Super investors such as Warren Buffett have shown us, investing in stocks which are temporarily out-of-favour can be a much better strategy for serious wealth creation than investing with the crowd.
The key is to correctly identify a temporarily out-of-favour company. This will be a company with some headline issue which can be resolved, rather than a stock which is in structural decline or with insurmountable problems.
The following three companies have witnessed significant falls in their share prices over the current calendar year, however, in each case, I believe their long term prospects remain sound.
Sirtex Medical Limited (ASX: SRX) – down 22%
Sirtex utilises a novel technology to manufacture a treatment for patients with liver cancer. The group has experienced impressive rates of growth as more and more oncologists around the world have chosen to utilise Sirtex's proprietary product.
In recent times the market appears to have become less enthusiastic about Sirtex's expected future growth rates and this has led to a decline in the share price.
Arguably, at current prices the stock is a good long term buy trading on a price-to-earnings (PE) multiple of 26x FY 2017 consensus forecasts.
3P Learning Ltd (ASX: ASX: 3PL) – down 59%
3P Learning has achieved significant penetration within the Australian school marketplace for its leading educational software including its Mathletics product.
3PL has expanded into the US marketplace, which obviously has huge potential, however it is still early days despite gaining some traction.
The market has understandably been disappointed by lower-than-anticipated sales growth and a change in the CEO.
A forecast PE of 15.7x could possibly more than fully compensate for the more muted growth expectations.
Flight Centre Travel Group Ltd (ASX: FLT) – down 21%
Flight Centre is undoubtedly a well-run company with solid management and an impressive historic growth record.
Recent guidance has underwhelmed the market with investors once again starting to question if the internet has finally caught up with the group's extensive bricks-and-mortar store operations.
While earnings per share growth rates are forecast to be low over both the 2016 and 2017 financial years, at a forecast PE of just 12.4x, there could be upside for the share price of this leading travel agent.
(Source: Reuters)
