Investors who thought it was a good idea to chase resource stocks such as Atlas Iron Limited (ASX: AGO), Fortescue Metals Group Limited (ASX: FMG) and Arrium Ltd (ASX: ARI) are now drastically trailing the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). There’s an important lesson here: avoiding the really disastrous investments is as important as finding the great ones. With that in mind, here are five solid, growing, safe stocks that might not shoot the lights out, but are likely to perform well for shareholders over the long term.
ResMed Inc. (Chess) (ASX: RMD) makes breathing apparatus (and machines) for the treatment of sleep apnoea. The disruptive condition is in part a result of the obesity epidemic sweeping countries like Australia and America, though it is also related to age (and can occur in otherwise perfectly healthy individuals). The shares are up over 10% since I suggested readers buy ResMed after the company released some slightly disappointing results. Though the most impressive growth is probably behind it, the company has plenty of growth ahead (and yields a handy 1.8%), as demographic and lifestyle trends are in its favour.
Carsales.com Ltd (ASX: CRZ) owns the eponymous car selling website and benefits from one of the best business moats – the network effect. That means that the company has pricing power because it has the most buyers and most sellers – it simply makes the most sense to buy or sell there, and buyers will pay for the privilege. The company also owns a fair chunk of iCar Asia Ltd (ASX: ICQ). iCar Asia has yet to make a profit, but is close to making its Malaysian website cashflow positive, having recently begun to charge listing fees. It appears that the Malaysian website will become dominant, though that is far from sure. More importantly, Carsales.com has recently purchased almost half of South Korea’s number-one car selling website, a fact the market seems surprisingly unexcited about.
The third growing blue-chip has to be CSL Limited (ASX: CSL) because it is perhaps Australia’s number-one superstar stock. The company manages to grow return on investment, buy back shares and pay a dividend every year. As it grows, its brand improves, because hospitals around the world want ready access to its blood plasma products. As the most reliable provider, CSL becomes the “go-to guy” for hospitals everywhere. The heavily regulated nature of its industry means that it is extremely difficult to replicate the business. As the company grows, it develops competencies in particular areas, such as being able to export product to China. This kind of institutional knowledge deepens the company’s moat.