2015 has resulted in a mixed bag of returns for shareholders of National Australia Bank Ltd (ASX: NAB), Computershare Limited (ASX: CPU) and Macquarie Group Ltd (ASX: MQG).
Macquarie shares have soared 36%, Computershare has climbed 4.5%, but NAB has underperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) by around 6%.
So is now the time to buy? Let's take a quick look at each of these companies to see if they're offering compelling value right now…
NAB
Having recently sought to raise $5.5 billion in capital from investors by issuing new shares, the market has discounted the value of NAB's existing shares to reflect the dilution of ownership (which is normal). Part of the money raised will fund the bank's exit from the U.K. whilst the remaining component will be used to bolster its capital position.
The prospect of being required to hold more capital in reserve has now increased in recent times and two of the big banks have responded by issuing new shares.
When coupled with a likely slowdown in domestic credit growth, being forced to hold extra capital in reserve theoretically moves NAB shares further up the risk curve.
Factoring these risks into my expected returns, and given their current price of $32.39, I think NAB shares are a sell.
Computershare
Computershare is a $7 billion share registry and transfer agency. Computershare has a deep and wide economic moat (another word for competitive advantage) which means its revenues are sticky and its margins are strong. Indeed, it'd be difficult for clients to transfer every shareholder over to another registry company without incurring hefty costs.
Operating in 20 countries, Computershare's profits are somewhat dependent on swings in currencies. However, this will likely be a boon for the company over the medium term since it derives half of its revenue from the United States and Canada, combined. Moreover, rising U.S. interest rates will provide a welcome boost to earnings because Computershare holds billions of dollars of client funds which can earn interest on a short-term basis.
At today's prices, Computershare appears a good long-term buy in this investor's opinion.
Macquarie Group
Macquarie Group shares have performed exceptionally well over the past three years, as local and global equity markets started a firm bull run. Macquarie, Australia's largest investment bank, derives 70% of its income from global markets and has two distinct business lines: annuity-style businesses, which are less volatile (think of products such as mortgages, fleet finance and funds management); and capital markets facing businesses, which house services such as mergers and acquisitions, and advisory.
Both of Macquarie's businesses have bolstered returns in recent times.
However, the challenge for long-term investors is to purchase the bank's shares for a price which is relative to underlying earnings over the entire market cycle. As it stands, I feel the time to buy Macquarie shares below that level has passed. Therefore, I rate it as a hold.
This stock makes up 10% of my portfolio…do you own it?
