Monopolies are a strange thing (the economic concept, not the board game). They are technically illegal in Australia under consumer law. And fair enough too. If a company has monopolistic power, it has the potential to exploit its customers in order to maximise profits, unhindered by the competition that prevents most companies from doing so. Yet there are some companies out there that I believe are unquestionably monopolies, or at least have monopolistic powers.
Through systematic quirks or unique regulatory environments, these ASX ‘monopoly shares’ are allowed to operate as such (albeit usually with some restrictions). These arrangements can be highly lucrative for shareholders, for the reasons mentioned above. Here are 3 such ASX shares that you might want to consider today.
3 ASX ‘monopoly’ shares
Transurban Group (ASX: TCL)
Transurban can be considered a virtual monopoly in my view. That’s simply because it is the only company in Australia with a massive grip on the network of tolled-roads in the country. If there is a toll road in one of our capital cities, you can bet Transurban has its fingers in the pie. In Sydney alone, the company owns or operates at least five.
Transurban’s tolls are regulated by the government as a result. But most are still very generous arrangements – often giving Transurban the right to increase its tolls by at least 4% every year (an amazing arrangement when inflation is essentially zero). As such, I think Transurban is a top, long-term buy for ASX investors today, especially those who enjoy dividend income.
ASX Ltd (ASX: ASX)
Yes, the ASX is, in fact, an ASX-listed company in its own right. And guess what? In Australia when you buy shares, it’s usually on the ASX. There is an alternative that’s popped up in recent years known as Chi-X. But in reality, the ASX is a monopolistic company. It can pretty much charge companies listing on it what it likes in terms of fees. That’s clearly in the interests of ASX shareholders, who have enjoyed more than 100% in gains across the last five years alone.
I believe the ASX company is one of the most overlooked monopolies on the market today, and as such, I think it will continue to be a lucrative investment.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
It’s all in the name with this one. Sydney Airport literally has a monopoly in terms of New South Wales air travel. There are other regional airports of course. But none are close to Sydney. And none service international flights with the same capacity (not that this is an issue right now). There is a second Sydney Airport currently being built (to be loquaciously known as Nancy Bird Walton Western Sydney International Airport) at Badgerys Creek. But this won’t be open until late 2026 at the earliest and will do little harm to Sydney Airport’s long-term profitability anyway in my view.
Like the ASX, Sydney Airport has rewarded its shareholders handsomely over the last decade or so (at least before the pandemic). And while things won’t return to 2019 levels for some time in my opinion, the current Sydney Airport share price might represent a good long-term buying opportunity.
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Returns As of 6th October 2020
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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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