Over the last two months we've seen most companies on the ASX deliver either full-year or half-year earnings results. That makes now the perfect time to assess which companies are the most likely to outperform over the next year or two.
Classifying Stocks
Many investors and analysts like to group companies into one of two buckets; growth or income stocks. Income stocks are generally favoured by more conservative investors as they offer a margin of safety through regular income, whereas growth stocks can be viewed as riskier given investors rely more heavily on capital gains.
Growth Stocks
Growth stocks are my favourite of the two because I'm happy to sacrifice immediate income for better growth. So when Macquarie Group Ltd (ASX; MQG) released a list of companies that have proven to be quality growth stocks over the past year; I paid attention.
Here's Macquarie's list of growth stocks and their 12-month share price performance:
- CSL Limited (ASX: CSL)- 13%
- Amcor Limited (ASX: AMC)- 6%
- Domino's Pizza Enterprises Ltd. (ASX: DMP)- 90%
- Ramsay Health Care Limited (ASX: RHC)- 40%
- Oil Search Limited (ASX: OSH)- 9%
- REA Group Limited (ASX: REA)- 21%
- Sirtex Medical Limited (ASX: SRX)- 69%
- Slater & Gordon Limited (ASX: SGH)- 67%
- SEEK Limited (ASX: SEK)- 51%
- Magellan Flagship Fund Limited (ASX: MFF)- 3%
- Crown Resorts Ltd (ASX: CWN)- 0%
- DuluxGroup Limited (ASX: DLX)- 20%
Analysis
I must say, that with the exclusion of Magellan, I believe their list is spot on. The companies above have established themselves as fully-fledged growth stocks in the past 12 months and future returns will align closely with how well they can execute expansion plans.
The average return of the 12 companies above is 34%, implying a return of $340 on every $1000 invested in an equal-weight portfolio 12 months ago. Such a portfolio would have outperformed the ASX 200 by 27% as well as delivering a dividend yield between 2% and 3%, a great performance indeed!
