Are these the 3 best growth stocks on the ASX?

Just as a list of ‘new lows’ can reveal stocks which have been over-sold and worth considering, so too can ‘new highs’ lists draw investors’ attention to companies which are doing well and perhaps have further to run.

DuluxGroup Limited (ASX: DLX) appears to be in a sweet spot as it rides the Australian property boom. Presumably many vendors are giving their properties a touch-up of paint pre-sale. However the bigger tailwind for Dulux is new home building; financing figures and building approvals data suggest there could be a big uptick in paint volumes for the paint supplier in coming quarters.

Shareholders in Dulux have enjoyed a brilliant return since its spin-off from Orica Ltd (ASX: ORI) in 2010. The pain maker’s stock price has risen 123% and is currently at an all-time high.

SKYCITY Entertainment Group Limited-Ord (ASX: SKC) is also at a multi-year high. The owner of casino operations in Australia and New Zealand is a good example of the benefits which can be afforded to the niche player. Sky City’s focus on monopoly assets in more regional cities has been a profitable strategy, rather than trying to be a ‘flagship’ casino operator.

The strategy has helped it grow its share price by 79% in the past five years, almost double the return from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).

While the heady days pre-GFC appear long-gone for Tabcorp Holdings Limited (ASX: TAH), shareholders are enjoying new highs for the stock post spin-off of its casino business Echo Entertainment Group Ltd (ASX: EGP) which occurred in 2011.

It’s interesting to note the difference in the performance of these two stocks. Tabcorp has rallied 47% since the split, while initial shareholders in Echo have suffered a 35% decline in value.

Foolish takeaway

Like a number of property and building materials stocks, investors need to be careful that all of the future cyclical growth is not already built into the share prices– Dulux could well fall into this scenario.

Casino operators don’t suffer from these cyclical issues and can make wonderful investments if purchased at the right price – understanding the regulatory risks of these businesses is key though. Despite the obvious regulatory risk – which Echo is all too aware of – Tabcorp and Sky City look to have decent long-term outlooks.

The top ASX pick you've never heard of...

Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small-cap stock that could be poised for big gains (and offers a fat, fully franked dividend!). Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool's Top Stock for 2014."

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.