Today is the day to pick up some bargain stocks.
As Warren Buffett once said, “Be fearful when others are greedy, and be greedy when others are fearful”.
Following yesterday’s crash I compiled a list of great companies trading around their current price to book values. Some are a little higher, but when you combine their price to book values with an excellent return on equity you end up buying great companies. Here’s the criteria I used:
- Return on Equity (5-year average) – Greater than 15%. Companies with sustainable competitive advantages should achieve above average returns on reinvested capital
- Total Debt to Equity (Recent Year) – Less than 40%. Less debt is better, especially when combined with a high ROE above
- 5-Year Revenue Growth Rate – Greater than 10%. Growth in sales is always a good sign
- Earnings per share (EPS) growth rate – Greater than 5%. Like sales growth, growth in earnings is also a good sign
- Market Cap – Greater than $300 million – We want to focus on the larger companies on the ASX
- Dividend Yield – Indicates whether the company is paying a dividend
- Price to Book Value – less than 5 – We want to find companies whose price to book is under 5x
The top 10 stock picks listed in ‘price to book value order’ are:
|Company name||Symbol||Return on equity (5 yr avg) (%)||Total debt/equity (Recent yr) (%)||5y revenue growth rate||5y EPS growth rate||Market cap||Div yield (%)||
|NIB Holdings Limited||(ASX:NHF)||18.53||18.76||12.46||27.67||1.51B||3.21||4.31|
|Vocus Communications Limited||(ASX:VOC)||16.69||36.35||78.36||33.48||1.31B||0.39||3.76|
|Credit Corp Group Limited||(ASX:CCP)||23.15||36.01||15.38||22.32||535.92M||3.73||3.04|
|Austbrokers Holdings Limited||(ASX:AUB)||17.94||23.48||16.7||13.11||499.90M||4.94||2.04|
|Woodside Petroleum Limited||(ASX:WPL)||15.39||16.42||16.69||7.27||26.96B||8.68||1.21|
|Magellan Flagship Fund Limited||(ASX:MFF)||17.67||0||39.9||39.51||879.02M||1.05||1.09|
|TFS Corporation Limited||(ASX:TFC)||16.62||34.14||17.48||5.75||519.27M||2.04||1.02|
|Mineral Resources Limited||(ASX:MIN)||25.13||11.24||49.13||28.71||931.12M||4.83||0.78|
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor John Hopkins has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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