half-year results were impressive with the firm achieving an 8% increase in underlying earnings per share. While the stock trades on a hefty multiple, it is reflective of the quality of the business and the long-term growth profile of the stock.
Harvey Norman Holdings Limited (ASX: HVN) reported an 18% rise in its first half net profit after tax (NPAT) on the back of a 4.9% rise in like-for-like sales. The latest data on housing approvals suggests Australia is in for an upturn in building completions to which Harvey Norman is well leveraged. Despite this leverage the stock is trading on a forward FY 2015 price-to-earnings (PE) multiple of only 13.
Lend Lease Group (ASX: LLC) has built an impressive international property and infrastructure business. The firm's first-half results were not spectacular but they were good and the outlook for earnings growth in the next few years is to see NPAT rise from around $530 million to $720 million. On these forecasts the stock is only trading on a PE ratio for FY 2016 of nine times.
Sydney Airport Holdings Ltd (ASX: SYD) continues its impressive performance. The stock offers investors a good combination of growth, income, low risk and is underpinned by a solid international passenger outlook. This combination can provide downside protection should the market fall while still providing reasonable upside if the market continues to rally.
Foolish takeaway
While a correction would see most companies sold off perhaps with the exception of some 'safe-haven' stocks. It is also a time that the market reassesses the above historical average metrics that many stocks currently trade on. When this happens, stocks that are more fairly priced stand the best chance of not suffering such significant falls.
