The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has rocketed 1% higher on Wednesday morning after a strong lead from Wall Street which saw the Dow Jones and S&P 500 end up 2.4% and 2.5% respectively.
With many leading blue-chip stocks gaining ground, investors may be wondering if the sell-off is over and it's time to start buying again…
While some investors become fixated on trying to determine which direction the market will move next, arguably a much more fruitful strategy is to focus on identifying attractively priced stocks and then buying and holding those quality stocks for the long term.
With Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) both still trading near their 52-week lows and AMP Limited (ASX: AMP) well off its highs, it's certainly not too late to consider the investment merits of each.
Based on the latest data from Thomson Consensus Estimates, analysts are expecting earnings per share (EPS) at Woolworths to decline in both financial year (FY) 2016 and 2017, while they expect the dividend to remain steady. If FY 2017 is the low point for earnings then investors can buy Woolworths today on a forecast price-to-earnings (PE) ratio and fully franked dividend yield of around 15x and 5.5% respectively.
In contrast, the consensus earnings outlook for Wesfarmers suggests a steady increase over the next two financial years, although the dividend is forecast to slip below the FY 2015 level. Based on Thomson's FY 2017 forecasts, investors can acquire shares in Wesfarmers today on a PE and yield of just under 16x and nearly 5.5% respectively.
AMP is arguably still one of the most attractively priced large financial stocks available to investors. According to the consensus data, both EPS and dividends per share are forecast to grow over the coming three reporting years (AMP has a December year end). Based on the forecast for FY 2017, the stock is trading on a PE of 13.8x and yield of 5.4%.
