A chief aim for most investors is finding stocks that offer good value. For me, this means finding top quality companies that are trading at distressed prices, whether that's because of short term challenges they face, or wider economic problems that are causing investor sentiment to be negative.
In fact, the more distressed the price, the better, since a wide margin of safety limits the downside and also, crucially, means there is much more potential upside, too. And, while being a value investor can mean higher than average volatility in the short run, it can also equate to impressive gains in the long run.
With this in mind, here are three ASX stocks that I feel offer great value for money, and could be worth buying right now.
Woodside Petroleum Limited
The current year is set to be a tough one for Woodside Petroleum Limited (ASX: WPL), with the major energy play set to see its bottom line fall by around 19.7%. However, next year is expected to see a drastic improvement, as Woodside continues to make efficiencies and cut costs, with its earnings forecast to rise by 28%.
As such, its current dividend yield of 6.4% (fully franked) appears to be highly sustainable, since next year it is expected to have a dividend coverage ratio of 1.3. This provides it with sufficient headroom to make the expected dividend payments, which frees up cash flow to invest in other energy sector plays that have excellent asset bases and which can provide Woodside with an even more appealing long-term growth profile.
Insurance Australia Group Ltd
Also trading on a high yield is Insurance Australia Group Ltd (ASX: IAG), with it currently offering 6.1% (fully franked). And, with IAG trading on a price to earnings (P/E) ratio of 12.3, it offers good relative value while the ASX has a P/E ratio of 16.8 and the insurance sector has a P/E ratio of 20.
Furthermore, IAG also offers relative stability over the short to medium term, should the RBA's interest rate cut fail to boost the Aussie economy. This is evidenced by IAG's beta of just 0.6, which means that its share price should change by just 0.6% for every 1% movement in the wider market. And, with an exposure to Asia, it could also benefit from a weaker Aussie dollar moving forward, too.
Scentre Group Ltd
Scentre Group Ltd (ASX: SCG) as the operator of the Westfield shopping centres in Australia and New Zealand has a dividend yield of 5.3%, with dividends set to grow at a healthy rate of 3.4% per annum over the next two years.
And, with Scentre Group likely to benefit from any further cuts in interest rates, its short-term performance could be relatively strong, while it remains a financially sound company for the long term. As such, its 25% share price rise over the last year should not put off potential investors, with there being scope for excellent returns ahead.
