Part of investing is filtering out the dud stocks. Occasionally you get stuck with one – that's also part of investing.
Readers may have seen my recent purchases of Greencross Limited and XERO FPO NZ, but I thought it might be interesting to show the other half of the equation, the stocks that haven't made the cut…yet.
Or maybe never, for reasons that will soon become apparent:
Praemium Ltd (ASX: PPS) is a marginally profitable software and investment management company that provides investment administration and financial planning technology for a variety of firms in Australia, Asia and the UK.
The flagship business appears to be the 'Separately Managed Account' (SMA) platform which allows financial advisers to offer a variety of model stock portfolios to clients. Praemium manages the investment portfolio while allowing the client to retain beneficial ownership of the managed assets.
Further investigation is required into aspects like its growth trajectory, performance of the managed portfolios and the independence of the business (e.g. are there 'beneficial relationships' with clients or partners?).
However, with strong, consistent growth in 'Funds On Platform', international diversification and other business opportunities combined with a price that isn't exorbitant, Praemium presents as an interesting opportunity.
Treasury Wine Estates Ltd (ASX: TWE) is Australia's largest publicly listed wine company that was originally spun off from Foster's brewing back in 2011. It hasn't been an outstanding business, although share price growth of 75% in four years belies the underlying problems.
I've consistently written that Treasury looks expensive at today's prices, however, the ongoing plan to optimise its supply chain and its strong brands made it worthy of a second look. Consolidating production and selling excess facilities will reduce costs, while growing revenues could see the company nicely profitable in the future.
However, for the kind of performance that shareholders can expect for Treasury, right now I would rather buy something like Coca-Cola Amatil Ltd (ASX: CCL), which trades on a similar valuation but generates way more cash and lacks the associated agricultural (actually, viticultural) risks.
For the moment, I'm still steering clear of Treasury shares.
Finally Spark New Zealand Ltd (ASX: SPK), formerly Telecom New Zealand, is the 'Telstra' of New Zealand providing a variety of broadband, mobile and IT services to customers. Unfortunately, it hasn't been nearly as successful as Australia's Telstra Corporation Ltd (ASX: TLS) largely thanks to the break-up of its monopoly a few years back.
Spark has been divesting a number of its assets to companies like FlexiGroup Limited (ASX: FXL) and My Net Fone Limited (ASX: MNF) in recent times in efforts to streamline its business to focus on a 'digital services future'.
Ongoing high capital expenditure has been cramping cash-flow and raising debt, yet the purchase of more mobile spectrum and a data centre should pay dividends in the future as demand for these services rises. I think Spark's goal of improving its margins is a tall order in such a competitive market, although I believe the company has a bright future ahead.
With positive market tailwinds and trading at its lowest price in over a year, I will be taking a closer look at Spark New Zealand.
