Australian shares have been hit hard in recent months, with some of the nation's biggest and most widely-held stocks amongst the biggest casualties.
Concerns about the local economy and Greece's debt situation, together with weak commodity prices and expectations of a US interest rate hike (or two) before the end of the year are all weighing on the market's sentiment, which saw the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) narrowly avoid a 'technical correction' recently.
Although the benchmark index has since managed to regain some composure, investors are still uneasy about the market which is creating some excellent buying opportunities for those individuals with a long-term focus. Indeed, even some of the nation's blue-chip stocks are beginning to look attractive after a prolonged period of excessive valuations.
With the ASX 200 currently hovering around 5,630 points, let's consider three of the nation's biggest companies and whether they're worth your consideration today…
CSL Limited (ASX: CSL)
CSL is a global biopharmaceutical company, running one of the world's largest plasma collection networks while it also engages in research, development, manufacturing and marketing of products to treat and prevent various human medical conditions. CSL is a behemoth in its industry (with a market value of $41.3 billion) and provides services that are vital to our society.
The company's shares have retreated from their all-time high of $96.60 and currently trade for $88.86. Although the stock still isn't cheap at that price, CSL does have the qualities and competitive advantages that could see its earnings continue to grow strongly for the foreseeable future.
Indeed, it should also benefit from a weaker Australian dollar (which I believe will continue to fall against the US dollar) given that most of its sales are generated overseas. Furthermore, it should also benefit from a rapidly growing and ageing population locally – a trend which is expected to continue over the coming decades. As such, I believe CSL could be a reasonable investment for 'Foolish' investors focused on the long term.
Woolworths Limited (ASX: WOW)
Woolworths has had a tremendously tough run over the last 12 months. Indeed, this has been reflected in the shares which have shed nearly a third of their price since May last year.
Due to management's intent focus on margins rather than customers, Woolworths has lost market share in its core Food and Liquor division while its rivals Coles and Aldi have quickly gained ground. At the same time, Woolworths' embattled Masters Home Improvement division remains heavily cash flow negative, despite a recent surge in sales.
Woolworths' management have admitted to their terrible decision-making while CEO Grant O'Brien even announced his resignation last week after less than four years in the job. To highlight just how badly things had gotten, the market actually bid the share price higher upon that announcement.
Although the future remains unclear for Woolworths, I would argue that now is a great time to buy. A change of management could be just what the group needs to get back on top of its game while its initiative to reduce costs and pass on the savings to customers in the form of lower prices should be enough to regain market share in the medium term.
While investors wait for that to come to fruition, they can enjoy the company's forecast 5.3% fully franked dividend yield, which equates to a 7.5% yield when grossed up for tax credits.
Commonwealth Bank of Australia (ASX: CBA)
Australia's largest bank narrowly avoided falling into a bear market recently – defined as a drop of 20% or more – and has recovered considerably ever since. The shares bottomed out at $79.19 a little over a fortnight ago and now trade at $87.29 – a very respectable gain on a $142 billion goliath.
With murmurs of another official interest rate cut from the Reserve Bank of Australia before the end of the year, it's likely that investors are becoming increasingly confident that Commonwealth Bank – and each of the big banks for that matter – can return to their historic highs.
Taking an alternate view, I actually think investors should consider taking advantage of the recent recovery to sell their shares, or at very least reduce their exposure to the bank. There are a number of strong headwinds facing the sector which could seriously hinder their ability to grow earnings and dividends at a pace strong enough to justify their current price tags.
While those investors who do decide to sell may miss out on some gains in the near future, I believe their cash can be better served elsewhere.
