How Your Lazy Neighbours Could Make You a 29.5% Gain on Stocks in 12 Months

By MoneyMorning.com.au

Let’s be honest. If you could find a way of making a lot of money without doing anything, odds are you’d jump at it.

We’d all jump at it.

Unfortunately, opportunities to be lazy and still make money don’t come around too often.

But rather than try and make money the lazy way, what if there was a way for you to snag a regular income from other folks’ laziness?

Well, if you look hard enough, you can find it. You just have to work out where lazy people spend their money. When you’ve figured that out, and if you hit the sweet spot, it can mean capital gains and income to boot…

Filter the Good Stocks from the Bad

So, where do you look?

One way to analyse stocks is by filtering out everything you don’t want to invest in. Simply because you can cut away the rubbish and leave the stuff you really want to look at.

Now, this filtering exercise isn’t a one-step process. It’s many-layered. As a quick example, today we’re looking for a way to make a buck from lazy Aussies. That means cutting out stocks where consumers have to put in a lot of effort…

Or where the consumer can easily switch their buying habits. Such as ditching shopping mall retailers in favour of buying online.

Once you’ve done that you know the stocks you don’t want. What’s left are stocks you may want. From there you just have to figure out which is best… and most likely to pay you a good return.

In this case we’ve found three of the laziest – potentially – moneymaking stocks on the market. And they’re all in the fast food sector.

When you think about it, fast food is about as lazy as you can get. How often to you get home in the evening, put your feet up and think, “I really can’t be bothered making dinner, let’s get pizza.”

If you’re like your editor it may be once every couple of weeks. But we know people (and maybe you do too) who make it a weekly or twice-weekly habit – fish & chips night… pizza night… KFC night…

Bottom line: there’s a lot of cash going into the tills of the fast food industry. A good example is the granddaddy of the fast food industry, McDonald’s [NYSE: MCD].

Since March 2003, McDonald’s shares have gained 676%. That’s pretty good for a burgers and fries operation. Of course, Macca’s has changed its menu by adding new products. (Some would say it’s even put food on the menu!)

But at the core of Macca’s success is the ability to tap into laziness and familiarity.

It’s something a successful Aussie business has done too – Domino’s Pizza Enterprises Ltd [ASX: DMP]. This morning it announced a 10% increase in sales, a 9.6% increase in revenue, and a 23% increase in net profit…

All from selling pizza, garlic bread and chicken wings to Aussies who can’t be bothered making their own dinner.

Not surprisingly, Domino’s shares have taken off this morning. Up 7% as we write. And if you’d bought in a year ago you’d be sitting on a nice 26% gain, plus dividends (which would take the total gain to 29.5%).

Easy money. If only it was that simple.

Because there are two other “lazy” stocks you also could have invested in last year: Retail Food Group [ASX: RFG] and Collins Foods Ltd [ASX: CKF]:

By the way, Retail Food Group is a stock we tipped in Australian Small-Cap Investigator in late 2008. It was a beaten down stock. But we figured it was the type of business that does well in almost any market. Simply because it sold lazy food: coffee, donuts, bread and cakes.

We tipped it at $1.16 and told investors to sell 13 months later for $2.50 (plus dividends). A gain of 115.5%.

But since then, RFG hasn’t done so well. It’s still paying a dividend, but for now the share price has stalled. In fact, it’s down 9% since this time last year.

The other stock, Collins Foods, has done even worse. It has fallen from $2.48 to $1.34. Does that make it good value? Or is it a sign to stay clear? We’ll do the research and let you know.

Don’t Be a Lazy Investor

In any sector there will always be firms that are better than others.

Because don’t forget, many of these businesses vie for the same punters (Collins Foods owns a bunch of KFC franchises, in direct competition to Domino’s Pizza). So not every company will win.

As we say, only one out of these three stocks would have given you a positive return this year. That’s why, once you filter out the stocks you don’t like, it’s vital to go to the next level and carefully research each of the left over stocks.

In short: there are a number of ways to make money from lazy consumers. But just because the consumer is lazy, it doesn’t mean investors can afford to be lazy too.

Cheers.
Kris.

Publisher’s Note: If you enjoy reading Kris’s essays in Money Morning, you’ll love hearing him talking about the challenges facing Aussie investors in person. This March, Kris will be speaking at the first ever Port Phillip Publishing investment symposium in Sydney. Come along. Meet Kris. Ask him tons of questions. Marvel at how tall he is. For more information on our not-to-be-missed March conference, go HERE

Related Articles

The Conference of the Year for Australian Investors

How to Win Even if the Australian Stock Market Doesn’t Go Up

Is There a Reason You’re Not Using the 90/10 Hedge Fund Strategy?

How Your Lazy Neighbours Could Make You a 29.5% Gain on Stocks in 12 Months