When I look for good stock picks, aside from good earnings growth and solid financials I also want to see why a company is doing so well. Is it just a good year, not likely to be repeated, or does it have staying power?
For a growth portfolio, you'll need businesses that have big competitive advantages and strong brand names. I look first for market leaders with steady earnings and dividends.
Still, probably your greatest share price gains will come from up-and-coming stocks as they generate bigger and bigger profits. That attracts more investors and the stock takes off.
If you are starting out with a sizeable $5,000 to build a growth portfolio, then these four stocks could be on your short list.
1) Carsales.Com Ltd (ASX: CRZ): The number one website for auto sales searches is expanding its services into vehicle finance to be even more of a "one-stop shop" for car enthusiasts. This creates yet another good income stream for the market leader and keeps more customers coming to the site. The company's competitive advantages are huge.
2) Ramsay Health Care Limited (ASX: RHC): The private hospital operator is still on a growth path, with several big acquisitions in FY 2014 that will push revenues even higher. It already has the biggest hospital network in Australia, but its highly successful overseas expansion in Europe and Asia has really impressed many investors (myself included) and is turning this healthcare company into a growth stock.
3) Slater & Gordon Limited (ASX: SGH): If you like business chains that grow their franchises across the country and have impressive share price gains, then this legal services company is for you. The law firm network is setting up new offices or acquiring small law practices to spread its well-known brand names such as Slater & Gordon, Trilby Misso Lawyers and Conveyancing Works throughout Australia's major cities. You can benefit from the expansion while it's still in the early phase.
4) IRESS Ltd (ASX: IRE): This company develops and operates wealth management platforms used by many fund managers and financial planners both in Australia and internationally. Its premium XPLAN platform is seeing high demand as more investors are setting up superannuation and SMSFs, which have high administration and compliance requirements. Increased share trading also drives its usage and higher revenues.
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