The Australian share market is in selloff mode again and heavy declines are being seen across the board. Many of the worst performers on the market have been high PE shares such as Altium Limited (ASX: ALU), IDP Education Ltd (ASX: IEL), and Nanosonics Ltd (ASX: NAN). While you could argue that these companies deserve to trade on such lofty multiples due to their strong long-term growth potential, that hasn’t stopped investors from panic selling today. Unfortunately, until market volatility finally eases, I suspect that high PE shares will remain vulnerable to further selling. In light of this, now could…
The Australian share market is in selloff mode again and heavy declines are being seen across the board.
While you could argue that these companies deserve to trade on such lofty multiples due to their strong long-term growth potential, that hasn’t stopped investors from panic selling today.
Unfortunately, until market volatility finally eases, I suspect that high PE shares will remain vulnerable to further selling.
In light of this, now could be a good time to consider adding a few value shares to your portfolio.
Two cheap shares that I think are worth considering are listed below:
Adairs Ltd (ASX: ADH)
This home furnishings retailer’s shares have fallen heavily over the last couple of months due to concerns that the housing market slowdown could impact its business. While there certainly is a risk of this, it is worth noting that this hasn’t been the case thus far. Adairs recently reported strong same store sales growth and reaffirmed its FY 2019 EBIT guidance of between $47.5 million and $51.5 million. This will mean year on year growth of between 4.9% and 13.7%. Given that its shares trade at 9x earnings and offer a massive trailing fully franked 7.9% dividend, I think this makes its shares a bit of a bargain.
Westpac Banking Corp (ASX: WBC)
I think that this banking giant’s shares could be a good option for value investors after its sizeable decline over the last 12 months. Westpac’s shares are currently trading on multiples which are meaningfully lower than their averages over the last decade. In addition to this, they offer a trailing fully franked 7.4% dividend. While I don’t necessarily expect a re-rating of its shares in the immediate term, I suspect that once the Royal Commission has finished and its final report is published, investors may start to return to the banks again.
And here is a third option that I think offers great value for money after a recent pullback.
You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia owns shares of Altium. 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.