As investors in individual shares I think it’s important to stick to our best investment ideas. Think of it this way, is your 40th best idea really worth holding in your portfolio? It’s no problem just investing in a diversified quality index like iShares S&P 500 ETF (ASX: IVV), but when you’re committing time and a larger part of your portfolio to an idea, it needs to be your best idea at a good price. As long as you’re investing in shares that are exposed to different risks then you will probably be getting the diversification you need, even with…
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As investors in individual shares I think it’s important to stick to our best investment ideas. Think of it this way, is your 40th best idea really worth holding in your portfolio?
It’s no problem just investing in a diversified quality index like iShares S&P 500 ETF (ASX: IVV), but when you’re committing time and a larger part of your portfolio to an idea, it needs to be your best idea at a good price.
As long as you’re investing in shares that are exposed to different risks then you will probably be getting the diversification you need, even with a portfolio or just 10 or so businesses.
These are my five favourite growth shares that I’m trying to buy:
Altium Limited (ASX: ALU)
The leading electronic PCB software business has been a tremendous performer over the past five years. I think it’s one of the best ways to get diversification into the increasingly-technological world.
It recently revealed a plan to become the leading PCB software provider in the world over the coming decade.
Whilst it’s still expensive trading at 40x FY19’s estimated earnings, I’m very keen to snap up some shares at under $20, if that happens.
Challenger Ltd (ASX: CGF)
The market-leading annuity business is one of the best ways to play the ageing demographic of Australia theme in my opinion. A growing retiree population wants a guaranteed source of income from their life’s wealth building, which Challenger can provide.
Challenger’s current share price sell-off due to a new CEO could a good time to pick up more shares as it grows from more distribution channels and benefits from supportive government policies.
It’s currently trading at under 15x FY19’s estimated earnings.
Costa Group Holdings Ltd (ASX: CGC)
Costa is Australia’s largest horticultural business, it grows berries, mushrooms, citrus fruit, avocadoes and tomatoes.
There are a variety of trends that should lend to Costa’s long-term growth such as a growing population, changing Asian middle class eating habits and healthier-in-general diets of everyone.
Costa also has a number of growth initiatives including productivity gains, expansion of plantations on three continents and acquisitions.
It’s forecasting low double-digit growth for the next couple of years, which could compound returns nicely. Costa is trading at 21x FY19’s estimated earnings.
InvoCare Limited (ASX: IVC)
The country’s largest funeral operator is facing tough times at the moment with lower-than-expected death volumes due to a thankfully benign flu season.
However, I am encouraged by the substantial investment it is making to improve its funeral home locations to be modern, brighter and offer a place to celebrate someone, not mourn them. Management believe the renovations will lead to long-term earnings per share (EPS) growth of 10%.
InvoCare has very defensive earnings, I think it could be one to own for the ultra-long-term regardless of what the economy does.
It’s currently trading at 23x FY19’s estimated earnings.
REA Group Limited (ASX: REA)
I’ve never been a fan of the idea of buying an investment property, but I do like the idea of owning a piece of a business that generates earnings on almost every property advertised and sold in Australia.
Being the clear market leader with realestate.com.au allows it to increase prices at a good rate with little detrimental effect.
Over the longer-term it could generate additional growth from its investments in leading property sites in the US and Asia.
Its recent price strength has meant I haven’t been able to invest in it, but a share price of around $65 could mean I finally become a shareholder.
It’s currently trading at under 29x FY19’s estimated earnings.
If I stick to my favourite ideas, like the above five, it should lead to market-beating results for my portfolio. Particularly if I only invest at the right entry price. At the moment I think Costa and Challenger are the two most attractively valued.
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Motley Fool contributor Tristan Harrison owns shares of Altium, Challenger Limited, COSTA GRP FPO, and InvoCare Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited and COSTA GRP FPO. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended InvoCare Limited and REA Group Limited. 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.