Although the traditional buy and hold strategy may not be the most exciting of investment strategies, it can prove to be the most profitable. Sure, buying the latest high-growth company for a huge multiple of its earnings because it could treble its bottom line in the next year may get pulses racing more than buying a slice of a slower moving, cheaper and less volatile company for the long haul.
However, as Warren Buffett and many other notable value investors have shown, buying high quality companies for a fair price and having the patience to hold on to them for the long run can transform your lifestyle and mean that you may not have to work for quite as long as you had anticipated.
With that in mind, here are three stocks that offer great value for money and could turn out to be excellent long-term investments.
Woolworths Limited
While there is understandable concern among investors with regard to the future sales numbers from established supermarket, Woolworths Limited (ASX: WOW), the company is still forecast to see its bottom line fall by just 1.6% per annum over the next two years.
While disappointing, this level of performance does not appear to justify Woolworths' share price fall of 22% in the last year, neither does it explain the company's price to sales (P/S) ratio of just 0.6, at a time when the ASX has a P/S ratio of 1.6 and the food and staples retailing sector has a P/S ratio of 0.95.
Furthermore, with Woolworths having increased its top line at an annualised rate of 5.4% during the last ten years, it is a relatively consistent performer that offers a favourable risk/reward opportunity.
Oil Search Limited
While the price of oil and gas has plummeted and sent most energy companies' share prices sharply lower, Oil Search Limited (ASX: OSH) is down just 8% in the last year. Furthermore, it continues to trade at a relatively large premium to the wider energy sector, with it having a price to book (P/B) ratio of 2.01 versus just 0.62 for the sector.
However, the reason for this is a relatively bright future, with Oil Search expected to increase its bottom line at an annualised rate of 12.3% during the next two years. And, with Oil Search having a dividend yield of 2% at the present time and having increased dividends at an annualised rate of 30.8% during the last five years, it appears to offer income, growth and good value.
Transurban Group
Of course, the lower oil price is good news for Transurban Group (ASX: TCL), since it means lower costs for motorists and more demand to use the company's tolls. This is being reflected somewhat in Transurban's profitability, with earnings per share rising by 54.5% last year. And, looking ahead, its net profit is set to rise at an annualised rate of 29.4% during the next two years.
Furthermore, while Transurban's shares may not appear cheap based on its price to earnings (P/E) ratio of 37.4, when its rating is combined with its exceptional growth prospects it equates to a price to earnings growth (PEG) ratio of 1.27. This compares very favourably to the ASX's PEG ratio of 2.32 and also to the transportation sector's PEG ratio of 1.62.
