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1 Formidable Singapore-Listed Stock That You Can Pass On To The Next Generation

In a recent article, I discussed the need to think in terms of decades and even generations when it comes to investing in the stock market. In the article, I mentioned:

“It requires a considerable amount of time for any business to do well. By focusing on the long-term, we are forced to think about the quality and fundamentals of the company we are investing in. If we have an “investing” time frame of just one month, we would only be looking at stock price fluctuations alone, and this will be to the detriment of our portfolio. The daily fluctuation in stock prices will not do any good for our psychological health as well.

However, if our investing time frame is measured in decades or even generations, we will be forced to think about the things that matter: The long-term prospects of a business; the leaders behind a company; and the value of a business. As Foolish investors, we want to invest in companies that have products or services that will not become obsolete in the next few years – ideally, we want companies with businesses that can thrive.”

On that note, I believe private healthcare provider, Raffles Medical Group Ltd (SGX: BSL), is a keeper for the long-term.

I chose Raffles Medical based on three simple questions, which are inspired by one of the best investors in the world, Warren Buffett. I use these same questions when I look for stocks to add to my portfolio. The questions are:

1) Is the business simple to understand?

2) Does the company have a durable competitive advantage?

3) Will the business still be around for decades to come?

Raffles Medical is one of the largest providers of healthcare services in the region with operations in 12 cities across Singapore, China, Japan, Vietnam, and Cambodia. It is indeed a simple-to-understand business. Raffles Medical is also a well-known and trusted brand with many experienced medical professionals under its headcount.

The company is very likely to be around many years from now due to its strong profitability, robust balance sheet, and solid ability to generate cash flow from its business.

It is also in capable hands, as seen from its rising adjusted return on equity (ROE). The ROE shows how capable management is at generating a profit using shareholders’ capital. Raffles Medical’s adjusted ROE has increased from 13.7% in 2013 to 19.3% in 2017. (Note: An adjusted ROE was used as three investment properties that Raffles Medical has invested in did not contribute to the company’s earnings from 2013 to 2017.)

During an economic crisis, companies which possess durable competitive advantages generally recover faster than those with no competitive advantages to speak of.

The Foolish takeaway

When investing in the stock market, we should look at the long-term and not bother about short-term pessimism. Hence, by thinking in generational terms, we would be forced to think about the things that matter about a business. Raffles Medical could be a keeper in your portfolio. However, before you own a piece of the company, you must ensure that the current valuation makes sense for you.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Raffles Medical Group Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Raffles Medical Group Ltd.