To beat the market’s average return you need to jump on opportunities when they present themselves because share prices can quickly recover if other investors also spot that opportunity.
Market volatility may seem scary and make good headlines for newspapers, but they’re a good thing when we want to add to our portfolio.
If I were going to buy four shares today, I’d pick these:
BWX Limited (ASX: BWX)
BWX is Australia’s leading natural beauty company with its popular Sukin brand. The business has made a number of acquisitions over the past year, including two in the USA.
Investors weren’t impressed by BWX’s recent report, which sent the share price tumbling down to around $5. I think this represents a really good opportunity because the company is expected to grow significantly in the US, Canada and the UK over the next few years.
It’s currently trading at 18x FY19’s estimated earnings.
Challenger Ltd (ASX: CGF)
Challenger is Australia’s annuity giant which is experiencing strong growth thanks to Australia’s ageing population, growing superannuation pool and increasing distribution channels.
The annuity king is usually sold down more compared to other stocks because of its huge balance sheet of assets. Interest rate rises are expected to hurt Challenger as well. It’s true that Challenger is facing some short-term headwinds, but I think it has a good long-term future, which is why I’m close to buying more shares.
Challenger is trading at 15x FY19’s estimated earnings.
Zenitas Healthcare Ltd (ASX: ZNT)
Zenitas is a small cap healthcare business which operates in the primary care, allied care and home care segments. I think healthcare is one of the best industries, along with tech shares, due to its defensive and growing earnings because of Australia’s ageing population.
Small caps are affected more during volatile times, Zenitas is down 18.5% since its all-time high at the start of the year, I think this presents an excellent entry price because Zenitas’ organic revenue growth is expected to be at 7.5% to 10% for FY18.
It’s currently trading at around 19x FY18’s estimated earnings.
Naos Emerging Opportunities Company Ltd (ASX: NCC)
Naos Emerging Opportunities is one of the best-performing listed investment companies (LICs) on the ASX. It targets shares that have a market cap below $250 million, which gives it a wide range of opportunities.
The investment team have a long-term 20% per annum return target for its investments, it is very close to achieving this over the past few years.
Naos is currently trading with a trailing grossed-up dividend yield of 7.62%.
I believe that all four shares will beat the market over the next three to five years and all of them are likely to deliver a growing stream of income too. If I had to choose one it would be Zenitas because its organic growth is impressive right now and demand for healthcare is only going to increase over the years.
Another growth stock I’m watching is this top share from the auto industry that I already own in my portfolio.
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Motley Fool contributor Tristan Harrison owns shares of BWX Limited, Challenger Limited, NAOS EMERG FPO, and Zenitas Healthcare Ltd. The Motley Fool Australia owns shares of and has recommended BWX Limited and Challenger Limited. The Motley Fool Australia has recommended Zenitas Healthcare Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.