The Blackmores Limited (ASX: BKL) share price and Gentrack Group Ltd (ASX: GTK) share price are higher risk but their futures look bright.
Growth versus dividends?
When many investors think of the sharemarket, they often think there are two types of investments:
- Safe, dividend-paying, 'income' stocks; and
- High-risk 'growth' stocks
We also fall for the mistake of thinking that our portfolio should be focused on either of these two categories as if it must be an 'income' portfolio or a 'growth' portfolio. I think that is a mistake for two reasons:
- They are the same thing
- Defining a portfolio for a particular purpose (e.g. income) will see you miss great opportunities (e.g. 'growth' companies), over time
Two high-risk ASX shares I'd buy my mother
Here are two companies that I think prove the idea that you can have both growth and income in a calculated share portfolio.
Gentrack
Gentrack is small-cap business, worth just $323 million. Ordinarily, someone might think of a small company as being high-risk. However, I think Gentrack could be quite the opposite. The company develops software that is used in airports and by big utility companies. By design, these products are 'sticky', meaning it is difficult for their clients to forgo their product or move to another company's software.
Gentrack pays a 2.9% dividend.
Blackmores
Despite being worth the equivalent of $1.8 billion, I consider this vitamins and infant formula producer as a higher-risk business than Gentrack. However, it counters the risk with long-term growth potential. The benefits of Blackmores' vitamins might only be a recipe of marketing, but they resonate with customers who believe in 'natural' methods of healing and sustenance. This is especially true among some Asian markets, which Blackmores' management are currently targeting.
The company is tipped to pay a 2.7% dividend.
Foolish Takeaway
Don't disregard a company's shares because it doesn't fit with your 'strategy' because the sharemarket has been proven only to show excess returns over the long-term (longer than 5 years). In that time, 'growth' companies will likely become better 'income' companies than the 'income' companies of today. And, potentially, vice versa.
