When it comes to buying and holding individual shares, our goal should be – as long-term investors – to beat the broader market's return…
Because if we can't beat the market, why wouldn't we just buy a low-cost index fund and save ourselves the hassle of researching and valuing all the different companies?
Of course, beating the market is easier said than done. And in a bull market, like we've experienced over the past few years, anyone can look like an ace stock picker.
Therefore, it's essential to identify companies which will perform well in all market conditions and pay a good price for the shares.
One of the companies which I bought last year to outperform the market is Bentham IMF Ltd (ASX: IMF). It is a litigation funder which is busy growing its international presence, including in the much larger market of the United States. IMF's earnings can be hit and miss, given the nature of the business. But in the long run, I believe they should average out to sustainable growth. Indeed, its 10-year average annual shareholder return is 12.9%.
Shine Corporate Ltd (ASX: SHJ) is another legal eagle which has a bright future ahead. Shine is a law firm which listed on the ASX in 2013. Since then, shares are up a whopping 79%. However the best could be yet to come. The group is expanding its network (acquisitively and organically), increasing exposure to litigation outside personal injury and will begin a marketing drive in 2015 to increase brand awareness. At today's prices it appears good value.
Boasting a market capitalisation of $442 million, Cash Converters International Ltd (ASX: CCV) is another company with an excellent track record for shareholder returns and beating the market. It has a 10-year average annual total shareholder return of 20.4%, far outperforming the S&P/ASX 200
(INDEXASX: XJO).
Looking forward, the company's payday loans business is back on its feet and the Carboodle service will start contributing to earnings in the medium term. In addition, the Cash Converters franchise is expanding its footprint in New Zealand and other countries, through joint venture partnerships. It also yields a dividend of 3% fully franked.
Our #1 ASX stock for 2015 – Yours FREE!
I think each of these companies could help long-term investors outperform the market. Indeed, I hold each of them in my portfolio.
