Stocks with premium price tags always polarise opinion, with some investors saying they are set for a fall, while others believe that momentum could carry them higher.
Of course, with the ASX still being some way off its all-time high of 6,748 in October 2007, few companies are currently trading at their highest ever levels. However, it’s surprising just how many are at 5-year highs, or even 10-year highs.
With that in mind, here are three stocks that are trading relatively high. Are they worth buying, selling, or holding right now?
Telstra Corporation Ltd
Shares in Telstra Corporation Ltd (ASX: TLS) are currently trading at their highest level since 2001, having recently broken through the $6 per share barrier. In fact, the company has undergone something of a turnaround regarding investor sentiment, with it being viewed as a rather unappealing choice five years ago.
However, since then Telstra has seen its share price explode and rise by 82% even though its bottom line has expanded by just 2.9% per annum during the period. However, what seems to have stimulated investors when it comes to Telstra is its potential for expansion in faster growing markets across Asia, as well as the deal with the NBN Co. that nets Telstra $11.2 billion at net present value.
As such, momentum seems to be with Telstra and with its shares trading on a price to earnings (P/E) ratio of 17.4, their premium price tag still seems to have scope to increase versus the ASX, which has a P/E ratio of 15. Therefore, they seem to be worth buying at the present time.
Westpac Banking Corp
Shares in Westpac Banking Corp (ASX: WBC) reached their highest ever level of $35.86 in April last year and since then have drifted somewhat as doubts surrounding the future of the Aussie economy and Westpac’s valuation have caused investor sentiment to weaken.
However, with it being mooted that the RBA could cut interest rates during the course of the year, Australia’s second biggest bank could stand to benefit from increasing demand for new loans, as well as a reduction in bad loans. Both of these aspects could improve the bank’s profitability and allow its shares to make higher highs over the medium term.
Also, with Westpac having increased its bottom line at an annualised rate of 6.2% over the last 10 years, it seems to offer an impressive track record that could allow its price to book (P/B) ratio of 2.1 to expand even further – even though it is at a significant premium to the wider index (1.24) and banking sector (1.29). As such, Westpac could be worth adding to your portfolio.
Scentre Group Ltd
Shares in Scentre Group Ltd (ASX: SCG) are at their highest level since the shopping centre operator listed in June last year. In fact, on an annualised basis, they have delivered a total return of 41.3%, which is hugely impressive and leaves the majority of ASX stocks in its wake.
Looking ahead, more growth could be on the cards. That’s because Scentre is a relatively cyclical business that responds well to a loose monetary policy. And, while an interest rate of 2.5% is historically relatively low, it could be much lower (as investors across much of the rest of the developed world are all too aware).
As a result, consumer spending may rise over the medium term, which would clearly be great news for Scentre’s bottom line and could help to push investor sentiment, as well as its share price, even higher.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.
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