Ocado(LSE: OCDO) is up more than 15% since mid-December, when I wrote it could deliver plenty of value to shareholders. Reckitt(LSE: RB) has also fared pretty well in recent weeks, while National Grid(LSE: NG) has been a disappointment. Meanwhile,International Consolidated Airlines(LSE: IAG) is flying high in the wake of merger talks with Aer Lingus.
Heres why you may want to hold onto all four companies if you are invested and why you may also be tempted to cash in now.
Ocado: I Wouldnt Sell
What to Like: Ocado will continue to grow, and as it grows, it will likely become more profitable and it will also enlarge its base of suppliers and clients. Managers have beaten consensus estimates in recent times, and I believe they may continue to surprise analysts over the medium term. Recents trends are encouraging.
What To Dislike:Its stock trades above 2x sales and 25x adjusted operating cash flow, on a forward basis, which are rich trading multiples for any business. If planned heavy investment doesnt help Ocado grow revenue by about 50% in the next couple of years, it could be a roller-coaster ride for shareholders in 2016.
Reckitt: Id Reduce Exposure
What to Like:Reckitt is a solid business, which, according to Neil Woodford, was too expensive in October 2014. A highly profitable company, it boasts strong operating margins and cash flows. Its asset base leaves plenty of room for improvement, and as I said in October when Mr Woodford exited the investment,when it comes to trading multiples for cash flows, Reckitt doesnt strike me as being a particularly expensive equity investment.
What To Dislike:The stock has recorded a +10% performance, having outperformed the FTSE 100 by only two percentage points in the last 14 weeks of trading.
National Grid: Id Keep It For A Little While
What to Like:The performance of National Gird has been truly disappointing in recent weeks. While the shares should trade above 10, in the light of decent fundamentals and a relatively convenient valuation, I have become less attracted to the utility sector. Of course, National Grid remains the best pick in the space, but regulatory hurdles are apparent.
What To Dislike: The shares have been looking for direction for some time, and it looks like theyll struggle to trade outside the 9.20-10.20 range for most of this year.
IAG: M&A Hightens Risk/Reward Profile, Take Profit
What to Like: IAG has done incredibly well in recent times and that is reflected in its stock price, which is not too high, based on fundamentals and trading multiples. It emerged on Tuesday that the board of Aer Lingus had recommended an improved offer of about 1bn from IAG, so nowIAG must win approval from the Irish government. Strategy-wise, management is doing a great job.
What to Dislike: Based onitsrelativevaluation, IAG stock is not expensive, in my view, but after a rally (+40%) in the last three months, any bad newsrelated to theoutcome of theAreLingus deal couldcontribute to value destruction in weeks ahead.
If you’re not interested in IAG and the broader airline sector, then I strongly advise you spend time to learn more about a great opportunity to add value to your portfolio — consider the shares of the company included inthis FREE investment report: they wereup 5% on Tuesday, and are bouncing off from their lows!
If you are seeking a 30% pre-tax return in 2015,this could be the investment for you. Our track record suggests a stellar performance can be achieved over time, and doesn’t cost you a penny: our report iscompletelyfreeand comeswithoutfurtherobligations.Click here now to get your freecopy right now!
Get FREE Issues of The Motley Fool Collective
Get straightforward advice on whats really happening with the stock markets, direct to your inbox. Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio wealth.
By providing your email address, you consent to receiving further information on our goods and services and those of our business partners. To opt-out of receiving this information click here. All information provided is governed by our Privacy Statement.