According to reports in the Australian Financial Review today, WAM Capital Limited (ASX: WAM) believes investors should avoid the big four banks and focus their attention on four other shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) instead.
The report states that Wilson Asset Management's Matthew Haupt is concerned that there is downside risk for the likes of Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) from potential capital raisings as early as 2017.
Whilst I agree that this is a potential downside risk, I believe the potential share price gains and strong dividends are more than enough to offset this risk if it does eventuate.
We may not agree on the banks, but we do agree on four shares which feature in WAM Capital's Leaders Fund. They are as follows:
Credit Corp Group Limited (ASX: CCP)
The share price of this Australian debt collector has risen 28% in the last three months thanks to a market update that revealed it expects to acquire between $225 million and $230 million in purchased debt ledgers this year, rather than its previous forecast range of $185 million to $195 million. As well as this the update forecasts an improved outlook for the next financial year, with its US operations expected to hit breakeven by the middle of FY 2017. At 13x trailing earnings, Credit Corp looks to be good value to me, despite the rapid rise in its share price.
Orora Ltd (ASX: ORA)
Since this packaging company demerged from Amcor Limited (ASX: AMC) back in 2013, it has been one of the best-performing shares on the S&P/ASX 200, with a massive share price gain of 134%. Given it has around 44% of its sales deriving from North America, the weakening Australian dollar could prove to be a boost to its top-line growth in the months ahead. At 20x trailing earnings it is about fair value now in my opinion.
Mayne Pharma Group Ltd (ASX: MYX)
Mayne Pharma shares came under the spotlight recently after announcing that it had successfully raised equity to complete its US$652 million acquisition of a portfolio of drug products. Mayne Pharma will acquire 37 approved and five FDA filed products from Teva Pharmaceutical Industries and Allergan plc. Management expects the deal to be significantly accretive to earnings from FY 2017 onwards. As its shares are up 33% in the last three months, I'd suggest waiting for a pull back before investing.
Reliance Worldwide Corporation Aus P Ltd (ASX: RWC)
This may not be a well-known company, but this new listing to the ASX certainly is a high quality one. Reliance Worldwide is the world's largest manufacturer of push to connect plumbing fittings and specialist water control valves. In FY 2015 the company delivered sales of $451.7 million, with its Americas segment contributing 66% of sales. Thanks to its products being available in many of the biggest retailers in the US, such as Home Depot and Walmart, Reliance Worldwide is yet another company which I expect to get a boost from a weakening Australian dollar.
