Goldman Sachs recently announced that now is the best time to buy Australian shares since 2005. While I'm not entirely convinced that's true, there certainly are a number of big name stocks trading at a discount. That makes today's article all the more important – you want to be very confident of the future if you're buying stocks at 52-week highs when there are so many others going cheap.
A special tip of the hat goes to Yowie Group Ltd (ASX: YOW) and Bellamy's Australia Ltd (ASX: BAL), who have soared to new heights after appearing in 52-week highs in recent weeks.
(You can find out more about Yowie's rise in Owen Raskiewicz's article here)
This week's big winners are big in every sense of the word, with a combined market cap of $17 billion. Here's what you need to know:
Sonic Healthcare Limited (ASX: SHL) – last traded at $21.37, up 26% for the year
Sonic's recent rise began last year with an entry into the Canadian market, but it was the recent announcement of a $450 million acquisition in Switzerland that really sent shares soaring. Sonic purchased a bunch of laboratories in Switzerland on a price of 8x earnings, simultaneously becoming the leading services provider in Switzerland and growing earnings by 8% per share into the bargain.
Sonic has a long track record of making this kind of acquisition and the results have been phenomenal for shareholders. Nevertheless prices above $20 per share are too expensive for my liking, and I rate Sonic somewhere between a 'Hold' and a 'Buy' depending on your investing timeframe and tolerance for risk.
Freelancer Ltd (ASX: FLN) – last traded at $1.36, up 43% for the year
Freelancer Ltd has enjoyed a particularly strong run recently, soaring in the wake of several positive announcements earlier this year, including the acquisition of online payments business Escrow.com and its first ever cash-positive quarterly update.
The most recent price rises, however, have been in the absence of news and on relatively normal volume, suggesting investors could be re-rating the stock or even buying in anticipation of the next results update in July.
Based on the results I'm expecting to see I feel that Freelancer is expensive at current prices – though it could rise further if it posts a cash-positive result. I would wait to see how its growth shapes up over the full year and the outlook for next year before considering a purchase.
Orica Ltd (ASX: ORI) – last traded at $22.43, up 20% for the year
Despite a subdued explosives market and the sale of its chemical business last year, Orica has enjoyed a strong – if bumpy – run thanks to its cost saving initiatives, strong financial position, and share buyback.
As announced at the half-yearly report, cost saving initiatives have already generated a net positive benefit (saving more money than the initiatives cost to implement) which will have a positive impact on future years. More cost savings are expected next year and while the demand for explosives and ammonium nitrate remains subdued, Orica appears to be in a strong financial position. It also appears to trade at an acceptable price with a Price to Earnings ratio of 14.
However based on an uncertain outlook which prevented management from providing an earnings forecast, and the fact that Orica is a mature and commodity-centric business, I consider it to be a 'Hold'.
