2 rising ASX shares of companies with a market stranglehold

A surprised and curious male investor drinks black coffee while reading the latest news on rising ASX shares in the newspaperA surprised and curious male investor drinks black coffee while reading the latest news on rising ASX shares in the newspaper

In troubled times such as now, it can be helpful to narrow one’s focus.

One way an investor could do this is to concentrate on buying ASX shares of companies that are absolutely dominant in their field.

Having a monopoly or near-monopoly allows a business more flexibility to increase prices if inflation pressures force their supply costs to surge.

The IML Australian Smaller Companies Fund this week revealed two such players it holds that are seeing their share prices start to move upward.

‘A very strong market position’

In the June quarter when the S&P/ASX 200 Index (ASX: XJO) lost a painful 12.4%, Tassal Group Limited (ASX: TGR) shares amazingly gained more than 33%.

According to IML, multiple takeover offers from Canadian suitor Cooke Inc pushed up the demand for the ASX share. 

“Cooke is now a significant shareholder in the company,” read an IML memo to clients.

“Tassal, which is based in Tasmania, has a very strong market position as the number one salmon producer in Australia.”

IML analysts said that after “investing heavily” in the business over the past few years, Tassal is now in a position to start a new era of “significant free cash flow“.

The business will also enjoy a couple of external tailwinds.

“The company has also been successfully raising its prices as global demand for protein increases and salmon producers are set to benefit from this increased demand,” read the memo.

“Tassal’s position as the largest salmon producer in Australia has been underpinned by Tasmania’s announcement that no new fish leases will be permitted for at least the next 12 months.”

Tassal shares also pay out a handy dividend yield of 3.1%.

Bouncing back after the pandemic

New Zealand casino operator SkyCity Entertainment Group Limited (ASX: SKC) did well to see its share price remain flat during a quarter when the rest of the market was absolutely punished.

IML analysts reckon conditions can only get better from here on.

“The company’s Auckland casino property has been materially impacted by COVID restrictions over the last 2 years but has bounced back after the NZ government announced an easing of COVID restrictions in March.”

SkyCity’s financial guidance last month showed the strong comeback, the memo stated. 

“The company released earnings guidance in mid-June which confirmed a stronger than expected recovery in Auckland gaming revenues and increased EBITDA guidance for financial year 2022 of NZ$135 million, which was significantly higher than expectations.”

The price of this ASX share looks attractive, according to IML analysts.

“[SkyCity is] trading on a FY2023 dividend yield of 5%, a PE multiple of 15 times and a free cash flow multiple of less than 10 times, given it has largely completed its significant capex programme.”

The post 2 rising ASX shares of companies with a market stranglehold appeared first on The Motley Fool Australia.

Our #1 Strategy for today’s inflation drenched markets

The ABC recently reported that inflation in the UK has hit an eye watering 40 year high.
Meanwhile the Reserve Bank believes that by the end of the year inflation in Australia will climb to levels not seen since 1990.
As prices surge we’ve uncovered 3 “inflation fighting” stocks we think could hand investors outsized returns as the market recalibrates.
And as Scott Phillips put it
“There’s one thing to avoid at all costs when inflation hits.
And that’s doing nothing.”
We reveal details on these three “inflation fighting” stocks here.

Learn More
*Returns as of July 1 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/cFwT5Qv

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s