What Makes a Great Long-term Investment Opportunity
I’ve always contended that good companies have a tendency to stay that way. Or, in other words, well-managed companies seem to remain well-managed over time.
Two companies that I continue to like very much for long-term investors are Luxottica Group (NYSE/LUX) and VCA Antech (NASDAQ/WOOF). I’ve written about these companies repeatedly for a number of quarters in this column, and to this day they continue to be well-managed wealth creators for stockholders.
Let me quickly review why I like these companies. Luxottica Group is a large-cap, global leader that manufactures and sells eyeglasses. This company owns the entire supply chain — the manufacturing plant, the wholesale distributor, and the retail outlets. This means it can adjust its prices to maximize profitability.
If you wear eyeglasses, you likely know that both frames and lenses are expensive. You also know that you can’t live without them. Finally, you might realize that the combination of an aging population and increasing wealth in developing countries offers excellent long-term fundamentals for the eye care business in general.
In the case of VCA Antech, this company is the most successful veterinary hospital consolidator in the country. The kicker to this company’s business is that it also owns a large number of laboratories that do the diagnostic work for independent veterinary hospitals. VCA Antech makes money from all aspects of the animal hospital business.
If you have a pet, you know that vet bills are expensive. You also know that you pretty much have no choice but to incur these expenses in order to have a healthy, happy pet. Finally, you might realize that the petcare business is a steady business. In spite of what happens in the general economy, your dog, cat, or horse will always need their vaccinations.
So, right off the bat we have two great businesses. Add to the mix the following: proven track records of success in business and on the stock market; reasonable financial metrics; solid growth prospects over the coming years; and an easily saleable story to institutional investors.
Eureka! Now you’ve got the makings of two great long-term investment opportunities.