When it comes to investing, I have a policy that simpler is better.
Analysing conglomerates and businesses with a lot of complexity can swallow infinite amounts of time. It's also harder to dig out the potential risks with complex companies.
Instead I focus on simple businesses with strong growth prospects. Or 'no-brainer' companies that can be bought for a reasonable price.
There are three companies I would call out as potential 'no-brainers" to consider today:
XERO FPO NZX (ASX: XRO)
I see Xero as having the potential to become a dominant brand in accounting software over the next decade. The company has a product that customers love and Xero works hard to add value and empower those customers. It's a rare combination.
Subscription revenue grew 44% in the year to 31 March 2017 and the company continues to grow closer towards financial break-even. I think it's a no-brainer for investors with a long time horizon.
CSL Limited (ASX: CSL)
Ok, yes, the work blood product company CSL Limited (ASX: CSL) does is incredibly complex. But it is a simple business to understand. The company develops and sells a portfolio of life-saving antibodies, vaccines and immunisations for which there is growing global demand.
To me, CSL is to healthcare what Johnson & Johnson is to consumer products, or what Nestlé is to snack foods; a well-structured staple producer with low cyclical volatility and strong margins and volumes.
So long as CSL can maintain its product quality and continue to reinvest in R&D, I see no reason it won't keep growing for many years to come.
Mantra Group Ltd (ASX: MTR)
Mantra Group Ltd (ASX: MTR) manages a growing portfolio of hotels and resorts. The company doesn't own the properties it operates, but has management or lease rights. It also produces bundles of cash and pays an attractive dividend.
I think Mantra Group is in a strong position to keep growing, but there are some risks. For example, the company is obviously exposed to any drop in tourism demand. Mantra Group also faces the competitive risk posed by Airbnb. My observation on Airbnb is that so far it appears to have helped grow the accommodation market as a whole.
A key performance metric for Mantra Group is average revenue per available room (RevPAR) which it has successfully grown over the last 18 months. This is a positive sign, but a metric I would continue to watch closely going forward.
