Telstra Corporation Ltd (ASX: TLS), National Australia Bank Ltd (ASX: NAB) and Rio Tinto Limited (ASX: RIO) are three S&P/ASX 200 (ASX: XJO) (INDEX: ^AXJO) companies which are likely to be on many investors' watchlists. But do they deserve a spot in your portfolio?
Respectively, in the past 12 months, their share prices are up 11.8%, 11.4% and 8% compared to a 12% gain from the index. It's hardly anything to get overly excited about.
However since all three companies are down between 1% and 7% in the past month alone, investors are now weighing up whether, or not, it would be a good time to take-up a position. Here's what I think you can expect from these three.
Telstra
As Australia's largest Telco, Telstra has a lot to offer investors. Not only does it pay a legendary dividend, equivalent to 5.5% of its current price, it also offers a promising (but slightly risky) overseas expansion. With a dominating mobile network, a rollout of wireless hotspots throughout much of the country and robust operating margins, Telstra has the perfect platform from which it'll leverage its Asian growth.
At current prices I believe it is a solid long-term buy and hold, but at the same time, I believe its high share price could come under downwards pressure when interest rates inevitably rise.
National Australia Bank
As Australia's premier business bank, NAB plays an integral role in the local economy. Unfortunately however, its expansion into UK Banking has proven to be a terrible decision, and has cost the bank (and its shareholders) dearly over the past 10 years.
Although it is quickly running down its UK commercial property portfolio, I also believe its Australian operations need some attention before it can be deserving of a "buy" rating. Alternatively a lower share price would be nice.
Rio Tinto
With a majority of its earnings derived from iron ore, our second biggest miner has come under intense investor scrutiny since the beginning of 2014. Its shares are down 15% so far! Whilst analysts believe the iron ore spot price won't fall much lower than its current price of approximately $US90 per tonne in the long-term, betting on a rebound in the short term could prove to be costly.
Whilst Rio appears cheap, the steelmaking ingredient could fall further and apply more downwards pressure on Rio's current share price. At the moment we're only able to speculate as to the effects of iron ore's fall on Rio's bottom line, and speculating on this seemingly high-risk/modest-reward investment isn't something I'm willing to do.
