Sometimes it can be tempting to invest in a speculative stock promising the world.
However, unfortunately for investors, more often than not, these type of ASX shares fail to deliver on expectations and destroy wealth instead of creating it.
At the same time, investors keeping it simple and focusing on defensive ASX shares with stable and strong business models are slowly getting rich with limited effort.
But which ASX shares could deliver the goods for investors in this way? Let's take a look at a couple that are reliable and defensive.
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CSL Ltd (ASX: CSL)
This biotechnology giant could be a quality option for investors. It has delivered market-beating returns over the past decade thanks to the strength of its business, its investment in research and development, and increasing demand for immunoglobulins.
And thanks to a rare period of underperformance for its shares, analysts at Morgans believe now is a great time for investors to invest in CSL. They commented:
While shares have struggled of late, we continue to view CSL as a key portfolio holding and sector pick, offering double-digit recovery in earnings growth as plasma collections increase, new products get approved and influenza vaccine uptake increases around ongoing concerns about respiratory viruses, with shares trading at 25x, a substantial discount (20%) to its long-term average.
Morgans currently has an add rating and a $315.40 price target on the company's shares.
REA Group Limited (ASX: REA)
Over at Goldman Sachs, its analysts believe that REA Group could be a high quality ASX share to buy now.
REA Group is the leading player in Australian real estate listings through its dominant realestate.com.au website. It is thanks to this market leadership position that Goldman is so positive on its outlook. It highlights REA Group's pricing power and opportunity in lead generation. It explains:
We believe REA Group, a leading real estate classified business with strong market positions across Australia, Asia and the United States, has one of the best risk/reward profiles in our domestic media coverage. In particular, we are positive on the pricing power of the real estate classified vertical, given that we believe budgets will rise (at the expense of commissions), and within existing budgets, REA, as a leading player in the vertical, under-monetises its lead generation. We also see the current negative sentiment around AU property as more a driver of share prices over earnings.
We believe REA is among the highest-quality names in our coverage, given it has the highest ability to continue to drive pricing, with: (1) significant disparity between lead share and revenue share; (2) the lowest cost relative to overall vertical transaction; (3) a profitable and still fragmented end market; and (4) the existence of Vendor Paid advertising, with strong valuation support with current trading multiples in-line with historical levels.
Goldman has a buy rating and $202 price target on its shares.
