Investing in a monopoly is, perhaps, one of the oldest plays in the book, and this S&P/ASX 200 Index (ASX: XJO) share could be just that.
Monopolies, by definition, dominate their sectors, facing low or no competition to provide a product needed – rather than wanted – by their customers.
With that in mind, could ASX 200 share, Transurban Group (ASX: TCL) be one of the ASX’s major monopolies?
At the time of writing, the Transurban share price is $13.75.
Could this ASX 200 share be a monopoly play?
Considering investing in ASX 200 giant, Transurban? Experts believe the toll road operator has plenty of reoccurring revenue and the ability to boost its fees alongside inflation.
Transurban operates toll roads in Melbourne, Sydney, Brisbane, and North America.
According to reporting by GEM Capital financial advisor, Mark Draper, published by the Australian Financial Review, investments in toll roads come with a side of certainty.
The job of a toll road operator is to build and maintain roads that convenience the public. They make their money by collecting fees from those who travel on their roads.
They generally have the right to collect tolls on their roads for a specified number of years. When that period ends, a toll road reverts to public infrastructure.
Investors Mutual portfolio manager Dan Moore was quoted by Draper as saying toll road operators’ income is generally protected from inflation, as their fees can be increased alongside the metric.
Additionally, according to Atlas Funds Management chief investment officer, Hugh Dive, the risk of competing toll roads being built nearby existing assets is low.
On top of that, once a road is built, maintaining it is relatively cheap. The assets can bring in margins of up to 80%, said Dive.
And governments tend to support the sector, even helping to collect unpaid fees.
Though, no investment – not even in ASX 200 shares – is without risks.
Moore noted that recessions and resulting high employment could dampen toll road operators’ income.
Additionally toll roads are, in a way, leased from governments. That m means there’s a risk that governments fail to stay true to their agreements. Perhaps, not allowing fees to rise in line with inflation – or expropriation – whereby fees are taken from the operator.
Transurban share price snapshot
2022 so far has been tough on the Transurban share price.
It has slipped 1.36% year to date. It’s also 0.87% lower than it was this time last year.
The post Could this ASX 200 share be one of the best monopoly plays there is? appeared first on The Motley Fool Australia.
Should you invest $1,000 in Transurban right now?
Before you consider Transurban, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Transurban wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of January 13th 2022
More reading
- Why is the Transurban share price revving up on Thursday?
- Why did the Transurban share price have such a good run in March?
- Broker names 3 more of best ASX 200 shares to buy in April
- 5 things to watch on the ASX 200 on Wednesday
- 2022 is not being kind to the Transurban (ASX:TCL) share price. Could this be set to change?
Motley Fool contributor Brooke Cooper 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 Bruce Jackson.
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