It's getting more and more common to hear investors talking about both specific stocks and the market in general as "fully priced." It's certainly a stretch to say that any sector – perhaps with the exception of mining services – looks cheap. However that doesn't mean that there aren't still opportunities for savvy investors.
Listed investment company (LIC) Australian Leaders Fund Limited (ASX: ALF), recently released a presentation by its manager Watermark Funds, which discussed in detail the current state of the market and areas of potential interest.
This quote sums up their thinking:
"With the US market up by over 150%, we have one of the most powerful bull markets in history accompanied by one of the weakest recoveries on record….In the post-war period the average bull market has lasted four years, so at five years and with monetary policy now tightening, we are deep in the final innings."
When it comes to the overall market, Watermark is obviously taking a conservative view about the expected returns from current levels, with Australian Leaders (ALF) presently holding approximately 70% of funds in cash.
Despite the high cash weighting, that still leaves 30% of the company invested in equities. Here are 6 stock positions of ALF which stand out:
- Australia and New Zealand Banking Group (ASX: ANZ), followed by Commonwealth Bank of Australia (ASX: CBA) are the two largest positions in the company.
- Amongst resource stocks Alumina Limited (ASX: AWC) and Tiger Resources Limited (ASX: TGS), were singled out as the manager believes they have a stronger outlook than the bulk commodity miners.
- Aurizon Holdings Ltd (ASX: AZJ) and Asciano Ltd (ASX: AIO), have been identified as two companies with the ability to take costs out of their business, to help off-set weak top line growth.
