The stock exchange was a wonderful creation to allow individuals and businesses to trade their share of ownership of companies almost every weekday of the year.
However, everyone has a different view of how much a business is worth so you often see swings of share price over days and weeks. It can create opportunities if you’re able to jump on them:
Paragon Care Ltd (ASX: PGC) – $3,000
This healthcare product distribution business has made a lot of acquisitions in recent years and it has also raised a lot of capital. I can understand why some investors want to get a grip on the business before sending its forward multiple of earnings beyond low double digits.
However, management are hoping for organic growth of 10% and continued inorganic growth through acquisitions. The more products it can offer on its purchasing platform the better the economics will be. There’s quite a few reasons to like Paragon.
It’s currently trading at 11x FY19’s estimated earnings with a grossed-up dividend yield of around 6%.
Challenger Ltd (ASX: CGF) – $3,000
Challenger is, by far, Australia’s leading annuity provider. This is a good place to be because retirement income products that can deliver a guaranteed source of income should be in growing demand due to Australia’s retirement population which is expected to increase by 40% over the next decade.
Australia currently has a very low amount of retirement money allocated to fixed assets and new Government rules requiring super funds to offer guaranteed income as an option should be another bonus for Challenger over the long-term.
It’s currently trading at 16x FY19’s estimated earnings and has a grossed-up dividend yield of 4.6%.
UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP) – $2,000
This exchange-traded fund (ETF) is based on the 50 biggest businesses based in Asia outside of Japan. Asia, particularly China, is a fast-growing region. China’s GDP has been growing for a long time and now middle class citizens are spending money and driving additional industries forwards. Infant formula isn’t the only place to benefit.
Technology, banks, insurance and other sectors could all benefit. That’s why this ETF could be a good way to benefit from the rise of China. Tencent, Alibaba and Baidu are all exciting opportunities.
WAM Microcap Limited (ASX: WMI) – $2,000
Small caps are also a good way to beat the market over the long-term. Small caps aren’t my specialty, so I’m happy to leave the investing to managers that I trust that have good track records, like Wilson Asset Management.
WAM Microcap’s portfolio has delivered a gross return of around 30% over the past year before fees and expenses. A steadily growing dividend makes this LIC even more attractive to me.
It’s trading at a bit of a premium to its underlying value at the moment, so I’m hoping I’ll be able to buy a lot more at some point in the future at a discount.
Paragon and Challenger have long-term growth tailwinds, are trading at good value and a pleasing dividend yield. I’d be very happy to buy more shares for my portfolio today, to add to what I already own of them.
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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited, Paragon Care Limited, and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended Challenger Limited. 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.