This is the time of year when many talking heads, analysts and share market commentators like to predict what will be the best-performing stocks or sectors in the year ahead.
And I'm not kidding when I say that in my role as the editor for The Motley Fool Australia that I get to hear a lot about the latest hot companies either recommended by readers, shareholders, or the companies themselves.
In all honesty most of them are rubbish. These are the kind of companies losing money, with no products, no track record, opaque management and almost no chance of ever producing strong long-term returns for investors.
In fact there are hundreds of companies all over the ASX that don't make money, have too much debt, no competitive advantages and virtually zero potential to consistently grow profits over the long term.
Still you'd be surprised just how many Australians love to buy shares in these types of companies out of general ignorance, or in the hope of getting rich quick.
If you're looking to invest for your kids or grandchildren this Christmas, I suggest you avoid almost the entire market.
As you'll need to find a company with a proven market-leading product that's built for the future.
I suggest investors look to hearing aid manufacturer Cochlear Limited (ASX: COH). Not only does it have market-leading products, but it also has an almost unlimited addressable global market and infinite growth runway.
The fact that its hearing aids are best-in-class means it can command premium prices as patients will always want the best products possible when it comes to their hearing. These are not the kind of products or commodities (like baby formula) that can go boom or bust depending on whether a competitor simply replicates them, or as supply and demand swings over cycles.
Moreover, after a recent share price pull back based largely around valuation and a wobble for growth stocks due to the changing outlook for the risk-free rate of returns, Cochlear shares are now trading at a reasonable valuation under $120.
Anyone betting against Cochlear shares?
Chart: Cochlear share price performance since April 1999, up 1,000%.
For comparison are Commonwealth Bank of Australia (ASX: CBA) shares up 214% and Telstra Corporation Ltd (ASX: TLS) shares down 40% over the same period.
Not forgetting the king of widely-held dud stocks in AMP Limited (ASX: AMP), down 71% over the period.
Of course Cochlear like other healthcare leaders including CSL Limited (ASX: CSL) is not without risks, as it has been forced to recall products in the past and is vulnerable to mismanagement or cut-price competition of sorts.
Still, to me there's probably not a better long-term growth stock on the ASX and I expect it would make an ideal present for parents looking to invest for their children's future this Christmas.
