If you look at the biggest gainers from the ASX over the past 12 months, there aren't many surprises. Miners, mining services companies, and banks. Those industries are cyclical, and, while they have delivered strong returns to shareholders, it's hard to say where the price of iron ore or demand for home loans will head over the next 12 months.
Here are 3 companies where I think investors have a better than average chance of determining a fair price to pay:
Computershare Limited (ASX: CPU)
At 26 times earnings, Computershare looks expensive. Shares rocketed higher after the election of Donald Trump, in the expectation that interest rates would soon head higher. Computershare carries a lot of cash for customers and higher interest rates will lead to significantly higher profits.
However, much of the benefit appears to be already priced in to Computer-shares, and the company's core business has been a mediocre performer in recent years. I'm not keen on the company today.
Challenger Ltd (ASX: CGF)
This annuity provider is the best in the biz and operates a variety of investment businesses including a boutique fund manager. Challenger's main drawcard are its annuities, which are a fee-free product designed to pay a guaranteed minimum amount of income for the life of the product. This is attractive for retirees and recently other companies in the industry have been outsourcing their annuities to Challenger.
This is a powerful tailwind, although at an estimated 19 times full year 2017 earnings, Challenger looks fairly priced.
NIB Holdings Limited (ASX: NHF)
This small health insurer has a strong track record of performance and growth at the expense of incumbents like Medibank Private Ltd (ASX: MPL). With government regulation on the industry, the company enjoys regular increases in premiums each year to cover the rising cost of healthcare. This has placed affordability pressures on many customers and there does not appear to be any relief in sight.
While profits can fluctuate, sales are generally reliable as health insurance is an important product, and NIB is the type of business that can be owned for the very long term. However, I think its price is a little high and would prefer to buy it at a discount.
