Investing requires a lot of thought – just because the ASX 200 is seemingly charging towards the 6000 mark doesn’t mean you just put your money anywhere. As Warren Buffett has always said you need to pick good companies with a great long-term future, and not focus on ‘hot’ stocks that are riding on short-term fads.
However even when you pick out a strong company with a bright future you still need to ensure you get it at the right price – a good company at a bad price makes a bad investment. Below are three stocks which I believe investors should hold off buying for now.
Woolworths Limited (ASX: WOW)
This one is a little controversial because Woolworths is an established blue chip with a long history of rewarding investors for their faith. Normally a large dip in price like we’re seeing now is a buying opportunity, but I’m quite weary of the threat from the likes of ALDI and the poor performance of its supermarket division. The company is looking to arrest the situation by installing the head of the successful liquor division to oversee the supermarket division, but as Warren Buffett has famously said ‘turnarounds seldom turn’ so I’m going to hold a healthy dose of scepticism.
Cover-More Group Ltd (ASX: CVO)
Cover-More has recovered nicely since investors dumped its stock off the back of its first half results, with the stock up over 9% since. With a solid business in a market-leading position in Australian travel insurance and no exposure to claims I believe it has a good future. Throw in the fact that it’s got a growing presence in Asia and I think it’ll make a great addition to any portfolio. Whilst one of their major distributors Flight Centre Travel Group Ltd (ASX: FLT) is seeing early signs of a recovery in the outbound travel market, it may not be time to take the plunge given the stock trades on a forward P/E of 18x under an optimistic scenario.
Japara Healthcare Ltd (ASX: JHC)
The company has managed to shake off the negative sentiment that has weighed it down since a payroll bungle was announced to the market in December, with the stock now up 30% in 2015. The future is bright for the aged care industry with an estimated 80,000 additional residential aged care places required by 2022, which is a massive tailwind that will benefit Japara. However the fact that it is no longer trading at a significant discount to its peers means that investors should refrain from jumping into the stock.
Investing can be a minefield so you need to be careful with your picks. Thankfully at the Fool we love helping investors to make better decisions. In fact our top analysts have just found their top stock for 2015, so be sure to find out what our analysts have to say.
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Motley Fool contributor Simon Chan owns shares in Japara Healthcare Ltd and Flight Centre Travel Group Ltd