Most of the attention and headlines are focused on the large blue chips. In my experience, real wealth, the wealth that lasts a lifetime, comes from well-selected mid-cap shares. Shares with a lot of growth still in them. Investors in Amazon.com, Inc. (NASDAQ: AMZN) made more if they bought in 2012 than if they bought in 2018.
This is, of course, fraught with danger. Mid-caps are inherently more volatile. They rise and fall quickly. The dynamics of a growth share also make them very hard to value.
Real wealth builders
The fintech sector has come out of nowhere with companies like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) dominating the sector. Nevertheless, there is a collection of 4 roaring mid-caps that have also exploded into the scene over the past 4 years.
Of these, I like Zip Co Ltd (ASX: Z1P). The Zip Co share price grew by 69.9% over May alone. The company has a market cap of $1.46 billion. This makes it a little more than 8 times the size of its buy-now-pay-later rival, Afterpay. Like most growth shares, Zip Co has negative earnings. But it has an average annual sales growth of 71.6%. In my view, this company clearly has a long way to grow and has a deeper consumer credit offering than others in the sector.
I think Kogan.com Ltd (ASX: KGN) is another of the real wealth-building shares on the ASX today. In the few years since its initial public offering, the company has delivered some really outstanding results. In May the Kogan share price rose by 44.34%.
The company's share price is currently trading at a price to earnings ratio (P/E) of 57.91. This is way above its P/E 3-year average. Still, I think the market has got it right. Kogan is a growth share. It is founder-led and I believe it will flourish should Amazon ever really ramp up in Australia.
The Reliance Worldwide Corporation Ltd (ASX: RWC) share price has leapt 21% during May. I think this is another great company for building real wealth. Reliance manufactures and sells fittings and technological solutions in the plumbing space. It has brands and branches in the UK, the USA and Australia. This provides access to the mighty US residential housing market. Interestingly, over the past 4 years since its initial public offering, the company has achieved an average 46.5% growth in annual sales.
