Where can you find the growth to drive stocks up 50% or 100% or more?
We're familiar with the growth of the big four banks which normally churn out earnings gains every year. Some investors might know of the phenomenal rise in earnings and share price of market leaders like REA Group Limited (ASX: REA), operator of the number one property search website realestate.com.au.
It's an investor's dream to find stocks that could double or triple in share price, but as companies get larger and larger, the chance they can have such explosive growth falls.
Catching companies past their start-up phase and before their maturity phase gives you the best opportunities to snag non-stop growth stocks on their way up. They have a successful business model. Now all they need is some juice and a runway to take off.
An easy example is Domino's Pizza Enterprises Ltd (ASX: DMP). It now has over 600 stores in ANZ and acquired a 75% stake in Domino's Pizza Japan. That helped lift revenue almost 100%. Now, it's on an expansion path to increase Japanese store numbers from about 320 to between 600 – 700 in the next five years. That will be tremendous growth if executed skilfully. I would watch this stock and pick some up when prices pull back.
One not as familiar is Magellan Financial Group Ltd (ASX: MFG). The fund manager had an incredible run up in share price in 2012 – 2013, going from about $2 to $12 – a six-bagger in such a short time! It concentrates on international equities and assets. This will give it an advantage over just investing in ASX stocks, which aren't expected to rise strongly in the short term. The US stock markets are hitting new all-time highs, so I would be looking for Magellan Financial to continue making appreciable gains in 2015. Due to its success, many investors are turning their money over to the fund manager, swelling its funds under management. That gives it more firepower to buy equities and drive earnings further.
