On a week-to-week basis, we try to pick stocks that will have upside within the next year. Sure, I know most of you want to buy now and start making money ASAP, but sometimes the value comes from you being a long-term investor, which gives you a chance to buy a stock that a speculator/trader hasn’t got the patience to wait for.
The speculator wants profits now. For these people, even instant coffee is too slow!
The irony is that impatient stock buyers make it harder for themselves because timing the market and timing shares is fraught with danger. On the flip side, it creates an opportunity for the patient long-term investor.
Last week I interviewed Marcel Von Pfyffer, founder of Arminius Capital on my YouTube TV show, Switzer Investing. Marcel gave me five stocks he thinks are great long-term holds.
I’ll share these with you and then look to the analysts (who are much more short term in their outlooks), to see if they share Marcel’s views about the buy-ability of these companies.
The members of Marcel’s team are numbers driven and the companies selected are given the thumbs up because the key readings about these businesses scream “buy me!”
His first selection is a company called ALS, with a ticker code ALQ, which is a global lab-testing company, clearly helped by the pandemic-infected world. They also do geological assay work, which adds diversification and gives exposure to the minerals that are used in the modern world of batteries and hi-tech. He referred to the old adage that “in a mining boom, you buy the companies selling the picks and the shovels”.
Analysts at FNArena think there is a 0.6% downside but remember, their view is more short term. No analyst has a very negative view, with the worst suggesting a 6.89% fall in share price and the most optimistic expecting a 6.74% gain.
His second selection is one that looks good for both the short- and long-term: Bluescope (BSL). He likes Aussie companies that have exposure to America. With the current building and infrastructure boom in the US, BSL is sitting pretty.
Meanwhile, the local housing boom works well for a company that’s debt-free and has $800 million in cash, which could be good for future buybacks.
The analysts expect there’s 32.6% upside, with the most positive, Ord Minnett, tipping that a 60.0% gain lies ahead!
The next stock, Graincorp (GNC), is not just a collector of grain but crushes seeds for Canola oil, which is very responsible for the chips many of us consume too readily on a daily or weekly basis! This is another local company that’s into exporting, which leverages off the growth of foreign economies. The outlooks of these countries look strong for the next two years (at least), which comes as food prices are spiking, Marcel adds.
It also happens as US rival grain growers are copping drought conditions, which adds to the argument for investing in the company.
The analysts see a 9.2% upside for GNC but Macquarie has a 16.6% upside call, while UBS sees a 14.7% rise ahead.
Marcel’s next stock is again an exporter: Iluka (ILU) — a mineral sands company producing inputs into paints, pigments, plastics and paper. He believes all the industry sectors will be advantaged by the global boom ahead and makes the point that not all rare earth materials are used only in mobile phones and computers, and many of ILU’s products have many applications in the modern manufacturing world.
The analysts see 0.9% upside on a consensus basis but Macquarie is much more positive, seeing a 14.9% rise in the offing.
The final company Marcel likes for the long term is James Hardie, which is another business linked to the strength of the US economy. Two-thirds of the revenue and profit of JHX comes out of the US, and analysts see a 6.6% upside in the shorter term.
However, two company-assessing experts, Macquarie and Morgan Stanley, see a 14%+ rise ahead.
Marcel points out the company’s June quarter was up 25% and EBIT was up 30%, and he thinks the end of Coronavirus fears will lead to more US spending and JHX will be a big beneficiary.
He also argues that timber and vinyl usage in construction is on the way out and JHX’s fibrous cement products will be advantaged. The company will also be marketing the pluses for brick as an alternative to the likes of timber.
All five companies have merit but I especially like the prospects for Bluescope.
Bluescope Steel Limited (BSL)
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
