Selling picks and shovels in the 19th-century gold rush turned out to be a much better bet than digging big holes by hand in the hope of making a big strike.
The Punter suspects that testing the quality of produce and minerals today is better than the risky business of trying to grow the stuff (weather permitting) or drilling deep holes in the hope of striking paydirt.
That was one of his main reasons for investing in HRL Holdings.
HRL is now being absorbed into a giant rival, ALS Ltd (ASX code ALQ), which is making an agreed unconditional 16c-a-share cash bid for HRL.
ALS already has acceptances from more than 70 per cent of HRL shares.
Although the Punter does not usually invest in large businesses with double-digit share prices, he is increasingly favouring well-established operations that seem likely to ride out difficult economic conditions.
ALS provides testing and analytical services around the world, particularly in life sciences, including food and environment, and commodities, mainly minerals.
It has grown partly through a series of acquisitions but also has an impressive record of growing those businesses.
The shares have dropped 10pc since the bid for HRL was confirmed at the end of last month, but still do not look particularly cheap.
They sell for nearly 22 times earnings and yield less than 3.2pc in dividends, despite falling 20pc since early April.
However, revenue for FY 2022 was up 18pc, net profit after tax and earnings per share up 12pc and a forecast increase in the dividend next year should lift the yield to almost 3.5pc.
It spent more than $410 million on capital investment and acquisitions last year but still ended the year with $123 million in the bank.
Its $63 million bid for HRL is almost small change.
The Punter has bought 300 ALQ for a total cost of $3040.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
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