To consistently beat the market return, you have to be consistent yourself. Sometimes investors jump at a stock because it popped up in share price suddenly. There's not much reasoning behind how they choose stocks and that can lead to not just underperformance, but straight up losses.
Having investing discipline and following a set of your own stock picking rules may keep you out of large number of stocks, but it will narrow the pack down to the better performers. Each investor is going to be different in goals and risk tolerance, so know why you chose a stock before investing the first dollar.
Lastly, the share price has to make business sense in purchasing the stock. Most stocks are a bargain at a certain price. Equally, some great companies can rise just too far above their value. That could set you up for frustration or loss if they sell off and you did your buying at the top.
If I had an extra $10,000 for investing, I would choose the stocks below because of their high performance and attractive value.
1) REA Group Limited (ASX: REA) has been a strong earner for quite a number of years. Its realestate.com.au website is the clear market leader in property advertising and search portals. Because property vendors want their homes to look their best in the real estate listings and attract the most potential buyers, REA Group garners a premium value for its services. Other websites like domain.com.au have their strengths, but there is still a wide gap between realestate.com.au and its competitors. Low debt and strong cash flows keep REA Group in the lead.
2) Domino's Pizza Enterprises Ltd (ASX: DMP) is now the world's largest franchisee group of the Domino's Pizza brand with over 600 stores in Australia and growing markets in Japan and Europe. Earnings growth is usually above 20% annually. Takeaway pizza can be considered a defensive business because even in weak economies, people still eat pizza. The Australian pizza market hasn't become saturated yet, so the company has room to grow. The fast food retailer is even devising ways to take market share from restaurant leaders like McDonald's and KFC. This stock is a solid grower for your portfolio.
