We are well into reporting season and some results are turning up opportunities. This is the chance to get up-to-date financial information from shares and make an investment decision based on the recent price movements.
If I had $10,000 to invest today, I'd do it like this:
Challenger Ltd (ASX: CGF) – $3,500
Australia's leading annuity provider is suffering short-term pain thanks to an underwhelming FY18 result. However, continued growth is expected in FY19 of at least 8%. New means tests and superannuation requirements could boost demand for annuities in FY20 and beyond.
Challenger is trading at around 13x FY20's estimated earnings. I think it look likes a good ultra-long-term opportunity at this price.
Rural Funds Group (ASX: RFF) – $2,000
Australia's largest agricultural real estate investment trust (REIT) is seeing its share price gently fall back to a more realistic level.
The long-term price drivers of increasing global food demand and food scarcity should mean Rural Funds can continue increasing its rental prices for many years to come. Management are confident that the distribution can increase by 4% per annum.
It's currently trading with a yield of around 5.2% for FY19.
Duxton Water Ltd (ASX: D2O) – $1,500
Duxton Water is the only ASX share to give investors pure exposure to water entitlements. I'm sure it's been hard to miss that many regional areas are currently in drought. I hope it does rain for their sake.
However, whilst rainfall is scarce the value of water entitlements will likely keep going up. Shareholders can benefit from the lease income Duxton Water receives as well as the long-term increase in value of water entitlement.
At $1.30 it's trading at a bit of a discount to its net asset value (NAV) of $1.34 at the end of July 2018.
Paragon Care Ltd (ASX: PGC) – $3,000
Paragon is one of my favourite ideas at the moment. It's a small cap healthcare supplier for items like equipment, devices and beds to clients such as hospitals and aged care facilities.
The company has been on an acquisition spree over the past year. There's quite a bit of uncertainty baked into the current price. As long as management do a reasonable job of integrating the businesses and extracting synergies then Paragon could be a decent long-term idea with Australia's ageing population.
As long as it can create decent organic growth then it looks cheap at under 11x FY19's estimated earnings.
Foolish takeaway
All four of these are trading at good long-term value in my opinion. Rural Funds looks like a good income choice at the moment, whilst Challenger could create excellent returns over the next decade if it can harness the power of the avalanche of retiree money wanting a place of safety.
