Knowing what to buy and what to sell can be tough. Here are four dominant companies from the S&P/ASX All Ordinaries (ASX: XAO) (^AXAO) you could consider buying today.
Rio Tinto Limited (ASX: RIO) is Australia’s biggest iron ore miner and soon to be the world’s largest producer of the steel-making ingredient. Although it has operations in aluminium, copper and a range of other commodities its earnings are not as “diversified” as many investors may think.
Rio’s ability to continue ramping up production of high quality iron ore from Australia’s Pilbara will be the catalyst for a higher share price in the next five years. However with the price of iron ore tipped to fall (thanks to a forecast global oversupply), investors will have to come to grips with the fact that it might not be a smooth upwards trending share price.
Challenger Ltd (ASX: CGF) is our country’s number-one provider of annuities to individuals in retirement. An annuity is a fixed income financial product which a company (like Challenger) will, in exchange for a lump sum, pay you regular instalments. Since the number of retirees is set to increase hugely in the next 30 years – thanks largely to the baby boomer generation – challenger appears to be in poll position to benefit.
In addition to a growing annuities business, the company has a rapidly expanding funds management division which is currently benefitting from the bullish returns in the Australian stock market.
Another company at the top of its game is Credit Corp Group (ASX: CCP), it is Australia’s largest debt collection business with operations both locally, in New Zealand and most recently in the US. In the half-year to 30 January 2014 revenue was up 25% and NPAT followed with an 18% increase. As demand for credit grows while interest rates are low, there is more potential for defaults when interest rates inevitably rise, resulting in more business for debt collectors. In addition to its core business, Credit Corp has a relatively new lending business which has exciting growth prospects.
Lastly, Greencross Limited (ASX: GXL) is a veterinary services provider seeking to consolidate the Australian market. Its footprint is extending throughout the country as it acquires more and more practices. While it always appears to be promising when revenues and profits continue to rise, investors should be sure to watch each acquisition and see how it stacks up in terms of being earnings per share accretive. Nevertheless it remains an exciting growth prospect at current prices.
Investing in industry leaders is always exciting because you can be assured the business model works and its services are continually in demand. Although Rio Tinto may be higher risk than the other three, it appears its current price of $63.48 reflects the uncertainty. Each deserves a spot on your watchlist.
Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
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