Three great ways to help the financial future of your kids and grandkids

Sometimes (if you’re a nice person), it’s worth considering buying shares for your children, grandchildren, or if you are both lucky and optimistic, great grandchildren.
 
Many years ago, we bought a collection of internet stocks for our kids, and it turned out to be a bonanza. Sadly, the stocks were sold to get into the housing market.  It’s the typical Australian story.  Why risk your money with shares when you can buy an overpriced house?  I suppose it’s called peace of mind.
 
But now, surrounded by seven lovely albeit eccentric grandchildren, my mind has turned to what would I buy for them – my heirs and successors….
 
I suppose one could look at bank shares (dull), CSL (expensive) or BHP (dull but cheap).  The problem with all of these is you don’t really get much bang for your buck and it’s probably pretty unlikely that CBA will go to $1000 or CSL to $3000.
 
Stuff that. It’s much more interesting looking at the cutting-edge stuff.  Companies listed on the ASX (or on its horizon) that have the potential to make a global difference. This is a little like looking for the needle in the haystack or a camel passing through one (a needle that is). I’ll give it a go. Here are my 3.
 
Acusensus Ltd (ASX: ACE) 
My thesis here is that the technology (cameras that pick up those not wearing seatbelts, snorting cocaine whilst driving, or other far more salaciously delicious activities) is globally cutting edge. The real “Ace” in this company may well be the new product that is being trialled to allow road workers and emergency services personnel to get an early warning alert before an accident / collision occurs. 
 
Those individuals who operate the stop/go paddles at roadworks (often lambasted as being lazy & overpaid) are effectively doing one of the most dangerous jobs going around. Have you noticed how few people obey restricted speed rules? In a world where corporates are held to account personally for accidents or deaths (often criminally), I can see this product becoming a truly global application.
  
Vitrafy Life Sciences Ltd (ASX: VFY)
Why one for the kiddies?  Well, in their more recent quarterly report, all sorts of markers occurred including the successful completion of phase 1 blood platelet study with the US Army Institute of Surgical Research.  There was reference to Bovine aka, “Bull semen” with a named counterparty to go live this quarter.  Finally, solid progress has been made in the Aquaculture space where VFY (who already work with Huon) are in discussions with another aquaculture provider to undertake a paid pilot in the coming quarter.
 
I know this company well and know that the quarterly would have been drafted (at least) 50.

times pre-release and it is worth reading.  Like ACE, this is groundbreaking technology with abundant applications on a global scale. 

COG Financial Services Ltd (ASX: COG) 

Finally, COG Financial Services Ltd. (ASX: COG). In a recent board shuffle, it was agreed that Tony Robinson, the former MD of PSC Insurance (ASX: PSI), and John Dwyer, the former executive director and major shareholder of PSC would join the Board of COG with immediate effect in the roles of Chairman (Tony) and Director (John). In my considered view this deal is a marriage made in heaven.

COG has two main divisions; finance and insurance broking focused on regional Australia, and a novated leasing portfolio. Both divisions make significant money and indeed COG pays a 6% FF dividend from earnings of north of $28m after tax.  There are a couple of investments on the books which are probably non-core, and the group has significant ‘headroom’ to make further acquisitions without a need to raise fresh capital.

So, let’s look at why this marriage is so ideal.

Tony ran, with great success, PSC, which over its 7 years on the ASX made several accretive acquisitions culminating in an eye watering takeover late last year.  John Dwyer, a self-confessed ‘regionalist’ has a close empathy with rural and regional Australia and has possibly the best nose I’ve witnessed in sniffing good deals from bad.

What is the difference between insurance broking and finance broking one might ask?  Surprisingly little actually. Whilst finance broking doesn’t have the annuity stream of insurance, clients love buying new trucks, graders, excavators, utes and other kit for their businesses.  My experience of regional Australia is that lots of people probably love their plant more than they love their partners!  So, as the banks withdraw to the towers of power, the brokers replace them in the relationship role, and, like insurance, ‘place’ the business into said towers

In summary Tony brings to the table the banking/accounting/market facing skills that have been well honed over 30 years.  John brings a superb bullshit meter and understanding of what drives place like Wagga, Dubbo, Toowoomba and the regions.

Like PSC this is not a flash in the pan opportunity.  It will reward patient capital by way of long-term dividend and capital appreciation.

Hugh Robertson is a Senior Investment Adviser at Morgans Financial with over 40 years experience in the Australian Capital Markets. 

Hugh owns shares in COG, ACE & VFY. He has received fees from capital raising activities for ACE & VFY.

Disclaimer: Hugh Robertson, Morgans Financial Limited (Morgans) and its associates may hold securities in the companies/trusts mentioned herein. Unless otherwise stated any advice contained in this article is of a general nature only and has been prepared without taking into account your relevant personal circumstances. Those acting upon information contained in this article without first consulting one of Morgans investment advisers do so entirely at their own risk. To the extent permitted by law we exclude (and where the law does not permit exclusion, limit to the extent permitted by law) all liability for any direct, indirect and consequential losses, damages and expenses incurred in any way (including but not limited to that arising from negligence), connected with any use or access to or any reliance on information contained in this article or any attachments. Morgans Financial Limited ABN 49 010 669 726 | AFSL 235410. A Participant of ASX Group.