The great thing about the stock market is that share prices are always changing. Sometimes the price changes by more than 5% in a single day.
What this means is that shares can quickly become good value in only a few days. That's why it's always a good idea to have the cash ready for at least one parcel of shares.
If I were given $10,000 to invest today, then this is how I'd do it:
Greencross Limited (ASX: GXL) – $2,000
Greencross is the largest pet company in Australia with its vet and Petbarn retail networks. It's utilising a clever co-location of putting a vet inside a Petbarn which should allow for cross-selling and cost savings.
The Greencross share price is currently 18% lower than before it issued its fateful trading update that included a number of write-downs.
I think the trading update (and the FY18 result) will be the low point for Greencross and it will get back to profit growth in FY19.
Ramsay Health Care Limited (ASX: RHC) – $1,500
Ramsay's share price continues to slide due to private health insurance affordability issues in Australia as well as volume problems in the UK.
But, the lower Ramsay goes the better value it becomes. The long-term ageing demographic is still a strong tailwind for Ramsay.
Ramsay could create a positive future earnings surprise in the next couple of years if it expands into China or its joint venture supply business turns into a large enterprise.
Paragon Care Ltd (ASX: PGC) – $3,000
Paragon is a small cap healthcare business which supplies a variety of healthcare items and products like devices, equipment and beds to healthcare customers like hospitals and aged care facilities.
Paragon suffered a large fall yesterday, meaning it's back to trading at $0.80 per share. This means it's trading at around 10x FY18's management's pro-forma post-acquisition earnings estimate. The company recently also announced a large New Zealand acquisition which could add another 10% earnings per share (EPS) growth for FY19.
Although the business carries a lot more debt, it appears to be cheap with good tailwinds.
Specialty Fashion Group Ltd (ASX: SFH) – $2,000
This retail business is selling all its retail chains except City Chic, which is actually the strongest one in the stable.
City Chic sells a good percentage of its clothes online and is also expanding its presence in North America and Europe.
If Specialty Fashion Group can continue growing its like for like sales at the rate it has done over the past two years then City Chic could be a really strong performer over the next year or two.
Duxton Water Ltd (ASX: D2O) – $1,500
Duxton Water owns water entitlements and leases them out to agriculture businesses to use each year. It generates meaningful earnings on its entitlements already and it could steadily grow as the entitlements become more valuable and it acquires more entitlements. Water is a very important commodity.
The rise of Australia as the food bowl of Asia should also indirectly benefit Duxton over time as well.
Foolish takeaway
Hopefully all five of these choices beat the market over the next five years. I personally believe they will, which is why I own most of them in my portfolio. At the current prices Specialty Fashion could generate the strongest returns over the next year or two as the market learns how good of a business City Chic is and how cheap SFG is trading.
