If you like making money, Gentrack Group Ltd (ASX: GTK) shares and Pro Medicus Limited (ASX: PME) shares should be on your watchlist.
Who is Gentrack?
I have been banging on about Gentrack for a while now and its share price has flown higher. To be candid, it pains me a little bit — because I didn't buy any!
Gentrack is a $380 million software business which has developed systems used by airports, energy and water utilities. The UK water market presents a key opportunity for the company in coming years. However, Gentrack's software can be sold nearly anywhere.
Why software?
If it is done right, developing software is often an underrated investment. Good software should only be written once. And once it is up and running and the program is being sold, new clients come on board with no extra heavy lifting. If the customer gets a good experience from the program they are unlikely to change or develop their own systems, so they accept the yearly price increases and pay what is effectively a subscription to the software company.
For some software companies, like Gentrack, these features can make them a growth and defensive business in one. Gentrack pays a handy 2.4% dividend.
Who is Pro Medicus?
Pro Medicus is a Melbourne-based company that ticks many boxes.
It has developed software that enables doctors and radiologists to send enormous medical images to a smartphone in seconds. It is excellent software and disrupting traditional systems in hospitals around the world. Tick.
The company is growing. Tick.
It has great economics (e.g profit margins). Tick.
Pro Medicus is well run, with many key players in its team having deep experience in their respective fields and a long tenure. Tick.
Management also own lots of their company's shares, which keeps them incentivised to do well by all shareholders. Tick.
Unfortunately, valuation is where this health technology business falls down.
I suppose it's the price of being a great business when 90% of the others around you are average.
Foolish Takeaway
Gentrack and Pro Medicus offer good products in attractive industries. However, their shares are not cheap, so we must take a long-term view (five years plus) to enjoy the benefits of these compounding machines.
