Everyone knows that Australian stocks had a great 2013. The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) rose by around 15%, led by financials and consumer discretionary companies. As we move into 2014, the better companies in the top 100 are much more expensive than they were a year ago and thus investors will have to be more careful about which companies to invest in.
The team at Morgans stockbroking have conducted an analysis of the companies most likely to outperform in the next month. This is too short a timeframe for Foolish investors (we’re interested in long-term growth), but the companies highlighted have positive earnings catalysts, generally good management, and strong business models which should help them to outperform not just in February, but in the years to come too.
Crown Resorts Ltd (ASX: CWN) is one of my favourite companies at the moment. It had a strong run-up in price in 2013, but has pulled back slightly to be trading at the same price it was in October last year. Since then, the company has further developed its plans to build a new casino in Sri Lanka, continued the redevelopment of its Melbourne Casino, and its 30% interest in its Melco Crown joint venture has increased by 10% to now account for around 50% of Crown’s market capitalisation. It appears as though the company’s Australian assets are being undervalued by the market.
Harvey Norman Holdings Limited (ASX: HVN) is highlighted as a company exposed to a pickup in housing construction and improving consumer confidence and spending. Better economic conditions should also boost group profit as support to franchisees will reduce with improving sales.
Healthcare and pathology services provider Sonic Healthcare Limited (ASX: SHL) is the team’s favourite healthcare exposure. As Australia’s largest pathology operator, and with its growing exposure to developed markets overseas, the group is well positioned to benefit from ageing populations.
Travel-agency group Flight Centre Travel Group Ltd (ASX: FLT) is expected to produce another strong first-half earnings result in February and should be a beneficiary of a lower Australian dollar boosting domestic tourism.
Online job website operator SEEK Ltd (ASX: SEK) is expected to benefit from its growing exposure to developing markets and the potential bottoming of the Australian jobs market. Its education platform is also maturing, increasing the group’s revenue streams to boost earnings in the years ahead.
Finally, Morgans believe that Sydney Airport Holdings Ltd (ASX: SYD), which operates the dominant Sydney Airport just out of the Sydney CBD, is set for a good year. The company gives quality exposure to global aviation trends, the lower Australian dollar boosting inbound tourism, and a solid, growing dividend yield.
While the analysis from Morgans focuses on shorter-term trading opportunities, long-term Foolish investors can use the analysis to identify companies that may outperform over the longer term. The best companies are those with strong competitive positions, such as the monopolies held by Crown and Sydney Airport, with quality management and a history of great operational performance. The companies listed above generally have these properties and are a good place to start your research.