Billionaire investing great Warren Buffett is well known for buying high quality businesses when they have temporarily fallen out-of-favour. These 'short term hiccup' type situations have allowed him to establish long-held positions in global powerhouse businesses such as The Coca-Cola Company and American Express.
Right now on the ASX there are three quality companies that face short-term headwinds which are putting pressure on their business operations and correspondingly their share prices.
The three stocks I'm talking about are Ainsworth Game Technology Limited (ASX: AGI), Breville Group Ltd (ASX: BRG) and Super Retail Group Ltd (ASX: SUL).
Ainsworth, like its larger peer Aristocrat Leisure Limited (ASX: ALL), is a leading global provider of gaming machines. Recent results have disappointed the market which has resulted in a near 31.5% fall in its share price over the past 12 months. Despite this fall, the three-year total shareholder returns (TSR) of Ainsworth are still a very impressive 62.8% per annum (pa).
Breville which is best known for the household electrical appliances that show its name has lost 10% in the past year which is certainly a less severe fall than Ainsworth, however, it does still represent an 18.5% underperformance compared with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Once again the wholesaler's longer-term track record remains impressive and arguably appealing with a TSR over the past three years of 40% pa.
Thirdly, Super Retail which is one of Australia's largest retailers with brands including Rebel, Supercheap Auto and BCF has also been struggling in the current economic environment, leading to a share price decline of 18.4% in the past year. Once again, despite the near-term underperformance the longer-term returns to shareholders remain first rate with a three-year TSR of 18.6% pa.
While structural changes and competitive pressures can mean future performance won't be the same as past performance, identifying companies with impressive track records – such as above average long-term total shareholder returns – can help investors choose businesses with sustainable comparative advantages. If these businesses become available at appealing prices then it often makes for a great investment opportunity.
