Why do all the best stock tickers start with the letter C? Is it some sort of wonderful investment strategy set down by the almighty ASX?
It might sound crazy but my best performing stocks of 2013 began with the letter C and at one stage, I owned each of the next 10 stocks – yep, you guessed it, all beginning with C.
What's more, I'm tipping all these stocks to outperform the broader market in coming years, thanks to continued earnings growth and great dividend yields. Lets take a look at this superstitious investment strategy and see if it stacks up.
Recently, I took my first position in Cash Converters International Ltd (ASX: CCV), after it suffered two hefty setbacks in its share price. However, I believe its long-term potential is yet to be recognised. Its niche market position, good balance sheets and diversification of earnings are all factors you look for in a small-cap stock. The big dividend is icing on the top of the cake. Did I mention it starts with C?
My most recent stock purchase was Collins Foods Ltd (ASX: CKF). It operates and franchises the KFC and Sizzler food chains throughout Australia and Asia. It recently acquired stores in Western Australia and the Northern Territory and will open more every year. Its growth strategies are earnings accretive and make the prospect of owning this up-and-coming small-cap stock even more delicious.
My biggest holding of 2012-2013 was Corporate Travel Management Ltd (ASX: CTD). Surprisingly, it proved to be an extremely successful investment although perhaps I shouldn't be surprised because it starts with the letter C. With earnings set to grow strongly in coming years, perhaps I was premature in my sale, nevertheless I was satisfied with the gain.
I group these next two stocks together because they are extremely similar and, consequently, rivals. Credit Corp Group Limited (ASX: CCP) and Collection House Limited (ASX: CLH) are successful debt collectors which will likely continue to grow earnings strongly in coming years. They both pay fully franked dividends.
Carsales.com Limited (ASX: CRZ) has cemented its position as Australia's premier online automotive listing site. Although competitors such as Ebay and Gumtree command a significant portion of the market, Carsales remains the most sought after domain. According to Morningstar's analyst consensus earnings, it is expected to grow well in coming years.
My favourite fund manager on the ASX is Challenger Ltd (ASX: CGF). I like the company because, in addition to its funds management business, it dominates a niche (but growing) market in the financial sector: annuities. It pays a strong dividend and has notched up capital gains of approximately 70% in the past year – thanks largely to funds under management (FUM) growing very quickly.
Recently, Crown Resorts Ltd (ASX: CWN) proved to investors it has the commanding position in Australia's gambling circuit. Since 2012, Crown's share price has blossomed as growth plans hit the market with maximum reception. Its established Australian casinos and hotels continue to be solid earnings drivers, and its recently approved Sydney complex will help steal market share away from competitors and grow its international reputation.
Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL) are two of the best biotechnology stocks on offer in Australia. Both dominate their respective markets and have a bright future ahead. Cochlear has recently suffered a setback in share price as customers patiently awaited its newest product release and a new Chinese competitor emerged. Nevertheless, both continue to operate successfully in extremely lucrative international markets.
Foolish takeaway
In the 2013 calendar year, the C investment strategy returned 36.7% plus dividends, compared to gains of around 15% for the S&P/ASX200 (ASX: XJO) (^AXJO). It would be specious to believe one letter is more profitable than another. Then again, I've seen my fair share of irrational investment strategies over the years.
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