With 2018 just around the corner, investors should already be turning their minds to companies that are likely to throw off opportunities and unexpected risks. Here are 4 I'd be keeping an eye on:
XERO FPO NZX (ASX: XRO)
Soon to be just Xero FPO following its NZX delisting, Xero looks fully priced or even overpriced on all conventional measures. As we wrote here and here however, there is a significant opportunity for the company to grow its subscriber numbers, revenue per user, and add additional features and functions that customers will be willing to pay for.
I would not bet against Xero, although today's prices mandate a 10-year time frame for your investment.
Nearmap Ltd (ASX: NEA)
Nearmap shares have been volatile recently as the company deals with ongoing speculation about competition and its chances of success in the USA. While a high-risk investment and currently unprofitable, Nearmap has a highly scalable solution. This means that it doesn't cost much to add or maintain a new customer, making each customer very profitable as long as the company can keep growing.
While there are no guarantees the company will be successful, today's share price essentially represents fair value for the Australian business in my opinion, with the US business representing significant 'blue sky' if successful.
Afterpay Touch Group Ltd (ASX: APT)
There's no denying the success of Afterpay, with the company's name already having become a verb to describe its buy-now pay-later solution. However, unlike the above companies, I would be having an eye to Afterpay as more of a risk than an opportunity.
The company's business model is untested in a weaker credit environment and it is not hard to see serious downside to the business if sales decline and delinquencies soar (as would be expected in an economic downturn). Against this risk, investors must weigh the possibility of the company continuing to grow market share. I do not think Afterpay is a 'Sell' but I think it would be very prudent to ameliorate the risks, perhaps through a smaller position size.
QBE Insurance Group Ltd (ASX: QBE)
Underpriced relative to peers, QBE Insurance was slammed this year with huge claim costs following hurricanes in the USA. In a stroke of fortune however, the company purchased its 2018 reinsurance prior to the event, meaning it may benefit from more profitable policies if insurance prices rise in the wake of the disaster.
While the company has long been an underperformer, I think it looks interesting at around $10.
