Let’s say you’d like to start your grandchildren off with an investment in the stock market, with a stock or two in the Christmas stocking. Part of this strategy should be one of the index-tracking exchange-traded funds (ETFs) that aim to give an investor the long-term return of the market index (minus fees), such as the Vanguard Australian Shares Index ETF (VAS), or the iShares Core MSCI (Morgan Stanley Capital International) World All Cap ETF (IWLD), but part of it should also try to tap into some individual stocks that are capable of building wealth in a portfolio. Here are three prime candidates for a spot under the tree this year.
1. CSL (CSL, $280.08)
Market capitalisation: $127.5 billion
Five-year total return: 28.6% a year
FY21 estimated yield: 1.3%, unfranked
FY21 estimated P/E: 34.7 times earnings
Analysts’ consensus valuation: $297.65 (Thomson Reuters), $274.84 (FN Arena)
Unfortunately, buying CSL now is not going to earn the return of someone buying it in its float (out of government ownership) in June 1994, at the equivalent of 77 cents. Nobody – least of all the Australian government – knew what CSL really was, and what it could be. But an exceptional management group did grasp what the company could be, and CSL has become a true global leader, the world’s largest maker of plasma-based therapies, a global leader in treatments for immunodeficiency and bleeding diseases such as haemophilia, and one of the world's biggest suppliers of flu vaccines.