ARB Corporation Limited and Blackmores Limited set to shine

Short-term setbacks make buying opportunities for long-term successful companies.

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We usually recommend to our readers to seek out quality companies that have a history of growing earnings and have some competitive advantage that makes them thrive even in down markets.

Even good companies can have an off year or market pessimism drives their share prices down. That's when investors need to be familiar with the stocks to realise it is a market discount.

Here are two companies that are good examples of this. Short-term business issues disappoint a shortsighted market and share prices languish. Soon enough, though, they are getting back on track, so this may be your opportunity to take a position at what may be bargain prices.

Blackmores Limited (ASX: BKL), producer and marketer of vitamins and nutrition supplements, has a long record of growing revenue and profit. Yet in FY2013, net profit was down about 10%. That took the share price down from its $36 peak to about $20 in December.

In its FY2014 interim report net profit was down another 10.7%, brought on by a weak first quarter plus a weaker Aussie dollar making imported raw materials more expensive.

The Australian market, its largest in revenue was subdued, but it saw impressive growth in Asia. The second quarter was stronger and showed it was starting to turn around.

The company expects that full-year net profit will be broadly in line with FY2013. The share price jumped 22% the day after the interim report release and is currently $26.00. Its dividend yield is 4.7%.

Off-road vehicle parts and accessories producer and retailer ARB Corporation Limited (ASX: ARP) has risen in share price steadily since 2009, from about $3 to $13. A popular brand name amongst 4WD enthusiasts and outdoor workers, earnings per share have almost doubled in the last four years.

The company showed concern about some overseas markets being down, especially in Europe and Africa, but the stockmarket may have been more anxious about the mining pullback's effect on sales.

From May 2013 its share price went sideways, dipping down to around $10.50. I believe the domestic market will improve as consumer spending rises, so customers will return to the stores. It is also expanding operations in the US, which is already recovering well.

It has a 2.3% dividend and its PE is 20.

Foolish takeaway

By following the company rather than the share price, you can look past temporary issues and see the business is still the same. When conditions get back to normal, previous earnings trends may return.

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

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