Sometimes the best stock picks are right under your nose. You might even be customers of the businesses already, but never thought of them of as investments.
For example, probably many readers have been to a Bunnings Warehouse DIY hardware store. I know I have, I'm renovating an old wood deck right now and I go there almost every day to pick up wood, screws, bolts and other supplies. It's a great business, but it's a subsidiary of Wesfarmers Ltd (ASX: WES). If Wesfarmers ever wanted to spin it off, I'd be buying shares at the IPO for certain.
There are other growing, successful businesses that are popping up in new cities and neighbourhoods all the time. Some of them are ASX-listed, so you can invest directly into the company.
Here are two great companies that are still expanding and could be promising additions to your portfolio.
Pet Care Supplies:
Even if you aren't a direct customer, you may have noticed a new Petbarn or City Farmers pet supplies store in your area. If that's the case, then Greencross Limited (ASX: GXL) has just moved into town. It originally was a veterinary service (that is still steadily sweeping across Australia on its own), but over the past two years the company has acquired the two pet supplies store chains. This has expanded their service coverage and combined pet healthcare and supplies under one business.
After a strong share price run up over the past three years, the company has pulled back from almost $11 to $8.20. However, some analysts are expecting it to grow earnings by as much as 20% annually over the next two years. With a 23 price-earnings ratio, the stock looks like it may be in bargain territory and could be a good buy.
Takeaway Pizza:
Raise your hand if you have ordered a Domino's pizza in the last five years. Ok, now of those readers, keep your hand up if you bought any Domino's Pizza Enterprises Ltd (ASX: DMP) stock since 2009. If you did, pat yourself on the back with that upraised hand because you saw the stock go from around $4 to $25.95 now.
Is it too late now to jump on? No, not really because the company is still expanding in Australia and New Zealand.
In addition, after acquiring a 75% stake in Domino's Pizza Japan, it is planning another big store chain expansion there as well. Currently around 330 stores, over the next five years the company intends to increase total stores there to around 600 – 800 and become the number one takeaway pizza chain in Japan.
The stock is at a high 43 PE, so this growth story is no secret. However, consensus forecasts are for earnings to grow an average 24% annually in the next two years. I regularly wouldn't want to pay a PE more than twice earnings growth, so I would suggest waiting for the share price to pull back before doing anything big with the stock.
