Buying growth stocks is where savvy investors make their money. Buying a good thing early-on in the game and holding it whilst it matures is the best way to take advantage of capital gains and potential dividend payouts.
So whilst stocks such as Rio Tinto Limited (ASX: RIO) and Australia and New Zealand Banking Group (ASX: ANZ) may represent sustainable long-term dividend payers. Their chances of doubling or even tripling in value in the next five years could prove to be a tall order.
Instead investors looking to put their research skills to the test, should focus their attention on smaller companies with tremendous upside potential. They don’t have to be speculative but could be niche market players with growing exposure and brand awareness.
For example, although Tassal Group Limited (ASX: TGR) might be largely under-researched, many will know it’s a profitable business which produces a product continually in demand. It is an example of a top growth stock because it boasts strong balance sheets and a runway of increasing sales.
Another well-known Australian company is Slater & Gordon Limited (ASX: SGH). The law firm specialises in personal injury but has recently begun its venture into personal legal services and, more importantly, into the United Kingdom. Expanding both organically here in Australia and acquisitively in the UK will enable the company to continue to grow earnings in the future.
Donaco International Ltd (ASX: DNA) is a personal favourite of mine. Although it is illegal for Vietnamese citizens to gamble, Donaco has strategically placed hotel and casino operations in Lao Cai, near the Chinese border in the northern part of the country. It attracts ‘high-rollers’ to gamble and enjoy its services. It recently undertook an expansion which will transform its 34-room hotel and casino to a brand new 428-room resort complex. The expansion is due for a soft opening in May.
I’ll admit it, this last one is a bit more speculative. A company which isn’t currently making meaningful profits should always be considered high-risk, but for a while now I believe this one has needed more credit than its been given. Liquefied Natural Gas Ltd (ASX: LNG) is its name. It has its flagship Magnolia operation in Lousiana, USA, which has the potential to produce around 8 million tonnes of gas per year. Currently priced at $0.38 (already 19% higher than when I recommended it last week) I don’t believe it’ll last long at this price.
The benefit of investing in the stock market is capital gains. Unlike term deposits, bonds or other fixed income securities, your success lies in your research of the underlying asset and has little or nothing to do with interest rates or macroeconomic trends, just businesses. I believe these four companies have strong business models and look set to bring greater shareholder wealth in the long-term.