Like any great ambition, aiming high with your investments may give you a better chance to achieve your long-term retirement goals for financial security. If you want to get a 10% – 12% return regularly, then shoot for 15% – 20% instead.
I think having shares in Slater & Gordon Limited (ASX: SGH) and Sirtex Medical Limited (ASX: SRX) could help you smash the market's return over the next ten years. Here's why.
Allowing for a regular dividend yield, that higher target now drops to around 12% or more in share price gain. That's possible by choosing companies that can regularly generate similar earnings growth.
The law firm business Slater & Gordon has done an excellent job in growing its network of law practices across Australia. Since 2009, annual revenue increased over 300% to $411.8 million in FY 2014 and net profit tripled during that time. Its Slater & Gordon, Trilby Misso Lawyers and Conveyancing Works brands are adding offices to its network steadily and there is still room in the market for further expansion.
When a business chain is in its growth phase, great returns for investors are possible. Perhaps you have seen these law office names pop up in your suburb or on TV. That could be a sign to look more closely at this company. Take the hint. Annual earnings growth is forecast by analysts to be around 13% over the next two years and the stock pays a 1.5% yield fully franked.
Another company that could be making big gains in the huge US healthcare market is Sirtex Medical. The catalyst for this is the upcoming results of a clinical trial for its SirSpheres liver cancer treatment product. The company has tripled its sales in the past six years because of the product's success already. However, if the trial results suggest it should be used more as a standard first-line treatment, then demand is expected to go through the roof.
The company projects that it will need to triple current production to satisfy potential orders. The 47 price-earnings ratio seems really steep, but the amount of business this company could be doing over the next ten years may make that reasonable over time. Consensus forecasts are for earnings to gain an average 44% per year in the next two years. The 0.7% dividend yield may not seem so big, but dividend growth is tipped to expand greatly over the same time.
One more stock to power your growth
I would prefer to have Sirtex Medical in my portfolio if the trial results are positive. The growth potential could be enormous because of the sheer scale of the US healthcare industry and large number of liver cancer patients.
