While no-one knows what will happen over the course of the next five years, we should be reasonably certain that the stock market will be higher in 2019, no matter what happens in the US, China or Europe in the next couple of years. The US economy is recovering, and when US consumers start buying products from the factories of the world, most located in China, we could see global growth begin to rise again. Picking stocks to buy and hold for the next five years means focusing, as ever, on quality companies with the ability to grow earnings materially…
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While no-one knows what will happen over the course of the next five years, we should be reasonably certain that the stock market will be higher in 2019, no matter what happens in the US, China or Europe in the next couple of years.
The US economy is recovering, and when US consumers start buying products from the factories of the world, most located in China, we could see global growth begin to rise again. Picking stocks to buy and hold for the next five years means focusing, as ever, on quality companies with the ability to grow earnings materially higher, over the next half decade.
So here’s my pick of five stocks that look attractive now.
Hearing implant maker Cochlear (ASX: COH) has been in the doldrums as investors fret over the company losing market share, not being able to withstand its competitors, and the fear of newer competitors rising with cheaper, high quality products. Cochlear has the management, the products and staff, as well as the distribution and marketing infrastructure in place to see its competitors off. The launch of new products should see a steady stream of rising sales over the coming years.
CSL Limited (ASX: CSL) provides blood plasma therapies to treat a range of human medical conditions, as well as vaccines for the likes of influenza. With 90 years of experience behind it, an outstanding management team, and a significant spend on research & development each year, that should see CSL continue to generate high growth in earnings for shareholders.
Resmed (ASX: RMD) develops products to assist with sleep apnoea, including machines along with associated equipment such as masks and pipes. With more than a decade of consistent growth behind it, and growing demand for its products, Resmed has the potential to growth significantly within five years, which should see the share price follow along.
Nearmap (ASX: NEA) provides overhead and oblique photos of the vast majority of Australia’s cities and towns. While many would think that it competes with Google Maps, Nearmap photos are taken from a plane at 7,000 feet, whereas Google’s are taken by satellite. Additionally, Nearmap updates its maps much more frequently (weekly or monthly compared to every couple of years for Google) and has developed a multi-year photo history, which is irreplaceable. Its proprietary technology means users no longer have to do site visits to measure or visually observe structures, saving its customers enormous amounts of money. As more businesses sign on, and with a potential expansion overseas on the cards, Nearmap could be a much bigger company in five years than it is today.
Possibly the most controversial of my picks, BC Iron (ASX: BCI) is one of Australia’s junior iron ore miners, with a 75% interest in the Nullagine Iron Ore Venture. Rising production and a strong iron ore price, combined with ready access to rail and port infrastructure means BC Iron generates fantastic cash flows. As a result, the company is building up a considerable cash balance, despite paying a fully franked dividend yield of 8% in the last year. Dividends could increase in the years ahead, as production rises.
Over the next five years, those companies should generate strong returns for shareholders, in the form of capital growth as well as dividends. You may want to add them to your watchlist.
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Motley Fool writer/analyst Mike King owns shares in Cochlear, CSL, Resmed and Nearmap . You can follow Mike on Twitter @TMFKinga