Unfortunately for investors using index funds, over the last 12 months the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has declined by over 2%.
Although I do think that index funds can be a great tool, I believe this decline demonstrates how successful stock picking can be a way of outperforming the market. But picking the right shares is no easy feat, by any means.
By carefully choosing quality shares with strong growth prospects I believe investors can give themselves an advantage. These three shares beat the market in the last 12 months, and I wouldn’t be surprised to see them do it again over the next 12 months.
Australian Pharmaceutical Industries Ltd (ASX: API)
I’m a big fan of Australian Pharmaceutical Industries. Its name might not ring a bell, but its portfolio of brands are likely to. API is the owner and operator of the popular Priceline, Soul Pattinson, and Pharmacist Advice brands, as well as being a distributor to pharmacies across the country. In the last five years, it has grown its earnings by an average of 11% per annum. Thanks to the strong performance of its Priceline brand, a fragmented market, and aggressive expansion plans, I believe API is poised to continue this strong performance for at least the next couple of years.
REVA Medical Inc (ASX: RVA)
REVA Medical is a clinical stage medical device company that has developed bioresorbable scaffolds as an alternative to traditional metal stents. Traditional metal stents are permanently implanted into an artery to treat coronary artery disease, whereas REVA Medical’s bioresorbable scaffolds are implanted and then designed to disappear naturally over a period of time after their work is complete. So far its clinical trials have been very positive and management looks to be positioning the company and its scaffolds well in a global coronary stents market which is estimated by Kalorama Information to be worth US$5 billion a year. With a market capitalisation of $500 million, I believe REVA has an incredible amount of potential.
Webjet Limited (ASX: WEB)
Webjet’s growth has been nothing short of spectacular in my opinion. The travel booking company has now delivered 10 consecutive years of solid top line growth, and I believe it can continue this trend for the foreseeable future thanks to the growth in tourism across its key markets. So far this year the signs of this happening have been good. Despite the slowing growth that Flight Centre Travel Group Ltd (ASX: FLT) is facing, Webjet produced half-year EBITDA growth of 26.4%. Another potential bonus is that analysts are expecting the company to grow its dividend at an average of 29% per annum for the next couple of years, according to CommSec. I feel this could well make Webjet a great long-term investment for both growth and income.