I can’t remember the last time I made a mistake and was rewarded with 20% in capital gains in less than two months.
Step in, Medibank Private Ltd (ASX: MPL).
In little over a month, my retail investment in the Medibank IPO – capped at $2.00 per share – is up a whopping 20%.
So what I thought turned out to be a brain fade investment decision, has actually been my best performer over the past 50-ish days.
For the record, I still haven’t sold my shares (see my disclosure below). Well, to be honest, I haven’t been able to thanks to a technical error on my broking account.
Fortunately, that’s now resolved and has probably made me money.
However at $2.40 per share, or 25 times next year’s profits, Medibank is looking like a sell. Especially when I consider it’s only going to pay a single dividend of 4.9 cents per share in 2015, equivalent to a 2% yield (it won’t be until 2016 that Medibank pays its second distribution).
So I doubt many investors will be falling over themselves to get into the stock. However with interest rates so low, I’ll probably have to keep my money in shares if I do decide to sell.
Respectively, they’re expected to pay dividends equivalent to 2.1% and 4.1% in 2015. However it’s their growth potential which makes them a compelling prospect for new money.
Over the past five years, they achieved average total shareholder returns (dividends plus capital gains) of 18.6% and 87.6%. Whilst growth may be more modest in the years ahead, I believe they could go on to make far better returns than Medibank from today’s prices.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool Contributor Owen Raszkiewicz owns shares of Medibank Private. You can follow Owen on Twitter @ASXinvest.
- ALL ORDINARIES finishes higher Monday: 10 shares you missed – October 30, 2017 4:44pm
- Are these the secrets behind Australia’s best ASX investors? – October 30, 2017 3:43pm
- My Aussie Share Market Investing Do’s of 2017/2018 – October 30, 2017 1:13pm