Analysts have, in my opinion, one of the most interesting jobs anyone could have. They get to thoroughly research a company by meeting with management, investigating competitors and digging into the group's finances. Of course not everyone is like me, and thus many Australians rely on the expertise of analysts to guide their investment decisions.
Conflicting Opinions
One of the more perplexing issues that retail investors have to deal with is when analysts offer completely opposite opinions. A great example of recent times has been Domino's Pizza Enterprises Ltd. (ASX: DMP). Dominos' share price has fluctuated wildly but the current price of $24.50 lies a long way from the highest analyst fair value estimate of $31 but still well above the $17 value by the lowest estimate.
Investors are rightly confused when situations like this occur and may be wise to consider only buying companies that are widely viewed as being 'good' buys. This can be done by signing up with all Australian brokers, or alternatively by signing up to a service that combines their research.
Confident Buys
There are a number of companies that are rated by all of the major Australian analysts as 'buys', but four stand out to me as particularly good long-term investments:
Rio Tinto Limited's (ASX: RIO) share price hasn't gone anywhere for nearly 6 years despite revenue increasing by nearly 25% and net profit before abnormals doubling. The recent weakness in the iron ore price may provide long-term investors with an opportunity to buy at a good price, however as we've mentioned in the past, mining companies are price-takers and therefore cannot be relied on to provide stable or predictable earnings.
Spotless Group Holdings Ltd (ASX: SPO) is loved by analysts after re-listing on the ASX earlier this year. It provides catering and cleaning services to stadiums, schools, individuals, hospitals and aged-care facilities in Australia and New Zealand. Strong demand for outsourcing these types of services should allow spotless to grow strongly in coming years.
Analysts also love Peet Limited (ASX: PPC), one of Australia's largest listed specialist residential land developers. Peet is well-placed in some of the fastest growing housing markets in the country with offices in Perth, Melbourne and Brisbane. Exposed to strong house prices and low interest rates, Peet has a bright future.
Finance group FlexiGroup Limited (ASX: FXL) has also received the praise of Australian brokers. Leveraged to an improving economy and stronger consumer confidence in Australia and the UK, Flexigroup is well placed to grow strongly over the next 5 years.
Should You Listen?
Analysts have an interesting record. Research has found that they're good at identifying the worst companies but aren't always the best at finding the best companies.
