Long term investing — everyone always tells you to do it, but does it really work?
Stock market volatility has made punters richer, but many investors poorer. Focusing on short term market fluctuations, unemployment rates and day-to-day bounces in indices is a sure way to make an investor sea sick. The market has shown us time and again that focusing on the horizon is the only way to get through it in one piece.
In the past three months, the benchmark S&P/ASX 200 (ASX: XJO) (Index: ^AXJO) has dropped 6%, but in the last 10 years has risen 55% (not including dividends). Healthy yields and dividend reinvestment plans are a good way to improve your wealth, but finding companies that offer both yields and growth is even better. Here are five companies that looked to the horizon and were rewarded by extra healthy share prices. They have survived the GFC, the mining boom and a housing boom but still live to tell the tale.
Forget Ramsay Health Care's (ASX: RHC) 10-year 800% return and Sirius' (ASX: SIR) speculative rise and fall, this company is an ocean darling that has returned a huge 1,196% in just 10 years. Mermaid Marine Australia (ASX: MRM) is a company that services Australia's offshore oil and gas industry. What's even more impressive about this stock is many believe it's still undervalued. Recently Macquarie (ASX: MQG) upgraded the company to outperform from neutral. With a 3.4% fully franked return, perhaps it's time to jump aboard?
One of the S&P/ASX 20's (ASX: XTL) great success stories has been CSL's (ASX: CSL) rise from one record high to another. Despite falling from an all-time high of above $63.00 in May this year, if you bought the company this time 10 years ago, you would be sitting on a cushy 1,375% gain, PLUS dividends.
There's no doubting it, information technology is a massively booming industry. It is tipped to rise from just 0.1% of GDP and 9,500 jobs, to 4% of GDP and 540,000 jobs by 2033. This is great news for those looking for a new job in the sector but it could be an even better opportunity for savvy investors. Australia's best and brightest have made hundreds of millions of dollars producing great software and products from their own computers.
SMS Management & Technology (ASX: SMX) is a consulting, technology and systems integrations company that specialise in operational performance of business and technology projects. Over the past 10 years, the company has risen an astounding 1,791%. But if that wasn't enough, it pays a fully franked 6.4% dividend.
Navigating through Australia's highly regulated financial sector can be tricky but lucrative. McMillan Shakespeare (ASX: MMS) provides salary packaging to public and private organisations in Australia and New Zealand. Its 3.1% fully franked dividend nicely complements the past 10 years of growth, which has seen it rise almost 2,000%.
A 1.4% dividend can be forgiven when a stock has risen as much as REA Group (ASX: REA). Providing high quality digital advertising, focused mainly on real estate, has allowed the company to climb from a modest $0.32 (only 10 years ago) to open today at $26.24 or 8,100% higher. With a market capital of $3.4 billion and a P/E of 32, perhaps the market is expecting this one to go even higher.
Foolish takeaway
The results speak for themselves and it's obvious that these five companies are truly great stocks to have owned. However, keeping in mind the previous results, all five have lost between 6% and 22% of their share value in the past two months. Does that make them bad stocks? The answer is no, but it might mean that shareholders are throwing away some truly great companies at bargain prices. I'm not saying they're completely risk-free or that they've got huge amounts of growth ahead, but based on past performance, they have made all the right decisions for hopeful shareholders.
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More reading
- 10 of the ASX's best dividend plays
- 10 stocks to hold forever
- Your advantage over the professionals
- Could these stocks make you rich?
Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
