National Australia Bank Ltd, Woolworths Limited and Macquarie Group Ltd: Should you buy?

No one likes to see their stocks fall but the reality is it happens.

Yes, even the big banks and supermarket giants have shown their weaker side this month, with a few falling much harder than others.

National Australia Bank Ltd (ASX: NAB), Woolworths Limited (ASX: WOW) and Macquarie Group Ltd (ASX: MQG) have fallen 8%, 5% and 1.5%, respectively, since the beginning of September.

So could now be the ideal time to pick up a bargain or are these stocks still expensive?

Excluding dividends, NAB, our largest bank by assets, has underperformed the S&P/ASX 200 (INDEXASX: XJO) for many years. In fact, over the past decade its share price has risen just 20% versus a 46% gain from the index.

Despite interest rates being stuck at only 2.5% and shares trading on a forecast fully franked dividend yield in excess of 6.1%, it appears investors still think NAB isn’t worth the risk. And I agree.

NAB shares still aren’t ‘cheap’, despite falling heavily in the past month and its woes in the UK continue to cause headaches for management. I’d like to see a divestment away from the UK, or given its poor profitability (compared to its peers), a price-to-book value much lower than its current 1.75.

Whereas NAB may be a serial underperformer, the same cannot be said for investment bank and diversified financial powerhouse, Macquarie Group. Macquarie shares took a big hit after the GFC and management has since started to grow the bank’s annuity style businesses.

Thanks to its global exposure, Macquarie is somewhat sheltered from the slowdown in the domestic economy. Indeed, with around 67% of income derived from outside Australia and New Zealand, the bank stands to benefit from rising confidence in global markets, especially those of North America and Asia.

Lastly, Woolworths may have taken a slice off its market capitalisation during the past month but I believe the retailer could still have some way to go. The company appears to be priced as if it is still the growth stock it was 10 years ago.

In coming years, Woolworths will not be able to emulate the same explosive growth it experienced in the previous decade because it is simply too big and the market place for its key profit driver, groceries, is becoming more competitive. I believe fair value is below its current market price and it is therefore best left on the watchlist, for now.

Buy, Hold, or Sell? 

Whilst I think there could be value in value in Macquarie shares at today's prices, I'm not rushing out to buy any of these three stocks because our top analyst, Scott Phillips, recently identified one cheap but growing small-cap ASX stock with a 6.3% grossed-up dividend yield which I think is a STANDOUT buy today. If you're interested in knowing its name, just click on the link below, enter your email address and we'll send you the FREE report on his top dividend stock idea for 2014 - 2015!

"The Motley Fool's Top Dividend Stock for 2014-2015"

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.  

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