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Resmed Inc and Suncorp Group Ltd: Is it time to buy?

Keeping up with a stock is the regular homework of investors even if they just have it on their watchlist. Following more than the stock price change will help you make more businesslike decisions about your investments. Benjamin Graham, the mentor of Warren Buffett and considered to be one of the fathers of value investing, once wrote: Investment is most intelligent when it is most businesslike.

In keeping with that, here are two successful companies that investors should know about. What do they have going on and would they be good to add to your investments?

-  ResMed Inc. (CHESS) (ASX: RMD)

The developer of respiratory aid devices may seem to have a low dividend yield at just 1.8%, but it is still reinvesting a large part of its earnings back into the company. Actually, it wasn’t until 2013 that it started paying a dividend at all, with 100% of its profits ploughed back into the growing business.

Shareholders were rewarded with a share price rise from about $3 to $5.40 in the last two years as revenue and earnings growth climbed. It has an expanding business in the big U.S. healthcare market. Profit margins are relatively high because of its specialised medical products.

It’s a strong long-term growth story due to the high demand for healthcare. You could benefit from it.

­-  Suncorp Group Ltd (ASX: SUN)

The insurer and banker is simplifying and restructuring its business model to improve earnings and margins. After two years of heavy natural disasters that produced a lot of claims, from 2012 the company has been on the rise.

To make sure it can meet its financial responsibilities, it is tightening its residential home lending to more conservative levels and has amassed about $1.2 billion in capital above its operating target levels.

It announced a $500 million non-cash write-down for its life insurance assets, but said this wouldn’t affect earnings results and dividend payouts. Its dividend yield is a very attractive 5.0%.

It may be time to start an initial position and see how it develops. The company stated its life insurance division may be depressed for another four years. Investors should be aware that life insurance earnings make up less than 20% of total earnings, so the situation is not dire. You can possibly accumulate on pullbacks.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

See all posts by Darryl Daté-Shappard
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