Investors with little time on their hands would do well holding a growth-orientated index fund such as iShares S&P 500 ETF (ASX: IVV), which has very low fees.
However, investors looking to retire quicker or richer may want to choose growth shares for their portfolio. These shares have the potential to beat the market over longer periods of time, leading to stronger wealth creation.
But, no share is a buy at any cost. The best time to buy growth shares is when they’re trading at good value.
Here are three growth shares to look at this weekend:
Citadel Group Ltd (ASX: CGL)
This could be the most underrated idea of the three in this article. Citadel is a secure management enterprise software business that has clients in defence, security, health, education and government.
Software is a key part of people becoming more efficient and effective with their jobs. It’s important that software is increasingly secure these days due to cyber threats.
Citadel is winning more and more long-term contracts that provide reliable income and high profit margins.
It could be the next tech share to watch and it’s only trading at 22x FY19’s estimated earnings.
BWX Limited (ASX: BWX)
The natural beauty business has divided opinion between investors with some thinking the last year has been a shambles and others saying the foundations and value is there for the Sukin owner to be a strong performer.
According to industry analysis, the natural beauty market is growing at an even faster pace than the overall beauty market. Sukin, Mineral Fusion and Andalou Naturals are well placed to continue their success in their home countries and expand into other geographies. Asia is also a very tempting market.
If revenue and earnings per share (EPS) can keep growing at double digit rates then it could be cheap trading at under 15x FY19’s estimated earnings.
Challenger Ltd (ASX: CGF)
Challenger is widely known as the market-leading annuity business in Australia. It turns people’s capital into a guaranteed source of income for the length of the annuity, which is sometimes for the rest of their lifetime.
Many experts believe that there’s going to be a large and rising demand for annuities as people look for the safety of fixed income compared to shares and property. Not only is there projected to be 40% more retirees in 10 years’ time, but new government rules will likely entice a higher percentage of people to take up an annuity.
Growing superannuation balances due to the mandatory super contributions, the tax-effectiveness of additional contributions and finally compound interest should all help the size of the annuities get bigger over time.
Challenger is currently trading at under 16x FY19’s estimated earnings.
All three businesses are growing faster than Australia’s economy and have tailwinds that could mean they soundly outperform the market over the next five years. Whilst I’m personally drawn to BWX, CGL may turn out to be the best performer if the market increases the multiple of earnings it trades at closer to the other hot tech shares on the ASX.
Another hot ASX stock that could be one to look at is this fairly unknown growth share that’s now taking its market-leading business to Asia.
You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!
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Motley Fool contributor Tristan Harrison owns shares of BWX Limited and Challenger Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited and Challenger Limited. The Motley Fool Australia owns shares of Citadel Group 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.