The great thing about the share market is that prices are always changing. Over the course of a month a share can fall in value by more than 10% despite nothing essentially changing about the business’ operations. This usually makes shares better value.
If I had $10,000 to invest, this is how I’d do it:
Challenger Ltd (ASX: CGF) – $3,000
Challenger’s share price has fallen by around a quarter, which makes the annuity leader considerably more attractive in my opinion.
The number of potential customers, the over-65 bracket, is projected to increase by 40% over the next decade. The mandatory superannuation contributions plus compound growth of people’s super balances should mean bigger annuities in time.
Labor seem more likely to win the next election, which could cause both shares and property to become less attractive, making fixed interest assets seem more attractive.
Challenger is currently trading at around 15x FY19’s estimated earnings.
Costa Group Holdings Ltd (ASX: CGC) – $2,500
Costa is one of Australia’s largest food-growing businesses. It grows mushrooms, avocadoes, tomatoes, berries and citrus fruit.
The fresh food aspect alone is attractive because people’s diets are steadily changing to healthier choices, plus Asian middle-class demand could increase the price of Australian-grown produce similar to the infant formula industry.
I also like Costa because it is actively expanding its operations. It is expanding plantations as well as making small acquisitions to bolster its operations in Australia, Morocco and China.
Whilst FY19 growth will be slower than FY18, the company is still predicting (low) double digit growth in the coming couple of years. Compounding profit growth can lead to solid returns over the long-term.
Costa is trading at 24x FY19’s estimated earnings.
Paragon Care Ltd (ASX: PGC) – $3,000
Paragon is a small, but rapidly growing, healthcare product supplier of items like beds, devices and equipment.
It has made a number of acquisitions in the past couple of years to add scale and offer clients more of their needs. It’s hoping to become a one-stop-shop with a quality purchasing platform.
The number of healthcare patients is projected to keep growing over the decades, meaning Paragon could very nicely benefit from the tailwind.
It’s currently trading at 11x FY19’s estimated earnings.
UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP) – $1,500
This exchange-traded fund (ETF) offers investors exposure to 50 of the biggest listed Asian businesses outside of Japan. Some of its top holdings include Tencent, Alibaba, Baidu and Samsung. It’s quite technology focused.
There is a lot more risk, such as ownership and government risk, attached to this ETF compared to other Western-focused ones, but I think China is such a big growth opportunity that it could be worth allocating a small portion of a portfolio to it for the long-term.
I think this ETF covers the China opportunity quite well for a modest management fee of only 0.45% per annum.
The Paragon and Challenger share prices look very attractive to me at the current levels for a long-term investment. Costa may drop further, so it could be worth waiting to see if it stops declining before jumping on board.
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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited, COSTA GRP FPO, and Paragon Care Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited and COSTA GRP FPO. The Motley Fool Australia has recommended Paragon Care Limited. 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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