Is there value in Metcash Limited, AGL Energy Ltd, and WAM Capital Limited?

Good morning Foolish readers, I hope you enjoyed your public holiday yesterday. The ALL ORDINARIES (INDEXASX: ^AXAO) (ASX: XAO) enjoyed a strong performance on Monday, rising 1.7% in trade, although if recent weeks are any indication we could well finish down this week.

Nevertheless, a number of shares were carried to new highs by Monday’s rise, although the catalysts for their recent performance germinated some months ago. Here’s what you need to know:

Metcash Limited (ASX: MTS) – last traded at $1.80, up 20% for the year

Not many would have expected Metcash shares to rise 80% in the past six months after conducting asset impairments, cancelling its dividend and being ignominiously dropped from the S&P/ASX 100 (INDEXASX: ^AXTO)(ASX: XTO), but that’s exactly what happened.

Shares in the grocer soared after a mediocre half-yearly report, which showed revenue up by 1.4% and underlying profits down by 6.1%, as a result of cutting prices to remain competitive. With debt significantly reduced and the company trading on a Price to Earnings (P/E) ratio of around 10, it is enough to interest bargain hunters.

However, competition remains intense in the supermarket sector and I don’t believe Metcash shares will rise significantly further in the near future.

AGL Energy Ltd (ASX: AGL) – last traded at $18.50, up 32% for the year

The rise of AGL Energy shares over the past 12 months can be largely attributed to several gas storage, transportation, and sales agreements that the company has signed with a variety of domestic players. The most recent one saw AGL potentially selling up to 34 PetaJoules (PJ) of gas per annum from 2018-2020 to Santos Ltd’s (ASX: STO) GLNG project in Gladstone, while also retaining the flexibility to supply domestic customers.

Looking at the company as a whole, shareholders can expect a modest rise in profit in 2016, with Underlying Profit expected to be between $650-$720m, compared to $630m in the 2015 financial year. Conditions remain challenging as domestic electricity demand is subdued and competition is strong, and I do not expect AGL shares to move significantly higher in the near term.

WAM Capital Limited (ASX: WAM) – last traded at $2.13, up 6.5% for the year

WAM Capital had a cracking year in 2015, earning returns before expenses, fees, and tax of 25.6% on its portfolio, compared to a measly 3.8% for the ASX All Ordinaries. This, combined with a long-term record of performance, is probably why this Listed Investment Company (LIC) trades at a premium to its Net Asset Value of $1.96 per share as of 31 December 2015.

Usually, investors looking for a bargain in LICs are best served by buying only when shares trade at a discount to their Net Asset Value. However, given WAM Capital’s average returns since inception in 1999 of 18.3% per annum (before expenses, fees, and tax), a small premium might be a fair price to pay for more passive investors.

While WAM’s performance is obviously linked to the performance of the stock market – and we could theoretically have a crash tomorrow – I believe continued performance will see WAM’s share price and Net Asset Value rise over the medium term.

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Motley Fool contributor Sean O'Neill 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.

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