Can you guess the one ASX stock I think every investor must buy?
If you ask an investor to define their version of Nirvana, my guess is the response would include something along the lines of “finding the next 10-fold winner”.
That’s because every long-term investor is assumedly in the market to make money, and rightly so, because what’s not to love about picking the next a2 Milk Company Ltd (Australia) (ASX: A2M) or Bellamy’s Australia Ltd (ASX: BAL) before it becomes a ‘ten-bagger’.
Finding the next big winner can be difficult, given investors have a choice from 2,164 companies on the ASX alone. However, the signs of greatness can be clear from the outset, and I believe I might just have found the next market darling.
Can you guess the stock?
The company I’ve selected has a proven history of year-on-year profit growth averaging a compound annual growth rate (CAGR) of over 25% since listing in 2006. Management has consistently increased dividends for the last 10 years and announced a robust international expansion strategy to drive growth.
On the back of a recent acquisition, I believe this star stock is poised for another great year ahead.
Have you figured out which one I’m talking about?
Clue # 1
The stock I’m thinking of is not an everyday name (just yet). Investors that have followed this company will recognise its brands from a mile away, but to the uninitiated eye, the company is not as ubiquitous as Medibank Private Ltd (ASX: MPL), or Woolworths Limited (ASX: WOW).
In fact, the company doesn’t even feature in the S&P/ASX 100 Index (ASX: XTO), which means it’s smaller than Australia’s 100th largest company (valued at $1.7 billion) in Sirtex Medical Limited (ASX: SRX).
Clue # 2
Clue # 3
Here’s a big clue. The stock I have in mind is in the food retail industry, serving pizza and coffee by the truckload.
Whilst you could be forgiven for thinking it is Domino’s Pizza Enterprises Ltd (ASX: DMP), you’d be wrong because this stock trades on a much more humble price-earnings of 17x and offers a tasty growing yield of 4% (fully franked).
In case you haven’t guessed it yet, the stock I’m rating as a current buy is fast-growing pizza, café and bakery conglomerate Retail Food Group Limited (ASX: RFG).
Whilst I’m by no means saying it will see 1,000% returns from current prices, Retail Food’s strong track record and exciting growth prospects makes for great promise if management successfully executes on strategy. Watch this space.
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OUR #1 DIVIDEND PICK FOR 2016...
Forget BHP and Woolworths. This "dirt cheap" company is growing like gangbusters, and trading on a 5.6% dividend yield, FULLY FRANKED (8% gross). With interest rates set to stay at these low levels for years to come, for hungry investors, including SMSFs, this ASX company could be the "holy grail" of dividend plays for 2016.
Motley Fool contributor Rachit Dudhwala has no position in any stocks mentioned. The Motley Fool Australia owns shares of Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
If you ask an investor to define their version of Nirvana, my guess is the response would include something along the lines of ?finding the next 10-fold winner?.
That?s because every long-term investor is assumedly in the market to make money, and rightly so, because what?s not to love about picking the next a2 Milk Company Ltd (Australia) (ASX: A2M) or Bellamy?s Australia Ltd (ASX: BAL) before it becomes a ?ten-bagger?.
Finding the next big winner can be difficult, given investors have a choice from 2,164 companies on the ASX alone. However, the signs of greatness can be clear from the…