Why boring stocks can be good investments – and one I like

In investing, excitement is often mistaken for opportunity. Every cycle brings its fashionable favourites, and every cycle ends with a new crop of investors learning that popularity and profitability aren’t the same thing.

Warren Buffett didn’t make his fortune chasing the next big thing. In 2009, he spent US$34 billion to acquire BNSF¹, a railway company with zero tech upside and nothing resembling a hockey-stick growth chart. BNSF now contributes over US$5 billion in annual earnings². It’s the kind of deeply unsexy business that quietly makes its shareholders rich.

Which brings us to the case for boring stocks: the slow, predictable compounders that rarely make headlines but often make money.

What Makes a Stock ‘Boring’ (and Why That Can Be a Good Thing)

A boring stock doesn’t mean a bad business. In fact, it often means the opposite. These companies tend to operate in mature industries, provide essential services, and deliver stable revenues with limited volatility.

They often lack the kind of explosive short-term upside that drives social media chatter, and as a result, they’re sometimes undervalued or simply overlooked.

Boring stocks also tend to share a few appealing traits:

• Predictable earnings
• High retention or recurring revenue
• Limited need for external capital
• A habit of returning cash to shareholders

In a market environment where narrative can outshine numbers, boring can be a surprisingly effective way to build long-term wealth.

A Boring Business That’s Doing Beautifully: AUB Group (ASX: AUB)

AUB Group is one of those businesses. It operates in insurance broking and underwriting across Australia and New Zealand – an industry that’s not exactly known for adrenaline. But the underlying economics are attractive, and AUB is executing well.

Insurance is a necessity. Clients rarely shop around. Premiums are sticky, and in recent years, they’ve been rising. AUB sits in the middle, clipping the ticket on policies, and building a portfolio of partner brokerages under its umbrella.

In AUB’s most recent half-year results (H1 FY25):

• Underlying net profit after tax (NPAT) rose 13%
• Revenue jumped 12.1% to $712.6m
• Net margins remain robust
• We estimate a forward dividend yield of just under 2.9% fully franked, based on the current* AUB share price.

This growth hasn’t come from wild bets or speculative ventures. It’s come from steady execution – especially in New Zealand and Agencies, both of which have been strong performers. There’s also a clear longer-term strategy in play: consolidating a fragmented market and using its scale to drive operating leverage.

CEO Mike Emmett holds a decent chunk of equity worth around $13.7m. He’s been with the company for six years, and was previously CEO of Cover-More, overseeing the buyout by Zurich. The remainder of the board only hold small or nil positions AUB equity.

AUB does face some risks of note. Affordability pressure and potential regulatory reform could impact future premium growth. Integration risk is always a consideration with roll-ups. But if you’re looking for a business with strong fundamentals, solid leadership, and long-term tailwinds, AUB stacks up.

Not Every Good Business Is Boring

Of course, not every quality investment idea fits the mould of a slow, predictable compounder. There are also opportunities in younger, faster-moving companies with ambitious growth plans and early traction.

One that comes to mind is a lesser-known software business that we recently profiled. It’s a very different beast to AUB – high growth, more volatility, and still flying under the radar – but it’s already rallied over 30% since publication, and the business itself has some similarly compelling traits: strong leadership, expanding margins, and a clear runway.

If AUB is the steady operator quietly consolidating its sector, this business is a leaner, faster climber – with a different risk profile, but just as much long-term appeal for the right kind of investor.

You can read more about it on A Rich Life here.

Final Thoughts

In a world chasing headlines and hype, it’s easy to forget that consistency still counts. When well-run, boring businesses can offer steady returns, strong margins, and the kind of resilience that doesn’t require perfect timing.

AUB Group may not be the most exciting company on the ASX, but it’s one I believe is worth paying attention to.

Sometimes, boring can be brilliant.

References:

1. NY Times – Berkshire Bets on U.S. With a Railroad Purchase (2009)
2. Berkshire Hathaway – 2024 Annual Report (Page 5)

*25 April 2025, Close. 

Disclosure: The author of this article does not own shares in AUB and will not trade shares for at least 2 days following the publication of this article. The editor of this article, Claude Walker, owns shares in AUB, and will not trade shares for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 343937).