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 – InvoCare Limited (ASX: IVC)
The country’s leading funeral business is facing a lot of negative sentiment at the moment. The number of deaths is (temporarily) low and this year’s profit will be materially less due to significant refurbishments to cater for modern funeral needs.
However, both of these issues sound short-term to me and are likely to turn out fine for InvoCare in a year or two. Its long-term growth seems assured with death volumes expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.
In the short-term the price may move lower but I rate it as an ultra-long-term buy, particularly with its attractive grossed-up dividend yield of 5.3%.
Hold – REA Group Limited (ASX: REA)
The REA Group share price has fallen around 20% over the past two months. This isn’t good for shareholders, facing the double whammy of rising interest rates and a slowing housing market.
However, if I were a REA Group shareholder I’d want to hold onto my shares for the long-term thanks to its strong market pricing power and potential international growth potential.
But, it hasn’t dropped low enough for me to put it at the top of my wishlist yet. It’s trading at 29x FY19’s estimated earnings. If it falls to around $65 I’d be close to hitting the buy button.
Sell – Sydney Airport Holdings Ltd (ASX: SYD)
This company operates a great asset and the growing number of international passengers is a very useful tailwind.
However, rising interest rates could have a particularly negative effect on bond-like defensive shares such as Sydney Airport.
The current income yield of 5.5% is fairly attractive, but I’d want at least 6% before considering holding it in my portfolio.
I expect to add more InvoCare shares to my portfolio over the next 12 months and I’d really like to buy some REA Group shares at the right price.
Another share that I'd rate as a buy at the moment is this top growth share that is starting to expand into Asia and just grew profit by 30%.
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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. The Motley Fool Australia has recommended InvoCare Limited and REA Group Limited. 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.