Experience has repeatedly taught me to be wary of ‘hot tips’, especially when they concern unproven speculative enterprises. In an efficient market one must be careful not to forget that by the time you have received the tip, so have a thousand others and the expectation will most often already be reflected in the market price. This is especially relevant for those concerned only with short term gains.
However, when one has the patience to hold onto an asset over the medium to long term, and as such can afford to wait for an investment to mature, the efficiency of markets is less of a concern. Moreover, when one looks to become a part owner in a listed company not simply to benefit from short term price fluctuations, but rather to benefit from the growth in earnings and indeed dividends, the potential for attractive gains improves considerably.
To that end I would like to nominate a few companies that appear to hold attractive prospects. The quality of these businesses is, in all cases, evident from their track record. While the future is forever opaque, companies with ‘runs on the board’ certainly represent considerably less risk than those that have yet to demonstrate their potential.
My first pick is Hastie Group (HST), a building, engineering and refrigeration services company that first listed back in 2005. Since inception the company has consistently grown its operating earnings, and furthermore provided reliable and reasonable fully franked dividends. At just 6.3, the PE points to an attractive valuation, and with an expected dividend yield of 6% investors could do far worse.
Next in line is Tassal Group (TGR), a producer and distributor of Atlantic Salmon. With the economy on the mend, and the appetite for high end products on the rise, this company is likely to benefit well from any recovery. Importantly, they are the largest supplier of Atlantic Salmon to both Coles and Woolworth, which represents a real advantage. As with Hastie, Tassal has consistently managed to improve both earnings and dividends and is trading at an attractive valuation (PE 8) and offering a decent yield (over 4%).
In both cases my recommendation would be to ensure you are well diversified and have an investment horizon of at least 2 years. Also, where personal circumstances allow, I would advise investors to reinvest their dividends. Both stocks provide attractive discounts via their reinvestment plans, and importantly a policy of reinvestment will give rise to compounding returns.
Go long and stay strong!