With the dust settling after an epic reporting season now is the time to refresh your portfolio by discarding weak stocks that you don't expect to perform well and replace those losers with quality stocks you have a high conviction will outperform.
While far from a complete list, here are three stocks which have caught my eye and could be worthy of further research by investors who are keen to upgrade or expand their portfolios.
Nick Scali Limited (ASX: NCK) – an upmarket furniture retailer still run by the founding family. With 'skin in the game', management isn't chasing growth for growth's sake, but rather they are focussed on long-term sustainable returns. That mindset is benefiting shareholders with profits growing from $12.2 million in financial year (FY) 2013 to $14.2 million in FY 2014. The outlook looks good too – there is the new brand Sofas-2-go which will expand the firm's footprint in the marketplace and with the tailwind of a positive housing market the business should keep sailing along.
Slater & Gordon Limited (ASX: SGH) – the leading listed legal services firm once again beat expectations this year, reporting a profit of $57.7 million. The group's Australian operations continue to hum along but it is the expansion into the UK which offers the most upside for Slater & Gordon's shareholders. The expansion is forecast to help grow profits by around 25% in the current year.
Carsales.Com Ltd (ASX: CRZ) continues to be the dominant player in the domestic automotive classifieds space. Its sites attract around nine million visitors per month – it's an enviable position to have. Earnings per share grew from 35.2 cents per share (cps) in FY 2013 to 40 cps in FY 2014. Management continues to look for ways to grow and expand its business and the recent acquisition of Stratton which is a vehicle finance broker looks a great fit with scope to grow significantly.
Given the solid outlook for these three stocks they should all continue to grow their earnings in the coming years. Purchased at a reasonable price they could also make good additions to a long-term portfolio.
