Finding industry leaders and buying them when they are trading for fair value will always be rewarding for long-term investors.
It can be tempting to wait and get these companies for extremely cheap, but due to the nature of the business and incredible performance and execution of those companies, it can almost be impossible sometimes to find these stocks below fair value.
As Warren Buffett has said before when talking about price, he would rather have a wonderful company at a fair price rather than a fair company for a wonderful price.
This is because even if you don’t get it for extremely cheap, the impressive execution that management will provide for the shareholders and growth you will see in the operations will end up generating far greater rewards in the long run than a mediocre company that was bought undervalued.
Jamieson Wellness is an industry leader when it comes to vitamins and wellness supplements. More than a third of all households in Canada will have at least one Jamieson-branded product.
The company has a lengthy track record of growth. Up until the end of 2018, it had a 6% compounded annual growth rate (CAGR) since 1987 and a 9% CAGR since 2014.
Though it has always been a well-run company, it has improved its operations vastly in the last few years.
Its revenue has grown at an 11% CAGR since 2015, and its adjusted earnings before interest, taxes, depreciation, and amortization grew at a 15% CAGR.
It continues to not only grow its business and sales each year, but also improve its margins. It is also seeing a lot of its growth from international markets, which now make up more than 30% of Jamieson’s total revenue.
It is an ideal hold for any long-term investor, as it’s an industry leader and has proven to be one of the best over the long term. It also pays a small dividend that yields roughly 1.65% to return some cash to shareholders.
Morneau Shepell is an industry leader when it comes to HR services. It has had an impressive run of growth combining high quality and strategic acquisitions with organic growth to create one of the best integrated companies in the industry.
It offers a number of services that all complement each other, giving it natural organic growth from the clients it works with.
Right now, roughly three-quarters of its revenue comes from Canada and 20% comes from the United States. This gives MSI ample room to continue to grow its revenue and its businesses, especially with other international markets as well.
For the next while, the company is committed to looking for attractive and strategic acquisitions to help grow the services it offers and reach it has.
Its large percentage of recurring revenue and consistent margins make it extremely stable and one of the best stocks in Canada in addition to its dividend that yields roughly 2.5% today.
Finding industry leaders and buying them to hold forever is an investment strategy that will always last the test of time. Both Morneau Shepell and Jamieson Wellness fit that bill, and both are top growth stocks that also offer investors quality and growing passive income.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. Morneau Shepell is a recommendation of Dividend Investor Canada.