4 stocks I’d buy if I had $8,000

Buying good quality companies and holding them for the long term is a proven method for investors to grow their long term wealth. You only need to look at the performance of the world’s greatest investor, Warren Buffett, to see how successful it is.

But the key is patience and allowing the power of compounding to work its magic.

If your aim is to beat the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) – and why wouldn’t it be, otherwise you may as well invest in a low-fee index fund – here are four ASX companies I’d consider buying today with $8,000…

  1. Insurance Australia Group Ltd (ASX: IAG) is one of Australia’s most well-known insurance companies with brands like NRMA and CGU. At the current price of $6.15, IAG trades on a P/E ratio of 11.2 and is paying a fully franked dividend yield of 6.3%. Over the past 5 years, IAG has delivered an average annual return of 15.9% to shareholders.
  2. Nearmap Limited (ASX: NEA) is a photomapping company with tremendous potential ahead of it. I’ve owned if for some time now, and I’m excited about its future growth both locally as well as potentially internationally. It may not appear cheap, sporting a P/E ratio of 30x, but that is inconsequential given its projected growth rates.
  3. Brierty Limited (ASX: BYL) a construction and engineering company, is trading on an undemanding P/E ratio of 7x and paying a fully franked dividend yield of 4.7%. The company was my top stock pick for September, with plenty of work in hand, net cash of $26 million and revenues forecast to rise by at least 20% this financial year.
  4. LifeHealthcare Group Ltd  (ASX: LHC) is another company that I think has a great future ahead of it, and is currently trading on an undemanding P/E ratio of 13.3x. As a bonus, the company is also paying a 3.1% fully franked dividend yield. In December 2013, I wrote that the company was forecasting strong growth – and recent results suggest the company has delivered on its impressive forecasts.

And here’s another stock I’d consider buying more of…

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Motley Fool writer/analyst Mike King owns shares in Nearmap and LifeHealthcare. You can follow Mike on Twitter @TMFKinga

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