If you sell Telstra Corporation Ltd and AMP Limited now you might regret it

One of the challenges as an investor is focusing on a company’s business performance, rather than on its share price performance. In other words, it is easy to watch a company’s share price and, upon disappointment, adopt the view that selling it is a good idea. And, with the grass always appearing to be greener elsewhere, this can lead to over-trading by many investors.

Realistically, though, share prices always fluctuate. In fact, a company can be performing well in terms of its earnings growth, the delivery of its strategy and its long term outlook and yet still deliver a challenging share price performance.

That appears to be the current situation with communications company Telstra Corporation Ltd (ASX: TLS). Its shares have fallen by 11% since the turn of the year and yet it is evolving into a diversified communications company with excellent growth potential, as evidenced by a forecast annualised growth rate of 7.5% over the next two years.

As well as an upbeat growth rate, Telstra is also reducing its risk profile, too. Previously, it was reliant upon the domestic economy for its sales but, over the medium to long term, Telstra is set to focus on diversifying geographically by investing heavily in its Asian operations. This, it is hoped, will enable the company to generate a third of its revenues in Asia by 2020 and, while the region is undergoing a challenging period with Chinese growth slowing and Japan being in recession, its long term outlook remains enticing.

In addition, Telstra remains a relatively appealing stock based on its defensive prospects. These are set to gain a boost from the company’s move into e-healthcare, where profitability is less positively correlated with the macroeconomic outlook. As such, Telstra’s risk/reward profile appears to be relatively impressive – especially with it trading on the same price to earnings (P/E) ratio as the ASX at 15.4.

Meanwhile, AMP Limited’s (ASX: AMP) shares have also disappointed in 2015, with them being flat year-to-date. However, selling up now could be a mistake since the wealth manager is expected to increase its bottom line by 33% in the current financial year, and by a further 7% in the next financial year. This puts the company’s shares on a forward P/E ratio of 13.4, which indicates that there is upward re-rating potential over the medium term.

As with Telstra, a key long term growth space for AMP is Asia. With financial product penetration being low, there is huge scope for AMP to increase its sales outside of its traditional markets. as well as the opportunity for rising profits as a result. This, plus continued strength in net inflows and a dividend yield which stands at 5% (partially franked), indicate that selling AMP right now could lead to regret further down the line.

Despite this, there are 3 other ASX stocks that I believe could outperform Telstra and AMP.

In fact, they have recently been named as The Motley Fool's 3 Top Blue-Chips For 2016 and could make a real impact on your bottom line as we move through the year. As a result, it's well worth finding out more about them.

Click here to do so – it's completely free and comes without any obligation.

Motley Fool contributor Peter Stephens has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!