The recent multi-year high of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) at 5,644 was a great achievement, returning to levels last seen six years ago. However since the last day of July when it occurred, the index has pulled back quickly, already down about 3%. It could be letting off a little steam, or it could be the first part of a normal correction.
Recently, Suncorp Group Ltd (ASX: SUN) and Woodside Petroleum Limited (ASX: WPL) also set new highs, yet have retreated. Can they keep up their strong performance? Would they be a buy, hold or sell?
Here's what you should know about these two stocks that are popular amongst investors.
Suncorp Group Limited
The general insurer and fifth largest bank has come a long way in the past two years. The banking division has improved earnings and the insurance business has seen less claims from natural disasters in recent years. In addition, the company is continuing with its simplification program to restructure the company. This is expected to create cost savings of around $265 million by 2016.
Currently at $14.04, that gives the stock an 18.1 PE, which is in the middle of its past PE range, so it's not excessive. Investors may be looking to potential special dividends or even a share buyback since the company stated it intended to conduct a capital return in the near future. It has a fully franked 5.1% dividend yield. With a more benign insurance climate, benefits from the restructuring to come and increased dividend possibilities, I find Suncorp attractive at today's prices and think it can continue up from here.
Woodside Petroleum Limited
The energy producer has already been successful with several LNG projects, but there are concerns that it doesn't have a lot in the development pipeline in the near term. It hit a $43.23 high recently, but has since slipped slightly to $42.26 now. That gives it a 13.5 PE, which is at the bottom of its past PE range.
It doesn't have a driving story of growth, and projects will require a lot of momentum to push it up because of the time and capital it takes to develop new oil and gas resources. Direct investment into existing projects may give it a quicker boost. The great thing about the stock is currently it offers a huge 5.9% fully franked dividend that shareholders can take advantage of. Right now, I would say that Woodside is more of a "hold" if you have the stock already.
