Over the past 10 years a number of well-known Australian companies have fallen significantly in value. Whether it be structural changes to the company or industry, it is clear some of these companies may be facing long-term headwinds.
One such example is Fairfax Media Limited (ASX: FXJ). As can be seen from the graph below the changing dynamics in the print media and advertising industry have posed a tremendous threat to the company. However with a share price of just under $1.00, some commentators are anticipating the tide has turned and shareholders could finally get the reward they deserve. Despite its recent half-yearly rally, I’m still sceptical.
Leighton Holdings Limited (ASX: LEI) has been at odds with Fairfax and its publications including The Australian Financial Review and The Sydney Morning Herald following allegations of corruption amongst its senior management. As a result of this and cost overruns on two major projects, its share price fell hard from around $40.00 in 2010. Trading at $16.00 per share in September 2013, I called it a buy. I believe it still is.
One stock I was more bearish of is Rio Tinto Limited (ASX: RIO). I expected a good end to 2013 but its subsequent rally was backed-up by strong results which surpassed my expectations. The reasons behind Rio’s fall from over $150 per share in 2007 to around $65 today was because of ballooning debt, poorly timed acquisitions and falling commodity prices. Although I believe CEO Sam Walsh is doing an excellent job, investors will have to be bullish on the long-term price of iron ore to justify an investment in Rio.
It should come as no surprise that over the past decade the media industry has proven to be a tough one to compete in as digital content changed the way consumers interact with advertising and information. Companies such as Ten Network Holdings Limited (ASX: TEN) failed to keep pace with its rivals, debt grew, and its share price tumbled from around $1.75 in 2010 to just $0.35 today. Like Fairfax however, it has faced its debt head-on and has made meaningful changes to its programming. Still, I feel its best days are behind it.
Warren Buffett is famous for his ability to pick stocks and pass on words of wisdom to his fellow investors. Looking at these companies, one quote which springs to mind is: “Turnarounds seldom turn.”
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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
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