Are these the 3 best companies for long-term investors to own?

We take a look at why CSL, REA Group and Monadelphous are so good.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Each year the Boston Consulting Group (BCG) releases a study which seeks to identify companies that create value for shareholders. Value is measured by total shareholder returns (TSR), which are the sum of the share price gain and dividends. The true value creators of course are the ones which produce sustainable TSR over many years. One way that BCG keeps a check on this is with reference to the fundamental value of a company which it determines based upon a firm’s return on equity.

The results of the study, which captures a 10-year period from 2003 to 2013, identified 13 companies which BCG classified as sustainable value creators including Computershare Limited (ASX: CPU), Sydney Airport Holdings Ltd (ASX: SD) and Ramsay Health Care Limited (ASX: RHC). While all 13 stocks could make worthy long-term portfolio holdings based upon their ability to sustainably create value, BCG singled out three for closer attention.

1)      CSL Limited (ASX: CSL)

The biopharmaceutical company has excelled and should continue to do so thanks to a number of practices identified by BCG. These practices include CSL’s commitment to reinvest to support differentiation; management of its portfolio of assets including the divestment of low return assets; and building a diversified revenue stream.

2)      REA Group Limited (ASX: REA)

The online classified real estate company has many strings to its bow. BCG highlighted its ability to consistently invest in R&D and innovation; pursue adjacencies; and its ability to establish a strong commercial presence as being amongst major reasons for its continued success.

3)      Monadelphous Ltd (ASX: MND) has made a number of adept decisions which according to BCG have provided long-term returns for shareholders. BCG pinpointed Monadelphous’ decision to evolve according to customer needs; establish demand stickiness through network effects, switching costs and cross-product synergies; and pursuing disciplined M&A and organic growth as important determinants of the contractor’s success.

Foolish takeaway

It is essential to be forward looking as an investor – not backwards looking. As Warren Buffett would say – If past history was all there was to the game, the richest people would be librarians. So while it is not enough to extrapolate the past into the future, an above average operating history can suggest that a company enjoys an economic moat which means the company should outperform in the future.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »