In this current bear market, we are faced with an opportunity to load up on world class companies at a reasonable price. Many companies that I considered way overpriced a few weeks ago are suddenly within striking range.
The S&P/ASX 200 Index (ASX: XJO) is home to a surprising number of world class companies – companies that are either already world leaders, or could become the best in the world in their respective industries.
Despite all of the shock news about the market sell off, most large cap companies are still overpriced, in my view. However, there are plenty of opportunities among the ASX mid caps.
Each of the companies below represents what I believe to be a world class company. Each has strong competitive advantages, good management, global reach and is currently trading at a reasonable price.
Killing the credit card industry
Afterpay Limited (ASX: APT) is one of the great emerging companies on the ASX 200. The credit card killer, Afterpay's pioneering buy now, pay later service is basically a lay-by approach, except you get the product now and pay for it over 4 instalments.
While other companies can (and will) create products to compete with Afterpay, its advantage is that of the first mover. It already has large a pool of users and a large community of vendors and, from my experience, its integration is seamless. Any competitor would have to take customers from Afterpay to successful, which will be difficult because it is already a world class company.
Afterpay shares have reduced in price by 72.65% since 1 January. The company is already ubiquitous and is already international.
A world class company built on research
Ansell Limited (ASX: ANN) has lost 24.9% of its share price since the start of the year (at the time of writing). Its H2 report was very positive, even calling out the role they are playing in protection against the current coronavirus pandemic. Currently its price has an earnings multiple of 12.7, which is lower than its usual multiple of 15.
It sells protective items with a core focus on protective gloves. Based in Richmond, Victoria, the company has a very rich history and already sells protective clothing in over 100 countries.
The barrier to entry of this company is in its patents. Through acquisition and research, Ansell is regularly developing new technologies and filing new patents.
Intellectual property as income
IDP Education Limited (ASX: IEL) is one of the real growth stocks in the ASX 200. It has lost 30.46% since the start of the year and is still at a P/E of 37. It is a world class company and regularly works across borders.
The company helps with student placement in universities around the world and provides English language teaching testing. Its competitive advantage is its one-third ownership of the high stakes International English Language Testing System (IELTS).
