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3 Great Shares That Have Withstood the Test of Time

Investors wanting to find shares which can become great long-term investments might do well to look at companies which manage to prosper even in the toughest of economic conditions.

I say this because of the experience of a fund in the USA named Voya Corporate Leaders Trust which was established in 1935. This is how the fund describes its investment philosophy:

“Voya Corporate Leaders Trust was established in the middle of the Great Depression with the idea that if companies could prosper even in those tough times, they could stay strong forever. The founders of the Trust bought equal shares of 30 leading companies in 1935 and decreed they could never be sold. The only exception was companies that went bankrupt, merged, or spun off.”

The fund kept to its word of never selling a share and still managed to deliver huge market-beating returns. Between December 1970 and December 2013, Voya Corporate Leaders Trust had grown by a total of 1,009%. In comparison, the S&P 500 (a broad market index in the USA) had gained ‘just’ 650%.

To be clear, I’m not here to be an advocate for the Voya Corporate Leaders Trust. But, its performance thus far does make its investment philosophy an interesting lesson for investors to note.

Tough times in Singapore

The last big economic crisis Singapore had gone through was the Global Financial Crisis of 2007-09. Back then, the Straits Times Index (SGX: ^STI) had collapsed by close to two-thirds from peak-to-trough and many companies saw their businesses heavily affected. For instance, the profits of Singapore’s flagship carrier Singapore Airlines Ltd (SGX: C6L) had fallen dramatically from S$2.05 billion in the fiscal year ended 31 March 2008 (FY2008) to just S$216 million in FY2010.

So, in line with the thinking behind Voya Corporate Leaders Trust, I ran a screen for companies that managed to grow their earnings through the crisis. The trio of Raffles Medical Group Ltd (SGX: R01), Dairy Farm International Holdings Ltd (SGX: D01), and ARA Asset Management Limited (SGX: D1R) were among some of the shares that had filtered through.

As you can see in the chart below, the trio had not only managed to weather the Global Financial Crisis well, they’ve even managed to prosper through those tough times.

Source: S&P Capital IQ (profit for 2005 is based to 1)

Source: S&P Capital IQ (profit for 2005 is based to 1)

Since the start of 2005, Raffles Medical, Dairy Farm, and ARA Asset Management have delivered capital gains of 815%, 309%, and 106% (ARA got listed only in 2 November 2007, so its returns would be based on the closing price for that date) respectively. Those are huge market-beating returns and are an example of why long-term corporate growth is so important when it comes to investing.

Foolish Bottom Line

The past stellar corporate performance of the trio of shares is definitely not a fool-proof guarantee that their businesses would continue to do well. But for investors wanting to find businesses that can withstand the test of time, these three might be a good starting point for a deeper look.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Raffles Medical Group.