Share price is driven by earnings, and over the long run there is a strong correlation between earnings growth and share price growth. You want good quality companies in your portfolio, but they have to able to grow to make your portfolio outperform. Here are 4 stocks that have definitely turned on the juice this year as well as in the past.
Bio-pharmaceutical company CSL (ASX: CSL) researches and develops products for blood disorders, viral and bacterial diseases. This $33 billion market cap firm grew earnings per share (EPS) by 38.7% in 2013, and has a 5-year annual EPS growth rate of 15.6%. It operates worldwide with its largest segments in the US and Germany. Its dividend yield is small, but net profit margin is 24%, so it is better to let a growing company use its earnings for growth.
Spark Infrastructure (ASX: SKI) is a utilities and infrastructure investment fund which has ownership in power generation and distribution companies in VIC and SA. Its EPS has grown annually for the past 5 years by an average 29.8%, and just this year achieved 29.5% EPS growth, matching the trend. As an investment fund, it has a good dividend of 6.29%, so investors get good numbers in growth and income.
Possibly known better by its brand names NRMA Insurance and CGU, Insurance Australia Group (ASX: IAG) is a general insurance company that operates in Australia, New Zealand and Asia under a number of brand names. It had an incredible 180% increase in EPS this year, and the share price has doubled from $3 to about $6 since January. Net profit after tax is returning to levels last seen before the GFC, so the recovery is complete. It paid a 6.62% dividend for the year.
Rail transport Asciano (ASX: AIO) owns Pacific National Rail, Pacific National Coal, and operates Patrick, a stevedoring business. It is the largest coal transporter in NSW, and has extensive operations in Sydney for freight transport, and operates in WA servicing mining ore transports. Its 5-year average annual EPS growth is a strong 23.5%, but this year reported a 38.9% increase, flowing from an rise in contracts in the Hunter Valley as well as from new contracts in QLD as they widen their footprint in the state which Aurizon (ASX: AZJ) has leading market share.
The Foolish Takeaway
Share prices are definitely up for these four, but that doesn't mean you missed the boat, and shouldn't invest in them at all. They have steady, stable track records, and that is what you need first of all. If they have staying power to deliver the same, earnings will grow still, and so will share price once more. Look for opportunities when the market misprices them, and start your position there.
Think about your own total return and find out about companies with good dividends. Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."
More reading
· Fortescue to focus on cutting debt rather than growth
· Your portfolio needs a checkup
· Bleak times ahead for mining services?
Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
