The prices of shares are always changing, which means what shares are good value can regularly change too.
It's important to keep a watchlist so you know what you're going to buy the next time you have some capital to invest.
If I were given $10,000 to invest, this is how I'd do it:
Challenger Ltd (ASX: CGF) – $2,000
Challenger is only trading at 16x FY19's estimated earnings. It sells annuities to retirees who want a secure source of income from their capital. The number of annuities sold should increase due to the growing number of retirees and the size of the annuities should grow thanks to contributions and compounding.
Challenger is growing underlying profit every year and this is good for shareholders over the long-term. One particular year may not be great, but compounded growth is a strong force, particularly when you add in dividends.
It currently has a grossed-up dividend yield of 4.6%.
BWX Ltd (ASX: BWX) – $3,000
BWX is only trading at 14x FY19's estimated earnings. It manufactures and sells a variety of natural beauty products through different leading brands.
The natural beauty market is steadily growing and BWX is becoming a global player as it increases the number of countries its products are sold in. It's a very different business compared to most other ASX shares.
With BWX's low-ish valuation it only needs to grow earnings per share (EPS) by 10% per annum to create market-beating returns considering it also comes with a 3% grossed-up dividend yield.
Paragon Care Ltd (ASX: PGC) – $3,000
Paragon is only trading at 11x FY19's estimated earnings. It's a healthcare item supplier that provides products like beds and devices to clients such as hospitals and aged care businesses.
It is steadily growing inorganically through acquisitions which is expanding the number of items on its single-platform purchasing site. Management also believe the company can achieve 10% organic growth through initiatives and the ageing population tailwind.
It also has a handy grossed-up dividend yield of 6%.
InvoCare Limited (ASX: IVC) – $2,000
Australia and New Zealand's largest funeral business is trading at 22x FY19's estimated earnings.
InvoCare isn't cheap, but it has very defensive earnings, and death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050 – this is a very long-term tailwind.
The company is also investing heavily in refurbishing its locations to be more attractive to families and hopefully earn more. I think this is a good strategy by management to focus on long-term gain for short-term pain.
It has a grossed-up dividend yield of 5.4%.
Foolish takeaway
I believe all four of these shares could be market-beaters over the next five years. I already own shares of them all in my portfolio and I wish to buy more over the coming months at the current prices.
