Top 3 Picks for 2016 (Shopping for Shares)

If you look at the All Ords over the past year you’ll be forgiven for thinking that things are bad. The market as a whole is down around 18%.

I knew that it was going to be stormy, but as always, when company prices fall, it’s a good time to snap up some bargains ready for the bounce back. This is long term investing – this game is won over time. Buy low and sell high and all those other lovely cliches.

That said, I’m actually more optimistic about 2016 than I was about 2015. Don’t get me wrong, things will still be bumpy, but I don’t think it’ll be as bad as last year. This year might even be fun.

Here are my recommendations:

*TOP PICK *
DWS – DWS Limited

Return on Equity – 19.1%
Earnings Stability – 80.8%
Debt/Equity – 8.4%
1 year return – 36.3%
5 year return (p.a.) – 4.1%
Dividend Yield – 6.8%
EPS – 11.3
EPS x 16 = $1.81
Currently Trading – $1.27

I have mad love for DWS right now. It’s got very strong financials and a dividend yield that’s hard to ignore. Last year they restructured their business to improve cashflow and reduce overheads (hence the investor love increase on their chart). And they have a strong client base in Victoria that isn’t going away.

And it’s one of the few value stocks that’s trading under the EPS x 16 that I usually use for determining when to jump in.

I don’t own this yet, but plan on grabbing it up in the next month or so.

TNE – Technology One

Return on Equity – 30.3%
Earnings Stability – 87.1%
Debt/Equity – 2%
1 year return – 21.9%
5 year return (p.a.) – 40.4%
Dividend Yield – 1.7%
EPS – 13.3
EPS x 16 = $2.13
Currently Trading – $4.67

I’ve liked Technology One in, like, forever. I first recommended it back in 2011 and it’s been on my picks list for nearly every year since. I do currently hold this (discloser) and have done for a number of years. I don’t see that changing any time soon.

It has strong financials and it’s business is solid with clients in both the government and private sector.

It’s just a good solid reliable stock.

DMP – Domino’s Pizza

Return on Equity – 21%
Earnings Stability – 82.5%
Debt/Equity – 40.9%
1 year return – 76.2%
5 year return (p.a.) – 63.5%
Dividend Yield – 1%
EPS – 100.7
EPS x 16 = $16.11
Currently Trading – $59.39

Domino’s is another stock that I’ve had in my recommendations for years. I first recommended it in 2012 when it was trading around the $10 mark. It’s now around $60. In full discloser I do own this company and don’t have any plans on getting rid of it in the future.

I’ve put it last on my list though, because it’s very expensive right now. If you don’t already have this, then put it on your watch list. If it gets down to under $50, or even better under $40, then consider snapping it up. I’m not sure it’ll get down that low although we are in for another turbulent year, so it’s possible.

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That’s it. My three picks for 2016. As usual do your own due diligence before buying into any company and remember that these are my personal opinions only. Take care, happy investing, and see you next year!

Tracey xx

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Image Credit: All graphs are taken from Yahoo! Finance.