Wise investors know that when you find a good company, you should also look into the companies that provide services to them. They can be worthy stock picks as well.
If you thought Apple was a great stock because of its mobile phones, then snooping around to find out what companies supplied parts to it may have yielded equally rewarding stocks.
Here are three stocks that support successful companies and are themselves very successful, growing businesses.
Brambles Limited (ASX: BXB) is a $14.7 billion supply-chain logistics company that specialises in pooling solutions services. It makes other companies' warehousing and distribution more efficient by managing the pallets, containers and reusable plastic crates.
Since 2011, revenue and net profit have risen at a good pace. The company operates in more than 50 countries and more than 80% of its revenue comes from overseas.
Its FY2014 guidance for underlying profit was confirmed by the company at US$930 – $965 million. It plans to reduce overhead costs by US$100 million over FY2015 to FY2019.
Recovering international markets spur on the need for more logistics services. Brambles is a major global business growing in the industry.
Mining Resources Limited (ASX: MIN), the mining services and processing company assists mining companies with crushing and processing ore, general mine services and infrastructure provision. While some mining services companies have gone weak with the mining pullback in exploration and greenfield development, processing ore is in great demand for increasing exports and improving sales.
The company had an excellent half year result for FY2014. Half year revenue rose to $928.4 million, which almost rivals the $1.09 billion in revenue for the whole year of FY2013. Earnings per share doubled to 70.2 cents per share on the previous corresponding period.
Iron ore miners are all ramping up production to expand earnings with higher volumes even if iron ore prices weaken. This company will benefit from that drive in processing.
Downer EDI Limited (ASX: DOW) has picked up several new engineering and infrastructure management contracts in QLD coal mining, as well as rail and port related contracts in WA within the iron ore industry.
In November 2013, it was awarded a $500 million contract for pre-strip and supplementary mining activity at the proposed Roy Hill iron ore mine, which is projected to be the fourth largest iron ore mine in WA.
2010 and 2011 were down years in reported net profit for the company, yet in the last two years profits have come back strongly.
Foolish takeaway
Mineral Resources and Downer EDI are great examples of companies that can perform well in good times and have the financial strength and finances to power through industry downturns.
Brambles grows by allowing other companies to concentrate on their core businesses while it becomes an integral part of their supply chain. It builds recurring business and income streams, firmly establishing its position as a market leader.
