2 tip top growth stocks which could double in 2 years

The stock market is fraught with risk. It doesn’t matter which stocks you hold. You’ll lose money.

But, if you’re good, you’ll make money, hopefully more than you’ll lose. Peter Lynch, a famous fund manager and investing guru said: “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

You can interpret that to your own liking but, for me, it says it doesn’t matter if you buy ‘blue-chips’ or ‘small-caps’ you’ll still lose money because you won’t get every purchase right.

The idea that companies like Woolworths Ltd (ASX: WOW) or Australia and New Zealand Banking Group (ASX: WOW) are safer than smaller companies is absurd. I’d buy a cheap small company over a big expensive one any day of the week.

From little things, big things grow

Although it appears large, the Australian economy is small. According to the International Monetary Fund’s 2013 forecasts, by 2015 Australia will be the world’s twelfth largest economy and we’ll account for only 1.4% of global growth between 2010 and 2018. For blue-chip investors that leaves much to be desired, but for small-caps, who have a bigger growth window, it’s not nearly as important.

There are many smaller companies on the ASX, which are pursuing international expansion or have already established themselves in foreign countries with niche market offerings.

China 1

Unsurprisingly, the next years of global growth are likely to result in China leading the charge – accounting for around of 24% of the all economic growth between 2010 and 2018. For Chinese citizens that means rising wages and affluence.

That’s one reason I’m banking on this next small-cap. Donaco International Ltd (ASX: DNA) is a casino operator with its key hotel and gambling operations located in Lao Cai, Vietnam. For those of us who haven’t been to Vietnam, it should be noted it’s actually illegal for Vietnamese citizens to use the casino.

I know what you’re thinking, why invest in a casino where its local citizens aren’t allowed to gamble? Well, it’s strategically located on the Chinese border where tourists are its targeted market. To give a brief example of its potential, it’s the only casino for 450km and Yunnan – a Chinese province which borders Vietnam – has a population of 46 million.

The company’s hotel targets ‘high rollers’ with 80% of revenues coming from customers with more than $100,000 to spend. The company uses junket operators, or VIP promoters, to book the hotel for high rollers for a commission, but at any one time the hotel cannot handle all the operators’ customers so a roster has had to be in place.

However, the group has recently renovated the hotel to keep up with demand. The property will have a soft opening in May and go from a 3-star 34-room hotel to a brand new resort complex with 428 rooms. What’s more the company has just increased its ownership to 95% following an additional 20% increase of the operations from its joint venture partner, the Vietnamese government.

With a price-earnings of 55, it doesn’t appear cheap. But the growth prospects speaks for itself and it has exceptional short and long-term potential. Since I told Foolish (capital ‘f’) investors why they should buy the company in late January, its share price is up over 50%.

United States 2

Despite its continued debt woes, the United States is anticipated to maintain the number two growth rate in coming years, as its economy rebounds post-GFC. This presents opportunities for Australian companies with ambitious growth plans.

One such company is Bentham IMF Ltd (ASX: IMF). It’s the world’s oldest litigation funder with exposure to the US market via its wholly owned subsidiary in New York, which also has an office in Los Angeles. It does not provide advice but financial security for cases which exceed $5 million in value.

From October 2001 to 30 June 2013, its track record went as follows: 65% of cases settled, 9% of judgements won, only 3% lost and 23% withdrawn. It also offers services outside of Australia and the US for cases in the UK, Europe, Canada, South Africa, New Zealand and Asia.

In its most recent half-year report it announced 44% income growth and profit up 63% when compared to the pcp. However, as can be expected from a litigation funder, earnings can be lumpy and unpredictable at times. Perfect for investors looking for a long-term stock.

Foolish takeaway

The market is an irrational beast. At times chewing up and spitting out your hard earned cash. But it can also make you a lot of money. If you have a long-term mindset, I believe that these two stocks will form part of your 6 out of 10 winners – that’s why I’ve already bought them!

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Motley Fool Contributor Owen Raszkiewicz owns shares in Donaco International and Bentham IMF. 

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