To be successful at investing, you don't need to have a business degree. Nor does being super smart necessarily give you an incredible edge. It's more about being correct in stock picking and then giving your investments the time to grow.
If you want to get an above average return, then choosing companies with above average performance is the first step.
The next step is time.
If you set a goal to double your portfolio value in, let's say, five years, that's ambitious, but not impossible. You simply need to achieve at least a 15% annual return. That can be a combination of earnings growth and dividend yield. A 20% earnings growth stock handily meets the target, but a stock with a 5% yield that grows 10% annually is ok, too.
But just to make sure you can make the 15% return threshold annually for as many years as possible, I would look at high-growth stocks that bring 20% plus earnings growth. After that you just have to hope the share price returns match the company's own growth in earnings.
Childcare centre network operator G8 Education Ltd (ASX: GEM) has been busily acquiring childcare and early education centres across Australia. Childcare is a service very much in demand among full-time working parents. The government also wants to support childcare services, so G8 Education benefits from government subsidies as well. Acquiring multiple centres at a time can push up company revenue and earnings quickly. G8 Education is forecast to have double-digit earnings growth well above 20% annually for the next several years, so the company could make a good high-growth candidate.
From childcare to healthcare, Sirtex Medical Limited (ASX: SRX) is another high growth stock that could expand greatly in the area of liver cancer treatment. Its specialised SIR-Spheres product is used to target cancer tissue in the liver without harming the surrounding healthy tissue in the way that traditional radiation therapy can. The company has been successfully growing over the past six years, but 2015 may be the year when the business really takes off in the US, its biggest market. Sirtex is waiting on clinical trial results that may suggest its product become a first-line cancer treatment. If this occurs, the company projects production could potentially triple. That could send earnings way up, yet the stock currently trades at a high 49 price-earnings ratio. New investors may want to wait for a better margin of safety in the share price.
