The last few months have been a busy period of investing for my ASX share portfolio. I'm going to talk about two names I decided to recently buy.
We can't control what the overall S&P/ASX 200 Index (ASX: XJO) is going to do – sometimes it will reach an all-time high. I believe we can always find value on the stock market if we look in the right places.
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Duxton Water Ltd (ASX: D2O)
Duxton Water is a company that owns water entitlements and leases them out on short-term or long-term contracts to agricultural operators that want additional water.
Water is obviously a key component of farming, I view Duxton Water as an indirect investment in the Australian agricultural industry. In my opinion, Australia is one of the world leaders in farming.
In my eyes, water entitlements are a commodity that can be impacted by supply and demand. When there's a lot of rainfall, it reduces the demand and impacts water values. Less rainfall should translate into more demand for water entitlements. It also helps that, over time, more water-hungry plants are being planted such as almonds.
The recent La Nina weather pattern pushed down water prices and bumped up water storage levels. But water storage levels are now reducing.
In the ASX share's latest monthly update for February, Duxton Water revealed Murray Darling Basin storage levels were at 81%, down from 92% compared to last year. Northern basin storages were at 66%, and southern basin storages were at 84%. Both of these levels are lower when compared to the previous year of 90% and 93% respectively.
I used the recent weakness of the Duxton Water share price to buy more shares. The ASX share has been paying an appealing dividend for several years, though that's not guaranteed to continue. It currently has a guided grossed-up dividend yield of 6.7%.
The Duxton Water share price is at a discount of roughly 10% to its pre-tax net asset value (NAV) of February 2024.
Johns Lyng Group Ltd (ASX: JLG)
I have invested multiple times this year in Johns Lyng shares – I recently decided to invest once more after seeing the FY24 first-half result and the subsequent decline of the Johns Lyng share price.
The ASX share's main offering is restoring building and contents after an insurable event, such as storms, flooding or fire.
It also has a sizeable catastrophe division which made $120.4 million in revenue in HY24, but this was 35% lower than last year. Work in this area is likely to be lumpy – catastrophes don't arrive like clockwork.
Johns Lyng reiterated that catastrophe events are "growing in size and duration". It's expecting this segment to continue to expand in future periods. The $120.4 million figure already represents more than 87% of the company's original FY24 forecast.
The ASX share reported its normalised business as usual (BAU) net profit after tax (NPAT) grew by 15.8% to $25 million. That's a good growth rate for its underlying business, in my opinion.
The company has also been making acquisitions in the strata services and essential home services space, which adds defensive earnings and can create synergies, according to the company.
I think the profit and dividend can keep growing for a long time to come, particularly if it can keep expanding in the US and other international markets.
