First and foremost it’s important to note only NAB has outperformed the S&P/ASX 200 (ASX: XJO) (^AXJO) in the past five years, whilst Woodside is the only one to do so in the past 12 months. So it would appear the market has mixed emotions towards the companies.
TEN Network Holdings
In the past 10 years, shares in TEN have fallen over 90% as its management struggled with burgeoning debt, falling ratings and the rise of the internet. Although it now claims to have little amounts of debt, since 2011 the number of shares on offer have increased by over 94% – it’s no surprise earnings per share have fallen from 5.6 cents to a loss of 0.2 cents.
While many investors may believe TEN could be a potential turnaround story, individuals are increasingly using cable television and online services to get their fix of popular programming. Although management appear to be narrowing their losses, it is no more than a speculative investment with limited upside potential in the long term. It’s a risk I’m not willing to take.
National Australia Bank
NAB is currently the cheapest and highest yielding big bank. But it seems it’s for good reason. NAB remains haunted by its troubled UK businesses and its profitability in local markets continues to lag its peers.
However NAB controls the biggest share of Australian business banking and, using fundamental valuations, some investors may believe it represents the best buy at current prices. Still, I would like to see it sell off its UK banking and commercial loans businesses, or a lower share price before hitting the buy button. Until then, it deserves its current price tag, therefore it’s not a buy in my book.
Woodside is Australia’s biggest independent oil and gas company with huge projects off the coast of Western Australia. As noted earlier, in recent years Woodside has struggled to get investors excited about its business. Recently the company quit from its proposed multi-billion dollar Israeli gas field, named Leviathan.
Although this may have some investors concerned, I believe the regulatory hurdles and massive amount of risk surrounding the project resulted in it becoming economically unviable. In the next five years Woodside will be relying on acquisitive growth, exploration and its Browse LNG project to drive earnings. I believe Woodside currently trades around fair-value although a weak performance in 2013 makes an upside earnings surprise this 2014 more likely.
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