It is tough to select stocks that can perform well in the long run. While large cap stocks may not be able to make you rich in a short period of time, they may be easier to analyse by just looking at the fundamentals.
Investors who are new to the market are generally better off sticking to well-known large cap stocks with strong brand recognition as they start off on their investing journey versus under-the-radar small cap stocks which require both fundamental and technical analysis. Let’s start with five that are particularly good for beginner investors because of their strong balance sheets, positive free cash flows, and competitive advantages:
#1 NagaCorp (3918.HK)
NagaCorp operates NagaWorld, Phnom Penh’s only integrated hotel-casino entertainment complex with a 70-year casino licence that runs till 2065. The company has been riding on the tourism growth in Cambodia, and that has been reflected in its financials.
Over the past six years from 2013 to 2018, revenue surged 34% per annum while net profit grew 23% yearly. In terms of future growth, on top of the expansion in tourism in the country, there’s also business expansion into Russia.
#2 ANTA Sports
ANTA Sports (2020.HK) saw its 2019 sales rose over 40% year-on-year to RMB 14.81 billion. This was due to strong brand recognition in running, cross-training and basketball. ANTA will also be the official sports apparel partner for the 2022 Olympic Winter Games in Beijing. This provides another opportunity to increase its brand presence.
Currently, ANTA trades at a forward PE ratio of around 22x and its dividend yield is about 2.4%. Given that its payout ratio was only about 50%, there is room for its dividends to grow further.
#3 Tingyi (Cayman Islands) Holding (322.HK)
Tingyi (Cayman Islands) Holding better known by its Master Kong brand name, produces and sells instant noodles, packaged drinks and other daily consumer goods. The company has been actively exploring higher end products, in line with consumption upgrading in China. The stock is currently trading at an attractive valuation with a P/E ratio of 20 times. This looks cheap compared to historical values of over 30 times. The company’s growth prospect remains strong due to robust domestic demand. During the first half of this year, it reported a 3.7% sales increase in its instant noodle business.
#4 Geely Automobile (175.HK)
Since hitting a low in August, Geely’s shares have begun recovering in stock price, but is still some distance away from its high in April. Even with this recovery, it is still about 45% below its all time high in late 2017. At its current P/E ratio of 9.3x, the stock looks like a bargain. If there is a traditional car company that is focused on the future, Geely is probably the one that comes to mind, as the company has recently invested in Volocopter, which develops flying cars.
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#5 Haier Electronics Group Co., Ltd. (1169.HK)
Haier is known for its household appliances, such as washing machines and water heaters. Haier’s strong brand name helps put the company in a favourable position among Chinese consumers. This allows the company to fend off competition from foreign brands. The continuous urbanisation of secondary and lower tier cities will drive demand for Haier’s products, strengthening its reach throughout the country. Given the growth prospects of this company, a P/E ratio of about 14 times appears to be very reasonable.