Since the beginning of 2014, the S&P/ASX200 Index (ASX: XJO) (^AXJO) has followed the lead of indices around the world including the S&P500, Dow Jones and FTSE.
At times like this it can be easy to think “sell sell sell” but astute investors are busy looking for discounted stocks which have outstanding prospects. However, investors don’t want to catch a falling knife and should carefully consider every investment they make based on its future prospects – not its history. Bank stocks, I’m looking at you.
Despite the market’s fall, we should remind ourselves of the few certainties in the stockmarket. They are:
- Companies will make more profit in the future
- They will pay bigger dividends; and
- There will be uncertainty
Here are five long-term stocks which will benefit from the few guarantees in the market.
Despite NIB Holdings Limited’s (ASX: NHF) defensive but growing business, investors have sold down the stock in recent weeks. NIB stands to benefit from a number of industry-specific tailwinds such as an ageing population, increasing premiums, medical costs and a health conscious society. It pays a trailing 10-cent dividend and I’m expecting modest earnings per share growth in 2014 (10% to 15%).
Recently, Transurban Group (ASX: TCL) was added to investment bank UBS’ model portfolio. It’s easy to see why. Like NIB Holdings it offers products which people very rarely skimp on (or have no choice in the matter). Transurban owns toll roads such as CityLink, Hills M2, M5 motorway, Lane Cove tunnel and many more throughout Australia and the US. Over time toll prices will increase and the group will look to expand its presence into other cities via acquisitions. It currently yields 4.8% fully franked.
Although it hasn’t fallen much in recent weeks, I believe the allure of Telstra Corporation Ltd’s (ASX: TLS) dividend, stable domestic earnings and international growth will keep it in high demand and minimise downside risks throughout 2014 – particularly while interest rates stay low. Telstra’s transition away from infrastructure-heavy businesses like its PSTN copper cables has been well-received by investors and the company’s increasing exposure to the technology sector will reward shareholders for many years to come.
Cash Converters International Ltd (ASX: CCV) has suffered a dramatic fall in price over the past 12 months, from a high of around $1.52 it now trades below $0.90 per share! The market sold-off shares for a number of reasons. Firstly, changes to the lending environment for small loans were introduced throughout Australia. Secondly, the company is facing a class action and lastly, partly due to subdued lending conditions, earnings ‘disappointed’ in 2013. However, with every downward movement in price I have re-invested. With only three reasons for investors to sell it, I’ve found a lot more to buy it: Cashies is a household name, has more stores in the UK than Australia, has recently begun an expansion in New Zealand and plans to consolidate with many more stores. It pays a great dividend, is a market leader and, most importantly, it is cheap!
Lastly, M2 Group (ASX: MTU) should be at the top of any watchlist for value investors. In recent years, M2’s tremendous growth has come from acquisitions but a shift to an organic growth model has spooked investors. Since 2013 the share price has largely drifted sideways. But it shouldn’t have. M2 owns names like Dodo, Primus and Commander. Its recent purchases of Eftel and Primus telecom are being integrated quicker than expected and shareholders shouldn’t be surprised if management decide to make minor acquisitions in 2014 and 2015.
Growth vs dividends. Why not have both? Savvy investors should use the market’s setbacks to buy good companies trading at even better prices. With a long-term focus I believe each of these stocks will reward shareholders with increased earnings and great dividends. Take advantage of the market’s uncertainty to pick some up today.