When investing in shares, it is always a good idea to take a long-term outlook. In my opinion, a time horizon of at least 5 to 7 years is reasonable, because it is very difficult to predict how the share market will perform in the short term.
That's why I prefer to invest in companies that have fundamentally strong business models, and are one of the market leaders in their market segments, with strong growth prospects in their own industries and operate in growing industries. This generally will translate to strong shareholder returns, above the market average over the medium to long term.
I believe that both the ASX companies below meet these criteria.
Corporate Travel Management Ltd (ASX: CTD)
I believe Corporate Travel is reasonably well placed for further share price growth over the next decade, due to its diversified business model and exposure to global growth opportunities outside its local markets. Corporate Travel designs customised travel solutions for businesses of all sizes.
More than 70% of its revenue base is generated outside of Australia and New Zealand, with its reach extending to the United Kingdom, Europe, Asia and North America. This percentage is also growing. It continues to grow strongly in all its key markets both in Australia and New Zealand and also in the United States, Asia and Europe, driven by new technology investments.
The company estimates the global market potential in its industry to be worth US$1.5 trillion. Given Corporate Travel currently has less than 1% of global market share, this provides it with enormous potential, especially as the global corporate travel industry is also highly fragmented.
Recent concerns about the impact of the coronavirus have seen a fall in its share price, which I believe positions Corporate Travel's share price in the buying zone for investors that are prepared to ride out any short-term market fluctuations.
Transurban Group (ASX: TCL)
Toll-road operator Transurban owns a virtual monopoly on the toll roads of Australia's 2 largest cities, Sydney and Melbourne, and also has a number of toll roads in Brisbane. It also manages and develops toll-roads in North America.
Due to the increasing number of vehicles using our toll roads, Transurban has been able to grow its revenue at a strong rate over the last decade.
A significant driver of increasing use of toll roads is the growing congestion on our main roads, which seems to be getting progressively worse each year. Our major cities continue to expand at a rapid rate, and vehicle volumes will inevitably continue to go upwards.
Another great attribute of Transurban as an investment is that it is also a strong defensive share – it is unlikely to be impacted by economic downturns, thus providing more stable dividends. It also currently pays an attractive dividend of 3.7%.
In its recently released results for the 6 months to December 2019, Transurban announced that its average daily traffic grew by 2.3%, while proportional toll revenue increased by 8.6% to $1,396 million. Proportional earnings before interest, tax, depreciation and amortisation and before significant items increased by 9.5% to $1,094 million. Transurban's FY20 distribution guidance was reaffirmed at 62.0 cents per security (cps). The group announced a 1H20 distribution of 31.0 cps, fully covered by free cash flow of $927 million.
