Bank stocks generally underperform the market from November to March. The reasoning can be sheeted home to when bank dividends are paid.
Once Westpac, ANZ and NAB go ex-dividend in the first half of November, investors go elsewhere looking for returns, with the big miners the obvious target.
This trend has already started to unfurl, with BHP and Rio Tinto finding a bottom and heading north over the past month or so.
If you are hooked on bank dividends and want to have an exposure over summer, then the recent profit results all point to hiding out in Westpac.
NAB is the cheapest of the big four but continues to battle problems in the UK. ANZ's balance sheet and capital positioning are strong but investors need to be wary of its desire to drive further into Asia. Meanwhile, CBA is relatively expensive and won't garner too much excitement until the new year in preparation for its result and dividend in February.
Westpac beat market expectations on its profit result. More importantly, the company will sail into Basel III on January 1 with more than sufficient tier 1 capital.
We have mentioned previously the big banks in a low-growth environment have been able to flex considerable muscle and maintain margins and grow capital. Westpac is leading the charge and at this week's result refused to rule out active capital management in 2013.
This could come in the form of special dividends or a buyback of stock. With a payout ratio of 65 per cent once the dividend reinvestment plan is taken into account, it is quite conceivable Westpac could pay $1.74 in dividends in 2013, plus a special of between 20? and 30? a share. This scenario puts the stock on a fully franked yield of between 7.5 and 8 per cent, meaning the stock could easily trade close to $30 a share.
Capilano Honey (CZZ)
QUEENSLAND-BASED Capilano Honey only listed on the ASX in July after a stint on the Bendigo Exchange. Since then the company's share register has changed dramatically, with Saleslink Australasia grabbing 19.9 per cent.
Saleslink provides food and beverage companies with sales management services in dealing with large retailers.
Even though it is not an investment company, Saleslink has a history of taking minority ownership stakes in smaller retail food brands that it works for.
It seems unlikely that Saleslink will look to make a full takeover bid for Capilano, but is looking to have a representative, Bob Newey, join the board at the annual meeting.
No doubt Saleslink believes Capilano is an outstanding brand, with almost 50 per cent of Australia's $110 million honey industry. The brand would make a neat addition to a larger food group.
Capilano has a market capitalisation of $19 million and debt of $13 million. This values the group on an earnings before interest and tax multiple of 6.5 times. Capilano spent heavily on stock and equipment in 2012 and should produce strong free-cash flow in 2013 allowing it to cut debt levels and pay a dividend.
A STOCK that has been out to pasture for a decade is Infomedia, an online publisher of car parts and prices.
The company went public in the tech boom of 2000, hitting a high of $2.65. Over the next 12 years the price slowly sank back to 17?. In recent months, the stock has sprung back to life, climbing to 38?.
The company has reintroduced itself to the market, following a big overhaul of the cost base and its suite of products.
Infomedia has forecast a profit of $8 million to $9 million for the year to June 2013, putting it on a price-earnings multiple of 12.5 times forward earnings.
While this is not cheap in the market, the company generates a return on equity of about 23 per cent, and the balance sheet has net cash, a good sign for a small company. It has experienced flat revenue for several years, battling a strong dollar. If the dollar stays steady or heads down, this could create a tailwind.
There are rumours that a big shareholder is preparing to sell down its stake, possibly providing an entry point into the stock.