Australia's financial institutions are renowned throughout the world because of their relative safety and high returns. It could be the strict disclosure or the fact Aussies demand better returns on their investments. From the big banks down to the smallest fund managers and insurance brokers, the corporate regulators and competition watchdog set a high standard for all.
However many Australians know this, so if you want to buy shares in our best finance stocks, they are going to cost you. Here are four of my favourite finance stocks listed on the ASX.
Of the big banks, ANZ (ASX: ANZ) is the one most likely to outperform its peers in the long run. Its exposure in Asia and its relatively small mortgage market share provide plenty of scope to grow revenues. Although it is trading at a premium, investors should look to add ANZ to portfolios if it drops to a more modest price.
As much as bank stocks have run up in share price over the past 24 months, fund managers have performed better. One stock that is highly sought after is Platinum Asset Management (ASX: PTM). It has around $20 billion under management, 12% of which comes from overseas. It pays a 3.9% dividend at current prices, which is likely to grow in coming years.
One stock that has continually impressed shareholders is Collection House (ASX: CLH). It's no wonder why — the company has enjoyed six years of consistent growth yet trades on very modest multiples. In the past year it has improved across a number of metrics including return on equity, DPS, net profit, gearing and revenues.
Down in small-cap territory is Yellow Brick Road (ASX: YBR), which has a market capitalisation of $111 million. Yellow Brick Road is a junior wealth management company that provides financial advice, professional services (estate planning, insurance, etc.) and management, execution and administration services. It operates in most Australian states and is headed by Wizard Home Loans founder Mark Bouris. Although it has yet to turn a profit, top-line growth is impressive and it will look to break even in the next few years.
Foolish takeaway
With the bullish run of S&P/ASX 200 (ASX: XJO) (^AXJO), it seems many of the ASX's best stocks are already so expensive. It's our job as savvy investors to sniff out opportunities where the rest of the market wouldn't dare. Some of these stocks pay great dividends and look likely to keep growing.
