Crowe Horwath Limited’s best investment ideas for 2014

Accounting and wealth management consolidator Crowe Horwath Australasia Ltd (ASX: CRH) has been a torrid investment for shareholders in the past few years. The previous chief executive officer – an outsider with next-to-no knowledge of the business – barely lasted two years before being shown the door. The board how now elevated long-serving chief financial officer Mr Chris Price to the CEO’s position.

Crowe Horwath is Australia’s fifth-largest accounting organisation with offices across most capital cities and importantly many regional centres. Its accounting business is focused on servicing the small and medium-sized enterprise (SME) market, while the expansion into financial services is aimed at cross-selling services to its accounting clients. At 30 June 2013 this cross-selling had led to $6.99 billion in funds under advice (FUA) and $2.722 billion in loans under management. It’s this access to a significant number of accounting clients, a large pool of FUA and loans that enticed SFG Australia Ltd  (ASX: SFW) to approach Crowe Horwath in late 2012 to discuss a merger.

Each year Crowe Horwath calls on its financial advisors, investment analysts and economists to make sense of the opportunities and challenges it expects its clients to face in the coming year. Here are some key takeaways from the firm’s latest: ‘Ten Best Investment Ideas 2014’.

  • Consider the potential investment opportunities created by an ageing demographic. Travel is becoming a major component of retirement, a trend Sydney Airport Holdings Ltd (ASX: SYD) should benefit from.
  • The shift online continues and the dominant players such as SEEK Ltd (ASX: SEK) and Limited (ASX: CRZ) should continue to benefit from riding this wave.
  • There are Australian companies that can benefit from the urbanisation and growth of the middle class around the world. These companies include CSL Limited (ASX: CSL) and Westfield Group (ASX: WDC).
  • Don’t simply focus on dividend yield – look for companies with growing earnings and growing dividends too. While Telstra Corporation Ltd (ASX: TLS) is seen as a ‘yield stock’, its dividend has remained constant since 2005. In contrast Sonic Healthcare Limited (ASX: SHL) may not be known for its yield but it has grown its dividend by 210% from 20 cents per share (cps) to 62 cps since 2002.

Foolish takeaway

A common theme amongst the stocks singled out in the ‘Ten Best Investment Ideas 2014’ is that they are all high quality businesses with reasonable prospects for future growth and strong balance sheets.  While some investors may not find this ‘exciting’, buying and holding quality stocks can lead to above average performance over the long term.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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