IRESS, Computershare and ASX — 3 stocks to benefit from a rising market

As investors are looking for companies that are used on a daily basis by consumers and industry for good stock picking ideas, they may be overlooking those that play a part in share trading and the computer systems that make it happen.

With increased share trading and more automatisation, these three companies help keep the system going, providing computer and software services that have to keep growing to maintain the high speed and volume of trading.

Computershare (ASX: CPU) provides registration and transfer services of the shares that are electronically traded each and every day. In addition, they offer corporate trust and governance services. When you buy a share, most likely this company played a part in the safe, efficient change and maintenance of that shareholding information.

This $5.8 billion company grows as the share market itself grows, and when the economy is booming and more people and organisations invest and trade, its revenues and profits rise. It is also expanding internationally to offer its services to other less developed share markets, as well as entering mature markets like the US that need more service providers.

It has a net profit margin of 15.1% and return on equity (ROE) is 27.2%. In 2013, revenue was up 22.9% at $2.17 billion, and its pre-tax profit was $429 million, although it did have a larger than average $222m abnormal charge which brought down net profit after tax (NPAT) to $173.1 million.

IRESS (ASX: IRE) provides system services for trading, information, compliance and order management for share trading. Investors and organisations use these services to access information and order trades. It has developed trading and financial planning platforms that bring all the necessary services together.

The company has steadily grown its revenue over the past 10 years from $53.7 million to $206.7 million. Net profit after tax in 2013 was down about 5% from $41.3 million to $39.2 million, but ROE was 30.9%, and net profit margin 18.9%.

Lastly, ASX (ASX: ASX) is the company that operates the Australian stock exchange itself. Its business and revenue will expand as the share market itself expands because it handles the trade and clearing house services that keep share trading fast, efficient and correct.

It has a market capitalisation of $6.8 billion, and on revenue of $611 million it had NPAT of $342 million, making its net profit margin 56.9%. Earnings have been stable but flat, which reflects the domestic share market over the past two years following the GFC. However its dividend yield is 5.5% and ROE is 10.48%.

The Foolish Takeaway

Investors should look for investment ideas in the day-to-day services that we use that keep our businesses and markets operating like clockwork. We can’t stop using them, and as our needs grow, they benefit and expand proportionately.

Think about your own total return and find out about companies with good dividends. Discover The Motley Fool’s favourite income idea for 2013-2014 in our  FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

·    3 sectors poised for an upturn

·    7% yields on offer from property groups

·     ASX rallies as US makes ‘tremendous progress’

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 


Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked…

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of The Motley Fool’s Top 3 Blue Chip Stocks for 2019.

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in a specially prepared FREE report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

See the 3 blue chip stocks

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.