The S&P / ASX200 has fallen around 10% since hitting highs of 6,352 points on August 29 2018 and its double-digit fall in value has taken stocks from every sector down with it. Some blue-chip shares such as BHP Billiton Limited (ASX: BHP) have fared not too badly on the back of plans to pay a special dividend and start a giant share buyback scheme. However, some of the high growth stocks have fared far worse than the index due to investor concerns that they may have been at bubble prices due to momentum-style investors bidding their prices up regardless…
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The S&P / ASX200 has fallen around 10% since hitting highs of 6,352 points on August 29 2018 and its double-digit fall in value has taken stocks from every sector down with it. Some blue-chip shares such as BHP Billiton Limited (ASX: BHP) have fared not too badly on the back of plans to pay a special dividend and start a giant share buyback scheme.
However, some of the high growth stocks have fared far worse than the index due to investor concerns that they may have been at bubble prices due to momentum-style investors bidding their prices up regardless of valuation. Rising interest rates in the US are also cited as a key factor likely to reduce the present values of today’s growth shares.
So let’s take a look at 3 growth shares smashed in October, and consider their value now.
Carsales.com Ltd (ASX: CAR) sold for $16.25 per share on August 22, but the stock has dropped 31% since then to $11.34 today. It now sells for 21x trailing earnings of 52.9 cents per share and offers a trailing dividend yield of 3.8% plus the tax effective benefits of 100% franking credits. Carsales has plenty of growth opportunities in markets like Australia, South Korea and Brazil, but does face some potential disruption from online social media giants.
The A2 Milk Company Ltd (ASX: A2M) share price has fallen from $11.89 on August 29 to $9.56 today, despite the baby formula and supermarket milk business giving no financial guidance or results to the market since its August 22 full year result. The company’s guidance has been quite vague in telling investors to expect costs and revenues to rise roughly in line over FY 2019, although the decision of the CEO to sell her entire existing holding is probably adding to the market’s nervousness over the stock.
The Treasury Wine Estates Ltd (ASX: TWE) share price closed at $19.47 on August 31, yet shares sell for just $14.60 today to be down around 25% in just two-and-a-half months. This despite the group on October 18 maintaining guidance for EBITS growth of 25%, with plans to continue lifting EBITS margins over the long term. It also stated Q1 FY19 performance had been in line with expectations across all regions. Given the recently discounted share price, TWE could be worth a look.
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Motley Fool contributor Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended carsales.com 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.