The share prices of businesses are always changing, meaning what you should do with a share can change based on its valuation.
If a share looks good value then obviously it’s a ‘buy’. If it looks overly expensive then it’s a ‘sell’. If you’ve bought it and it’s had a good run it may not be worth buying or selling, it’s simply a ‘hold’.
So, here’s one of each:
Buy – BWX Limited (ASX: BWX)
The BWX share price has fallen by around a third over the past two months, with the end of Bain Capital’s takeover interest sending the value down in investor’s minds.
Although the business is now in a transition phase, I think it looks attractive. It is one of the few ASX businesses that is generating revenue from several countries overseas. It has plenty of growth potential with geographical cross-selling opportunities and growing online sales yet it’s only trading at 14x FY19’s estimated earnings.
Hold – Macquarie Group Ltd (ASX: MQG)
Macquarie is by far my favoured major compared to the ‘Bank 4’. Its earnings are diversified across continents and also across different market segments. Macquarie is not as cyclical as it was before the GFC and it isn’t reliant on Australian mortgages (which look subdued, at best).
I like the bank’s focus on the future, with plans to expand further in the infrastructure and renewal energy segments. However, Macquarie’s share price has run hard and we are near the end of this current bull market – I’d rather buy shares during a recession rather than the current supportive economic environment.
It’s currently trading at 16x FY19’s estimated earnings.
Sell – WiseTech Global Ltd (ASX: WTC)
There are few shares on the ASX that have generated as strong returns for investors as WiseTech. The logistics software business is generating pleasing profit growth each report.
However, there is now integration risks considering how many additional businesses it has acquired over the past two years. Its valuation has now reached a dizzy 109x FY19’s estimated earnings. It’s definitely a good business but I’d consider taking some (or all) the profits off the table with this one.
I have the strongest feeling of the three that it would be wise to lock in some gains with WiseTech – rising interest rates may not support those types of valuations forever.
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Motley Fool contributor Tristan Harrison owns shares of BWX Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia owns shares of WiseTech Global. 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 Scott Phillips.