Receiving a large portion of revenue from the government can be a risk, but it can also be an opportunity if the business can win a major contract.
Our federal and state governments are some of the most well-funded (for the population size) in the world. A rising population should mean more funds for the governments and bigger contracts for the businesses.
Here are three ideas to take advantage of that government money:
Cromwell Group (ASX: CMW)
Cromwell is a real estate business that leases office buildings to large organisations such as Qantas Airways Limited’s (ASX: QAN) global HQ.
According to Cromwell, ‘Government’ is responsible for 39.6% of total gross rental income, which includes Government owned and funded entities. The Federal Government is 23% of the total rental income and the NSW State Government being another 13.1%.
Citadel Group Ltd (ASX: CGL)
Citadel is a software company that describes itself as a specialist in secure enterprise information management. It operates under long-term contracts to provide advisory, training and technology services.
It counts the Federal, State and Local Governments as clients. It operates in national security, defence, education, transport and health sectors. It boasts of having industry-leading profit margins.
MNF Group Ltd (ASX: MNF)
MNF is a Voice over Internet Protocol (VoIP) provider. Nothing quite beats picking up the phone to call with a question or a complaint, MNF can offer organisations this service at a much cheaper price compared to the past of copper phone lines.
Along with Uber and Skype as clients, it also has various government bodies as customers as well, such as the Tasmanian Government.
All of the above three businesses are very good operators in their industries. At the current prices I’d be very interested in adding both Citadel and MNF to my portfolio because their share prices have fallen over the past few months, yet the management teams are still expecting short-term and long-term growth.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia owns shares of Citadel Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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