Many of you Foolish readers might feel a little overwhelmed at the prospect of starting a new share portfolio. How do you construct a diversified portfolio? What are the best stocks to pick for long-term growth?
With so many companies out there to choose from, here are the five stocks that I currently rate as "must haves" for any portfolio – solid companies with growth potential that could set any investor up for long-term returns.
- Afterpay Touch Group Ltd (ASX: APT)
Afterpay offers a simple financial platform that is both scalable for the business and easy for consumers to understand. It allows shoppers to buy products now and pay later in four equal fortnightly instalments. But it doesn't charge any interest to the consumer, instead taking a small fee off merchants who adopt its payment platform.
In the six months leading up to 31 December 2017, Afterpay grew its customer base by 85% to 1.5 million, and annualised sales made through its platform are estimated to hit $2 billion. With plans to expand into the US market, Afterpay still offers investors excellent growth potential.
- Altium Limited (ASX: ALU)
Another tech stock, Altium helps develop printed circuit boards (PCBs), an integral component to almost all electronic devices. The company forecasts that more than 30 billion smart devices will be connected to one another wirelessly through the internet by 2020. This shift in technology will spur demand for ever more complex PCBs – and with over 30 years of investment in R&D under its belt, Altium is best positioned to take advantage of this new trend in tech.
The company's first half FY18 results were impressive: Altium announced that revenues had increased 30% on H1 FY17 to over US $63 million, and net profit was up 50.8% to US $14.8 million. By continuing to grow its subscription pool, Altium is confident it can achieve its lofty goal of US$200 million in revenues by 2020.
- ResMed Inc. (CHESS) (ASX: RMD)
Over the last 10 years, the S&P/ASX 200 Health Care Index has delivered an annualised return of a little over 13%, which is more than double the 5% annualised return on the broader S&P/ASX 200 – so you would have to be foolish not to want a healthcare stock in your portfolio.
And my pick of the healthcare stocks right now is ResMed. It is a global healthcare company that specialises in the treatment of sleep apnoea and other chronic respiratory diseases.
Revenue for the period ending 31 December 2017 was US $601 million, up 13% on the same period in the prior year. Net income for the quarter was impacted by a one-off additional US income tax expense of $119.9 million for unremitted foreign earnings. But non-GAAP income, which is adjusted for this tax and other one-off expenses, was $143.8 million, up 39% on the prior year period.
- National Veterinary Care Ltd (ASX: NVL)
National Veterinary Care is a growing company focussed exclusively on veterinary clinics in Australia and New Zealand. It is smaller than its established rival in the pet care industry Greencross Limited (ASX: GXL), but it has grown impressively over the last 12 months.
Revenue for the first half of FY18 was up 27.6% on 1H17 to $41.6 million, and NPAT increased 27.7% to $3.3 million. The company acquired seven new veterinary clinics in the half ending 31 December 2017, and another four joined the network in January. National Veterinary Care is planning significant additional investment to grow its network, but it's also pleasing to note that organic growth for its existing clinics was 3.11%.
- Challenger Ltd (ASX: CGF)
Challenger is an investment management firm that specialises in selling annuities to retirees. The company's prospects will only improve as Australia's population ages.
In 1H18, Challenger grew its assets under management by 18% to $76.5 billion. It announced a record normalised net profit before tax of $275 million, despite statutory NPAT falling 3% to $195 million. Normalised profit is corrected for one-off expenses and negative investment experience Challenger believes will reverse over the longer term.
Challenger's outlook for 2018 remained bullish, with normalised net profit before tax on track to hit guidance targets of between $545 million and $565 million. After a recent pullback in its share price, I think it offers good value to investors right now.
