Over the past six months, three big name stocks have climbed over 15%, more than double the 7% gain of the S&P ASX All Ordinaries Index (ASX: ^AORD). So if you didn't buy into their rallies, have you missed the boat? You have to look at why they went up and see what kind of headwinds or tailwinds there are for each stock.
1) REA Group Limited (ASX: REA)
The growing housing market has really benefitted the company of the number-one realestate.com.au property website and that could keep on going with the current low interest rates driving more property purchases. It is also expanding overseas into developing property markets.
It offers a 1.1% fully franked dividend, but this stock is a fast grower, so that's fine. The high 37 price/earnings ratio means strong growth is priced into the stock. I believe the stock is taking a breather from its recent run-up and the tailwinds are still there to drive it more. I like the company's growth potential, yet it isn't at a bargain price.
2) David Jones Limited (ASX: DJS)
The department store company is under a takeover bid from South Africa's Woolworths Holdings Limited (Johannesburg: WHL), which skyrocketed the stock up to the $4 per share takeover offer. The bid has been complicated by the share registry raid of billionaire Solomon Lew who could potentially try to block or influence the takeover.
There isn't much upside to this story for new investors. The stock is at $3.94 so unless an even bigger bid was lobbed in by a new party, the stock probably won't go up much from here. However, if the takeover offer fails, the stock could easily fall, possibly even back to the pre-takeover offer price of about $3.20. I would avoid buying into this one until the dust settles on the deal.
3) Newcrest Mining Limited (ASX: NCM)
The gold miner has rebounded since mid-December along with the gold price. Up around 41%, the company is cutting costs and increasing gold production to raise sales volumes. The stock's rise is very dependent on gold commodity prices. It has just opened a new mine in NSW with very promising production levels projected over the next three years.
Gold is back above US$1,300 an ounce, so having at least a small position in the stock would be adequate. From there you can build upon your stake as gold possibly rises further and Newcrest increases sales.
