They're considered the juggernauts of their respective industries.
BHP Billiton Limited (ASX: BHP) is the world's largest mining organisation, and one of the lowest-cost operators.
Commonwealth Bank of Australia (ASX: CBA) is the largest of our 'too-big-to-fail' banks with a market value of $123.5 billion.
And Woolworths Limited (ASX: WOW) is the dominant force in Australia's $90 billion grocery industry – a position it has held for decades.
Despite their dominant positions however, all three have come under intense selling pressure in recent times, casting a veil of doubt over whether investors should continue to have faith in the businesses, or if they should look elsewhere for superior returns.
Are any of the three worth buying today?
BHP Billiton
With its low cost operations and high level of diversification, BHP Billiton has long been a favourite of investors. It was especially popular through the mining boom years at a time when Australian resources companies were on the receiving end of enormous global demand for their products.
That is no longer the case. BHP Billiton is now desperately trying to cut costs at a time where commodity prices are crashing as a result of excess global supplies and waning demand from China. Its earnings fell considerably in the most recent financial year and could fall even further this year if conditions don't improve.
Right now, it seems one of the biggest things going for BHP Billiton is its generous 7.4% fully franked dividend yield. While that might seem irresistible in this low interest rate environment, investors need to assess the risk of the miner's shares falling even further – potentially offsetting any dividend gains – while BHP's ability to maintain that dividend payment in the long-run also needs to be scrutinised.
With China's growth slowing down considerably, I would suggest investors overlook BHP Billiton for now, and focus on some of the market's other opportunities.
Commonwealth Bank
Commonwealth Bank has generated enormous returns for investors over the last few years, but the last six months have been far more challenging for Australia's biggest bank. The stock hit a peak just below the $97 mark and has since fallen into an official bear market, down 24.6% at $72.88.
While many would see this as a great opportunity to buy, I'm not so convinced. Indeed, the bank has benefited from a number of strong tailwinds in the past, including low interest rates and subsequent low bad debt charges; a booming property market and strong loan growth.
Now, it seems that bad debt charges could soon reverse course which would ultimately weigh on the group's ability to grow earnings. It must also overcome tougher competition within the sector as well as stricter regulatory rules designed to stem loan growth, and ensure the banks are able to withstand a downturn in the economy.
Although it is certainly more appealing now than it was in March this year, I believe Commonwealth Bank's shares are still overpriced based on these headwinds. In my opinion, Commonwealth Bank is one for your watchlist at its current price, but not your portfolio.
Woolworths
Woolworths' recent struggles have been well documented, and many investors have already written it off as a lost cause. But that could be why Woolworths' shares represent a decent buying opportunity today.
The market is fixated on Woolworths' struggling Masters Home Improvement chain, while it is also worried about Woolworths' lost market share in the core food and liquor division. This has led to a massive devaluation in Woolworths' share price which is now hovering just below $25 – down from nearly $39 in May last year.
I won't deny that there are issues at Woolworths. The loss of market share to Coles and Aldi is a real concern and one that needs to be addressed immediately. But I also believe that the group's new management team (when a CEO is eventually appointed) will bring a refreshed approach that can help restore the company's dominance as Australia's biggest retailer.
Again, an investment in Woolworths is not without its risks but at $24.92 a share, it certainly seems a worthwhile one for long-term investors.
