LancashireHoldings (LSE: LRE) is trading at its 52-week high today, while Serco (LSE: SRP),KenmareResources (LSE: KMR), and Xtract Energy (LSE: XTR)are also outperforming the FTSE 100,whichwas up 1.9%around midday.
So, should you ever consider an investment in any of these four companies?
Lancashire Looks Overvalued
The shares of Lancashire are surging 6% today, as the valuation of the insurer benefits from the 3.4bncash offerthat has been put forward byJapansMitsui Sumitomo Insurance Company forreinsurerAmlin of the UK.
While there is talk thatLancashire , whose stock is up 23% year to date, could also attract interest from suitors, I am more focussed on fundamentals and trading multiples neither of which suggest that its share are a compelling buyright now.
Serco is not cheap enough
Id also be very cautious with Serco, whose valuation was up 4% at the time of writing, if for very different reasons.Serco has gone through torrid times in the last couple of years, with its shares down over 50% in the last 12 months.
This is an outsourcing business that breached covenants on its debts and had to seek help from its shareholders to stay afloat its trading multiples now suggest that Serco could be overvalued by at least 40%, unless management proves that it can preserve margins and deliver a higher level profitability, in my view.
Its shares are risingtoday along with the market, but they still trade at their one-year lows. Frankly, Id look elsewhere for value.
Kenmare Resources: whos right?
Kenmare isnt particularly enticing, either, the bears argue yet this is not an easy call.Its stock was up over 6% in early trade, but has given up some of its gains since.
On the one hand, its valuation has fallen over 70%in the last 12 months, and youd be buying the shares of a miner thatis highly unlikely to be profitable for at least a year and whose balance sheet arguably carries too much debt (net debt stands at about $300m).
On the other, problems with production and industrial action have gone hand-in-hand in recent times, but these issues wont affect its performance to the end of 2015 and beyond, the bulls could argue. Moreover, Kenmare managed to refinance its debts earlier this year and it has beentargeted for months by Australian mineral sands producerIlukaResources.
Still, I am looking for less risky options in the sector. How about Xtract Energy, for instance?
Xtract: a defensive play?
If you are eager to take an opportunistic bet on gold, Xtract could well be the name for you.
Its possible that the group whose shares trade at 0.27p, having surged 12.5% so far today will ask shareholders to back its funding plans, but then I think that dilution risk could have a minimal impact on its share price at these levels.
The obvious warning is thatwe have little visibility on financials and trading multiples, while its pipeline of projects has yet to deliver.Youd add volatility to your portfolio with XTR, but consider that anybody who had bought it in early January would have recorded an 84% paper gain.
Value is up for grabs
These four companies offer less value thanarental equipmentcompany,whosestock boasts a strongtrack record,and is nicely bouncing back from its one-year lows (it’s up 11% since late August on the back of strong fundamentals and growth rates).
Thisvalue candidate in included in our excusive Foolreport,which also investigates the prospects of some of the topperformers over the last 10 years!
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Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.