As Christmas holiday is just around the corner. At EastMoneyStocks, we believe that your money can still work for you, even while you are away from work. To do that, we consider 2 stocks with strong fundamentals that hold their value across time. After all, you don’t want to be constantly checking on the stock market while you are on chilling on the beach.
It is challenging 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 dive in into 2 stocks that are particularly good for beginner investors because of their strong balance sheets, positive free cash flows, and competitive advantages:
MTR Corporation (066.HK)
Hong Kong’s mass transit railway operator is also a major property developer and landlord in the city. Its stable properties and the ubiquitous railway transport system which it runs, operating as a monopoly, offer strength and stability.
However, since the protests and riots broke out in Hong Kong and as it makes substantial amount of its money from developing commercial and residential property next to its subway stations, the decline in commercial activity in Hong Kong has hurt real estate values. The share price has taken a dive – it peaked at HK$55.70 on 18 July and is now down 23% to around HK$43.45 (as of the time of writing).
MTR reported a 7% year-on-year rise in revenue for first half of 2019, and stripping out exceptional provisions made for certain rail projects, underlying net profit would have increased by 26.4% year-on-year.
We believe MTR will eventually recover as the protests will not go on forever. Investors can take this opportunity to hunt cheap shares as its valuation has been dented by poor sentiment.
Guangdong Investment (0270.HK)
Guangdong Investment Group (0270.HK) owns essential utilities such as the Dongshen Water Supply Project, which supplies most of Hong Kong’s water. The revenue from water supply to Shenzhen and Dongguan has increased steadily, rising by 12.5% year-on-year in 2018, a strong driver for revenue growth. The company also invests in other essential utilities such as sewage treatment, water distribution, toll roads, power plants, and bridges across mainland China in addition to property and department stores.
Nearly two-thirds of the company’s adjusted operating profit comes from its water business and another 10% from its infrastructure investment business. Due to the essential nature of sewage and water distribution, the company’s cash flows are fairly predictable. Regardless of the political situation, everyone living within Hong Kong will still need water and sewage treatment. Guangdong Investment’s dividend for the past 8 years grew at a compound annual growth rate of over 17%. Its dividend yield is around 3.3%
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The real estate business has become another highlight. For example, its Tianhe City shopping center in Guangzhou has an average occupancy rate of 99. 9%. In addition, many properties in Guangdong are located in the Dawan District and they can benefit from the rapid development of the area.
Two of its property projects in Buxin and Wanbo are expected to generate cash flow in 2020 and 2021, which will enable the company to invest in more water resources projects. Guangdong Investment has been recording increasing dividends, nearly doubling from 28 cents per share in 2014 to 54 cents in 2018, making this stock more popular with conservative investors. While growth of the company is modest, investors could benefit from upside in its real estate business.