FYI | Mar 10 2020
By Peter Switzer, Switzer Report
Stocks for the next ten years: what the experts say
Around this time two years ago, I asked some respected market experts to give me one stock to hold for 10 years. One of the enduring lessons I’ve learnt over 30 years of being interested in building wealth, was that being fixated on quality assets and being prepared to buy them when their respective markets have problems with them is a pretty good, consistent policy to stick to, if you like to get richer over time. The Coronavirus has created a market situation that fits this story.
Recently I checked out how the stocks picked by my experts had performed.
- FNArena’s Rudi Filapek-Vandyck opted for CSL at $160.91and it went to $338.68 — that’s up more than 100%.
- Paul Rickard of the Switzer Report tipped CSL and is pretty happy with himself!
- Geoff Wilson of Wilson Asset Management selected TPG at $5.49 and it went to $8.10 — a 47% gain.
- Roger Montgomery of Montgomery Investment Management tipped CBA at $72.31 and it went to $87.85.
- I selected IOZ and my own dividend/growth fund, SWTZ, which delivered 22% and 11% respectively, plus a 14.2% dividend yield.
The other five stocks struggled, but the tipsters still have eight years to go before we can say they got it wrong. For your information, they were PACT, Tencent, Event Hospitality and Entertainment (EVT), Maruti Suzuki and Liberty Lilac, which were little known overseas stocks. As stock prices are under challenge, I decided to talk to some experts again to see what they like for the next 10 years. I will share them with you and some of the reasons for their choice.
S.T. Wong, the Prime Value’s CIO & Portfolio Manager pushed Macquarie Group (MQG) as one for the next 10 years, and this is why:
“It has demonstrated a strong ability to adapt to changing market environments and take advantage of opportunities as they arise. The company is forward-looking and has a strong management team, so Macquarie Group in 10 years could have quite a different earnings and risk profile compared to what it is today.”
Michael Wayne of Medallion Financial likes the small business accounting company, Xero (XRO).
“Xero is the largest provider of cloud accounting software to small and medium-sized businesses, primarily across Australia and New Zealand, and is making inroads into the United Kingdom and the United States,” Wayne said. “The software gives firms and their accountants or bookkeepers the ability to perform all invoicing, inventory management and payroll functions online in real time. Xero has seen explosive subscriber growth since 2006 with the latest results indicating the business now has 2.057 million subscribers. When you consider it took 10 years to get the first million subscribers, and two and a half years to get the next million, you can understand the acceleration and growth of the company.”
Fairmont Equities’ Michael Gable is a CSL man, even at these high share price levels.
“Sounds boring, but I would have to go for CSL,” he said. “It has a brilliant track record since listing, and the business has a high chance of remaining stable in the future whilst achieving above market earnings growth. Finally, in terms of the chart, it remains in a long-term uptrend and is the least volatile stock in the top 200.”
Geoff Wilson, the founder of Wilson Asset Management has opted for a local star performer in Breville (BRG).
“It has a strong position in Australia and is quickly winning market share in the US and Europe on the back of their dominance in the manual coffee machine category, which is now slowly becoming a trend overseas,” he pointed out. “They are a product leader in business and their success is tied to their innovation pipeline, which we are bullish about. It’s on 27x FY21 PE with a sustainable earnings growth of 20% CAGR over the next 5 years. Their ungeared balance sheet also means they can make accretive acquisitions.”
Julia Lee, the founder of the fund Burman Invest, likes three companies.
“My criteria would be to look at companies that were able to grow earnings for more than 10 years due to structural tailwinds, and so my top three that match that criteria are CSL, Resmed (RMD) and the Goodman Group (GMG). These companies benefit from an ageing population or the move from clicks to bricks. GMG is a warehouse supplier to the likes of Amazon and other online sellers.”
My colleague on the Switzer Report, Paul Rickard, stole my thunder opting for Xero, as did Michael Wayne, which underlines this company’s potential!
“I have two stocks,” he said. “I am going to stick with CSL (I tipped this two years ago), although I am wary about the price. I don’t think the next decade will be as good as the last decade, but if it can maintain global leadership in blood plasma products and influenza vaccines, shareholders will be handsomely rewarded.”
“Another company that has a chance to be a global leader is Xero, the provider of cloud based accounting software services. It is expanding aggressively offshore and you would have to think it must be a target for the existing accounting software giants. While wary of the price, I think this is a stock for the bottom drawer,” said Paul Rickard.
Aitken Investment Management fund manager, Charlie Aitken made it short and sweet. He’s been a big fan of Microsoft (MSFT) in the US for years and has done well out of the stock and he threw this one in: “a contrarian idea in coronavirus times is Auckland Airport in NZ (AIZ).”
Rudi Filapek-Vandyck is a Macquarie (MQG) fan: “because of the corporate culture that allows them to adjust to whatever new dynamics and challenges might present over the decade ahead.”
In addition he said:, “given Macquarie’s track record, I think investors can give management, and staff the benefit of the doubt in finding new drivers of growth on the back of emerging new megatrends. While at the same time coping with predictable challenges ahead.”
Morgans’ Raymond Chan is keeping the faith with the local telco, Telstra (TLS)! He likes a lot of companies but he sees TLS as being a consistent yield play for those investing over a 10-year period.
So how many have we got for investing for 10 years?
- Macquarie Group (MQG)
- Xero (XRO)
- CSL
- Resmed (RMD)
- Goodman Group (GMG)
- Auckland Airport (AIA)
- Microsoft (MSFT)
- Telstra (TLS)
- Breville (BRG)
- IOZ + SWTZ.
For my part, I will again throw in iShares IOZ, which gives you the top 200 companies in Australia, so I’m betting on Australia for the next decade and its top companies. I also like the fund that carries my brand, the Switzer Dividend Growth Fund (SWTZ), because it specialises in selecting good dividend-paying stocks while trying to snare a bit of capital gain. (There are also other listed funds in this category including eInvest’s EIGA or VHY from Vanguard). I think interest rates will be low for a long time and so products like SWTZ have a place in those cautious investors’ portfolios who want income first and before lots of capital gain that can also come and go.
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
Content included in this article is not by association the view of FNArena (see our disclaimer).
Important information: 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. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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