When we invest I think it’s important to think long-term, so this article is about shares I’d invest in for at least until 2020 and beyond.
It’s getting quite hard to find good value shares these days with how long interest rates are in Australia, the US and Europe. People have been searching for yield and growth, sending share prices higher.
I do think there are opportunities are out there, we just have to look beyond the typical shares.
Here are three opportunities in my opinion:
Paragon Care Ltd (ASX: PGC)
The healthcare distributor has gone through a rough FY19 with it suffering a profit slump due to what it calls a ‘legacy capital business’ which was making losses. In FY19 that business will have contributed a $4 million to $5 million loss to the overall result.
However, Paragon recently announced that it has sold that business to Cabrini Health for $4.5 million. What remains in Paragon is a growing set of businesses with higher profit margins exposed to the positive ageing population tailwind.
If the company can show in 2020 that it’s a solid and growing healthcare business then sentiment could return, particularly if the company continues its dividend growth. It’s trading at around 10x FY20’s estimated earnings.
Duxton Water Ltd (ASX: D2O)
The water entitlement business continues to grow its portfolio, increasing its value and income potential for shareholders.
More dry weather is expected over the next year, which may lead to even more water price increases, making the current 10% discount to its post-tax assets (and 18% discount to the pre-tax NTA) seem attractive at today’s price with a grossed-up dividend yield of 5.6%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
I think it’s hard to find a business that’s better than Soul Patts whilst also trading at an attractive price.
The investment conglomerate has seen its share price decline quite a lot over the past six months, due to the weakness of three of its largest holdings of Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPM) and New Hope Corporation Limited (ASX: NHC) – all of them have faced individual unrelated issues, but things could have reversed in 2020 for the ACCC TPG merger decision, the Australian construction market and the coal price.
With a long history, highly invested management, strong capital growth and a growing dividend there’s lot to like about Soul Patts shares in the low $20s.
All three of these shares are potential market-beaters in my opinion. If I had to pick one it would be Soul Patts for its diversified portfolio, contrarian investment nature and value & cashflow focus.
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Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO, Paragon Care Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks, DUXTON FPO, and 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.