The ongoing concerns in Greece and China have seen the Australian sharemarket struggle to gain any momentum over the past six months and it appears as though the market might now be waiting for earnings season to provide some guidance.
Although earnings season might be just around the corner, I have identified three long-term investments that I believe are a buy right now:
1. Ainsworth Game Technology Limited (ASX: AGI) – Investors should not expect any surprises when Ainsworth releases its full year results in August as management have already confirmed they expect the FY15 results to be similar to the $61.6 million of profit reported in FY14.
The reason I have been buying Ainsworth shares is that I'm betting on continued strong growth in its overseas operations that have increased by more than 40% over the past year. Along with new product releases planned for the domestic market in FY16, I expect strong revenue and profit growth to return in the coming year and the share price to rebound strongly. The shares are trading at just under 14x FY15 earnings and investors can expect to receive a dividend yield of around 4%.
2. Cash Converters International Ltd (ASX: CCV) – I have been a long-term holder of the payday lender and I can tell you first hand that it has not been a stress free investment. The share price has struggled to gain any momentum over the past three years as a number of issues have plagued investor sentiment towards the stock.
One of the main issues that was contributing to this negative sentiment was the long-running class action against Cash Converters that has finally been settled for $20 million. Potential regulatory changes have been the other issue hanging over the stock, although I am confident Cash Converters is in the best competitive position to tackle any changes that might be introduced.
From an operations point of view, Cash Converters has seen strong revenue growth over the past year and the demand for its short-term cash lending products is continuing to increase. The impact of the class settlement makes it difficult to forecast earnings per share for the coming year but investors can expect to receive a fully franked dividend yield of around 5.5%. Although the company faces some short-term issues, the long-term fundamentals still remain pretty solid and investors who are willing to embrace some short-term volatility should be rewarded with handsome gains.
3. Market Vectors MSCI World Ex Australia Quality ETF (ASX: QUAL) – Although the name might be long, the investment is pretty simple. It is an exchange traded fund (ETF) that provides Australian investors with a diversified portfolio of quality international companies listed on exchanges in developed markets around the world, excluding Australia. Examples of companies that make up the ETF include Apple, Johnson & Johnson, Microsoft and Google.
Many Australian investors are under-exposed to global equities and ETFs are a cheap and simple way to get exposure to global markets. The underlying index that this ETF tracks, has returned nearly 18% each year over the past five years compared to 9.26% for the broader Australian market.
Although investors could use a managed fund such as those provided by Magellan Financial Group Ltd (ASX: MFG) or Platinum Asset Management Limited (ASX: PTM), the management fees for ETFs are substantially lower (0.75% or less per year) with historically similar returns.
With the Australian market lagging behind a number of other developed markets, I will look to increase my global equity exposure to between 10-15% of my entire portfolio over the next few weeks.
It's not all bad news for the Australian market though- The Motley Fool has just identified a winner for your portfolio!
