Today, Charlie Aitken writes about the importance of prioritising the tracks over the train and potential “ambitious valuations” of the Internet darlings like Carsales.com.au.
These companies might look expensive, but with retail spending set to improve – the RBA isn’t considering interest rate rises because we’re slowing down – there could still be some upside in these well developed business models. It just means you need to wait for a market dip to buy them.
And if you’d got in when we first mentioned them in this report, you could well be streets ahead already.
If you had bought REA Group, owner of Realestate.com.au, back in January when Jelena Stevanovic from Platypus Asset Management wrote about it [1] for a Fundie’s Favourite, your $41.21 investment would now be worth over $48 – that’s an increase of over 16% in three months.
Roger Montgomery recently wrote about one of his favourites [2] – Carsales.com.au. Montgomery Investment is a big fan of the company’s offshore expansion plans and points out that it might be hard for a company that’s exposed to growing vehicle sales to lose money.
“According to VFACTS [3], in 2010 nearly one million new cars were sold in Australia. In 2013, this figure has climbed to over 1.1 million, which means amongst Australia’s 20 million adult population, 5.5% buy a new car every year. That’s a lot of turnover.
“One also suspects that just as many, if not more, second-hand cars are turned over as well, and the dominate online player that is leveraged to this industry without having to buy stock, lease a showroom or pay the wages of mechanics is Carsales.com.au (CRZ).”
Last week, Manny Pohl from EC. Pohl & Co. wrote about Domino’s Pizza [4] in a Fundie’s Favourite and how its internet strategy is also making it a game changer.
But these aren’t the only IT companies exposed to the consumer discretionary sector. On Monday, James Dunn will look at those companies set to become the next Seek, Realestate.com.au and Carsales.com.au.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report
- Charlie Aitken: Telstra on track for $6.00 target [5]
- Roger Montgomery: IPO opportunity in Japara Healthcare [6]
- Gary Stone: SUN may be set to rise [7]
- Staff Reporter: Buy, Sell, Hold – what the brokers say [8]
- Tony Negline: When all SMSF members die – individual trustees [9]
- Questions of the week [10]