Ocado (LSE: OCDO), Premier Foods (LSE: PFD), BGGroup(LSE: BG) and Rio Tinto (LSE: RIO) there is a lot of risk involved in these four stocks, but there are also a few reasons why BG and Rio Tinto may deserve your attention. Read on
Ocado falls enough to buy?
Ocado is down 20% in the year to date. This is not an easy stock to value.
At 334p, where it currently trades, I think you should add 1.5% of Ocado to your diversified portfolio, however.
This online delivery company may not seem a very safe investment, but it could deliver nice returns over time.As a gentle reminder, the stock is up 107% over the last two years. Value investors may not be bothered, but I am convinced that its fast-falling valuation offers a decent entry point.
Keep an eye on growth for sales in the next few quarters.The bears have been proved right so far this year, but Ocado is a long-term play and I would wait some time before suggesting that this growth story is over.
Premier Foods rises enough to sell?
Premier Foods has been on my radar for a very long time, but its shares have never looked cheap enough to deserve attention and this is one big difference with Ocado.
Similarly to Ocado, though, Premier Foods is not an income stock, and could also be highly volatile.
Its share price has risen 35% in the year to date, but is down 35% overthe last twelve months.
Most of the surge in 2015 came in January, when the food producers fourth-quarter results did not disappoint investors, and it showed decentmarket share figures for the quarter.
The stock has lost 80% of value over the last five years, and itcould be a roller-coaster ride for shareholders in the second half of 2015. Sales are still falling, margins are thin and its debt load remains problematic.
Certainly, net leverage has significantly improved, but its hard to say whether Premier Foods will return to the black on a consistent basis.Trading multiples arent very reliable at this point in time.
BG Group & RioTinto have you had enough?
BG is on my wish list, while Rio is my least favourite stock in the mining sector.
How many times have you been told that these two stocks are dirt cheap?
BG is up only 2% this year, having lost 20% of value in the last 12 months. The appointment of Helge Lund fromStatoil wasgood news, but new management must prove it can turn around BGs fortunes ifBGs share price istorise at a fast pace, however.
I am a bit concerned about its payout ratio, and shareholders may need assurance on that front. For the time being, BG has decided to slash capital expenditure, but Mr Lund may surprise investors with more action in months to come. Shareholders may welcome a more aggressive strategy with regard to the dividend.
The average price target from brokers is about 23% above BGs current stock price, which points to downside risk, particularly if management doesnt deliver.
MrLund will find a way to sort out BGs problems, in my opinion and, after all, this remains one of the most attractive restructuring stories in the marketplace.
Rio Tintos cash flow profile still provides reassurance.Is the dividend really safe, though?
Investors would notwelcome a cut in the payout ratio, but that is a risk weighing on Rio stock. Its forward yield is above 5%, and more than double BGs.
Rio is down 3% this year based on most trading metrics, it looks fully valued, the bears argue.
All the bad news is now priced into Rio stock, the bulls insist!
Who is right then?
What I know is that management must restore confidence, although theres nothing they can do to fend off the threat of a very challenging macroeconomic landscape.
A slide in iron ore prices is turning the screw on Chinas fragmented mining sector, paving the way for closures and consolidation with three-quarters of the countrys mining capacity operating at a loss, industry officials said on Friday, Reuters reported today bad news forRio and for BHP Billiton.
Similarly to BG, the average price target from brokers is about 23% above Rios share price.
And also likeBG, it could be hard times for shareholders, but if you are willing to embrace risk, you would likely do well toadd some exposure to both of them right now.
Of course, you may also want to hunt for value, income and growth in less cyclical sectors.
If so,get to know more about a high-growth onlinebusinessthataccording to our Motley Fool analystspromisesmuchhigher returns than those associated to Rio Tinto, BG, Premier Foods and Ocado!
In fact, if you don’t fancy the risk/reward profile of these four stocks, I suggest you consider instead abusinessthatcould deliver a terrificrate of growth into 2018.What are you waiting for?
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