As an owner of shares in a publicly traded company you must expect to see your investments fluctuate in value over time. Indeed attitudes to stock market movements are what will distinguish top-class investors from ordinary speculators. Stock values will change from day-to-day and month-to-month, but the best investors will not let short-term price movements dictate their investment decisions.
Smart investors place reliance on holding great companies over long-term horizons. Their investments’ behaviour will not control their own, rather they control their financial future by buying and holding a portfolio of quality companies with great prospects. Here are a few to consider.
Kitchen appliance maker, marketer and distributor Breville Group Ltd (ASX: BRG) just posted sales growth of 23.2% for the six months to December 2013. Total revenues were $311.3 million, Australia and New Zealand contributing $144.6 million and North America $130 million. Rest of the world revenues made up the difference of $36.6 million and were up 69.1% on the prior corresponding six-month period.
Breville wants to repeat its success in North America in the UK and other significant markets and has hired celebrity chef Heston Blumenthal as a brand ambassador. With a strong balance sheet and no gearing it has plenty of cash to support the international expansion. Trading on a forward price-earnings around 25 the market likes its prospects to grow. I think its quality products might be about to cook up a feast of their own for investors.
Magellan Financial Group Ltd (ASX: MFG) just more than doubled its half-year net profit and tripled its interim dividend for the six months to December 2013. It appears to be in a growth sweet spot of a strong sales and distribution team able to capitalise on the investment team’s outperformance amid rising global equity markets.
The feedback effect has seen retail and institutional money keep flowing in fast, with the well-connected Frank Casarotti, who managed Colonial First State’s hordes of financial planners, now cranking the inflows for Magellan. The company has more than one-in-four total staff involved in the distribution effort and with the mega-marketplace of institutional business development also offering almost unlimited potential the future looks good.
Rival fund manager, Platinum Asset Management Limited (ASX: PTM), is more than twice the size of Magellan by value with both competing strongly for the business of retail (often superannuation) investors seeking international exposure through global equity funds.
Insurance Australia Group Limited (ASX: IAG) just announced a half-year net profit up 39% to $642 million for the six months to December 2013. The group has refocused on its core Australia and New Zealand markets with the planned $1.845 billion acquisition of Wesfarmers’ insurance underwriting companies central to this strategy. It is also focusing on growing its exposure in Asia, with significant footholds in Thailand and Malaysia.
Based on FY 2014 analyst consensus forecasts it trades on a reasonable price-to-earnings ratio less than 12 and dividend yield of 6.48% fully franked. It looks a solid long-term prospect.
ResMed Inc (ASX: RMD) We all need a good night’s sleep and ResMed is an innovative sleep treatment business that looks good value. The share price has travelled sideways after January’s announcement that second-quarter 2014 earnings didn’t quite meet analysts’ expectations. They were high though and based on the company’s impressive track record of growth through new products and markets it remains a sound investment with a strong brand and global footprint to support its long-term growth trajectory.
Sometimes you have to pay up for quality growth prospects and I like the look of Breville to grow revenues, profits, and returns for shareholders. All of the others should also offer solid returns on long-term horizons. Smart investors don’t try to be too clever by holding any single security in a too greater a concentration, they spread the risk by ensuring each investment represents part of a balanced portfolio.