Value investing may look like bargain hunting sometimes, but growth always has to be part of the equation. Just buying a stock on the cheap may not be wise if there's a good reason why it is heading down.

We want to buy distressed stocks, not distressed companies. Legendary investor Warren Buffett's style of selective contrarian investing (buying beaten-down stocks of only companies with long-lasting competitive advantages) has helped make him very rich.

In fact, Buffett has said that the term "value investing" is redundant because growth and value are: " Joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous…"

For example, mining giant BHP Billiton Limited (ASX: BHP) is back down under $30 a share, just a few dollars above multi-year lows. It is a market leader, one of the lowest-cost producers of iron ore and most likely will survive this prolonged collapse in iron ore prices.

But could it be a buy now?

Making the case for growth in the near term becomes harder for the Big Australian. Should iron ore slip lower- even down into the $US30s per tonne, then earnings and/or dividends could be constrained. The stock could fall lower and stay low for some time. I don't feel the growth is there to justify identifying a bottom yet, even for the major miners.

I can think of a better proposition than BHP.

That's Greencross Limited (ASX: GXL), the operator of a network of veterinary service practices, as well as two store chains for pet supplies – Petbarn and City Farmers. Altogether, it has 125 clinics and 196 stores across Australia and New Zealand.

After buying the pet supplies store chains, acquisitions have slowed. The company is taking time integrating the new businesses, so organic growth may come at a slower pace. Maybe that's why the stock is back down under $7 a share and hitting new 52-week lows. The market can become bored and distracted.

However, I think this growth story is far from being done. There should be much more room to expand the business nationwide. Even the analysts are forecasting earnings growth of about 20% annually on average for the next several years, so I'm not alone on this.

Trading at 20x earnings and a forward price/earnings ratio of about 15 for financial year 2016, that is pretty good value for the expected growth. Adding Greencross to your portfolio at these lower prices is a good buying opportunity.

The post BHP Billiton Limited or Greencross Limited: Which should you buy? appeared first on The Motley Fool Australia.

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Would you like to live until you're 100? You stand a much better chance of reaching that ripe old age now since average life span estimates are longer than ever.

The problem is, though, your superannuation may not be enough for a comfortable life in retirement.

According to the website for the government's 2015 inter-generational report, current life expectancy at birth for men and women is 91.5 and 93.6 years, respectively. In addition, people nearing retirement age now could make it well into their late 80s or early 90s.

The Australian Financial Review reported the chairman of retirement income at Challenger Limited (ASX: CGF), Jeremy Cooper, stating the general target of $1 million in savings probably will be insufficient.

He added, "The brutal reality is that a fair price for an age pension in today's interest rate environment is around $1 million. For that amount, a couple will get $33,717 of income a year. A comfortable retirement would cost more."

You may have both aged pension benefits and superannuation savings, but covering expenses for another two or three decades after retiring may be a daunting financial task.

That's why share investing over the long-term could fill the gaps and even provide more for a comfortable lifestyle. You should start soon because the long-term potential gains come from many years of compounding interest on your returns.

Having a sizeable proportion of your portfolio made up of quality dividend stocks is wise. Solid dividend-paying companies that steadily grow dividends like the ones below could be a good start.

Westpac Banking Corp (ASX: WBC) currently offers a 4.8% fully franked yield. Over the past five years, dividends are up an average annual 9.4%. As one of the big four banks, Westpac should be around for a long time, so investors may look forward to stable dividend income growth over the coming decades.

Insurance Australia Group Ltd (ASX: IAG) also has a good dividend track record in the past five years. It is the largest general insurance company listed in the ASX. Its recent acquisition of Wesfarmers Ltd's (ASX: WES) insurance underwriting business should increase revenue and help maintain its market leader position. The stock offers a fully franked 6.1% yield- much higher than most term deposit rates.

Perpetual Limited (ASX: PPT) is a fund management company that could become a blue-chip stock in the future as it grows more. Dividends grew in the double digits in financial year 2014 and that is expected to continue over the next few years. The stock yields a healthy 3.6% yield fully franked and is trading at a reasonable share price compared to its forecast double-digit earnings growth.

The post Buy these 3 stocks for a super retirement appeared first on The Motley Fool Australia.

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You should never "get married" to a stock. Still, you don't have to permanently break up, either.

Even the best companies go through funks of low performance or make silly, short-sighted decisions that upset the business.

You shouldn't hang onto some stocks that are a drag on your returns for too long. You can always circle back once the company has started working things out, so let go or at least sell down to a comfortable level. Economic cycles and business turnarounds sometimes take years to reverse directions. In the meantime, you could be missing out on better returns somewhere else.

If it's a temporary situation that could be adjusted, the sag in earnings and share price could be a buying opportunity.

I think it's time to circle back on these three stocks. In recent months, they have been on the rise. They are still down from their highs, but now their outlooks are improving and deserve a second look.

Super Retail Group Ltd (ASX: SUL), the operator of Supercheap Auto, Rebel Sports, BCF and Amart Sports, has risen about 27% in three months, partly due to strong same store sales early in the second half. Lower interest rates are leaving more disposable income for consumers. Retail trade could pick up more in the second half. Cost savings from the company's new distribution centres in Queensland and NSW could help improve margins as well.

Flight Centre Travel Group Ltd (ASX: FLT) is still off from its $55 high about a year ago, but is now back above $40 and up 11% in the last two months. Its overseas business is generating solid growth and foreign denominated earnings should get a boost from the weak Aussie dollar. The stock pays a 3.8% fully franked yield. Analysts forecast better earnings growth after financial year 2015.

Coca-Cola Amatil Ltd (ASX: CCL) made some business changes a number of years ago that saved some costs, yet didn't help its long-term growth. Together with stiffer pricing competition in supermarkets and a general consumer trend moving away from fizzy, sugary soft drinks, the bottler and distributor saw revenue and earnings head down. The stock is now up from its $9.00 lows and rose about 16% since February. The new restructuring program is in its early stages, but picking up some stock now before all the benefits flow through could give you an attractive long-term return.

The post Coca-Cola Amatil Ltd, Flight Centre Travel Group Ltd and Super Retail Group Ltd: On the rise and ready to buy appeared first on The Motley Fool Australia.

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Telstra Corporation Ltd (ASX: TLS) is taking its next major step into healthcare by opening its new e-health product, MyCareManager. The telecommunications leader is leveraging its expertise in communications and mobile networking to provide customers a way to have medical consultation services via online video.

GP and healthcare specialists can discuss health issues with patients, as well as monitor and analyse their conditions via high-speed broadband and cloud data applications.

If you've ever had the experience of meeting with a medical professional, you would greatly appreciate the time saving and convenience this offers. Regularly, people might have to travel one or two hours to a medical centre. Then they would sit in a waiting room a long while for their appointment, all for a consultation that could last only a short 10-15 minutes possibly.

New e-Health division growing quickly

Telstra's e-health division has grown with a number of recent acquisitions. In the first half of financial year 2015, Telstra made five acquisitions and investments in e-health companies in its drive to become the leading e-health service provider in Australia.

Already, the division contributed $31.5 million in income in the first half. Telstra has projected this growing business could be one of its biggest revenue generators in five years. It may even rival the growth and earnings of the telecom giant's network application services (NAS) business for cloud computing and business enterprise solutions.

Recent ventures and acquisitions

In March, Telstra signed a letter of intent with 3D Medical Ltd (ASX: 3DM) to provide medical diagnostic imaging services that allow medical professionals to enable ownership and access to imaging data to improve patient care.

This was followed by Telstra's $40 million acquisition of Dr Foster, a UK-based software developer for medical administration management.

Telstra's future growth plan

The rise in demand for healthcare and the development of faster telecommunications gives Telstra the opportunity to become embedded in nationwide healthcare systems. In Telstra's recent analyst briefing announcement, CEO David Thodey said,"Asia, e-health and software continue to be absolutely key focus areas as we drive out growth, growth for the future, and it is these initiatives that will lay the foundations for growth, we believe, into the next decade."

The growth in e-health and the business expansion into Asia should help maintain Telstra's market leader position in tech and telecommunications into the future. That's why having the stock in your portfolio could generate solid long-term returns. You can benefit from the 4.8% fully franked yield and Telstra's reputation of being a solid dividend payer.

The post Here's why you should own Telstra Corporation Ltd shares appeared first on The Motley Fool Australia.

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Is your portfolio needing some "oomph" in the growth department?  I have three stocks with impressive catalysts for growth that may give solid long-term returns.

Telecommunications and internet service provider M2 Group Ltd (ASX: MTU) has doubled in share price in the last 12 months on the back of recent acquisitions and the expansion of utility payment services. This month the company announced it will acquire New Zealand's third largest broadband and fixed voice service provider Call Plus Group and a related company 2Talk for $245 million. This could help offset slower subscriber growth in Australia. Annual earnings rose strongly in financial year 2014, but analysts forecast growth going forward in the mid to high-single digits.

The stock is trading at the high end of its past price/earnings ratio range. I would hold off for a better entry price since the stock may need to settle down for a while after such a strong run-up in share price.

REA Group Limited (ASX: REA) recently made a big acquisition together with News Corp for the third largest property listing website in the US. The stock has been trading sideways for the last twelve months and could be consolidating for the next leg up. Investors should be looking for updates on how REA Group plans to expand into the US real estate market.

Earnings are expected to rise in the high-double digits. The company has a long record of high growth and this next stage of business in the US could set up REA Group for long-term profit expansion. I would take advantage of the lull in share price movement and add to positions.

Ansell Limited (ASX: ANN) is following up its 2014 acquisition of US-based BarrierSafe Solutions International (which has sales of about $290 million) by buying Microgard, a UK-based chemical protective clothing maker. Ansell is a leading producer of protective wear and gloves used in homes, industries and medical facilities. These two acquisitions will expand its exposure in the company's two major overseas markets.

Similar to M2 Group, the stock has climbed to new highs thanks to strong organic growth and acquisitions, so the stock could take a breather. The company is a quality performer, so owning the stock is a good move over the long term. Still, the stock could come down and give you a cheaper buying price. Wait for that pullback and review company progress before buying.

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Biopharmaceutical CSL Limited (ASX: CSL) has been an Aussie success story for many years. It may even earn the bragging rights of being the first company in the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) to reach a $100 share price. It's about $94 currently and now ahead of Commonwealth Bank of Australia (ASX: CBA), which is around $92.

That won't make it a reason to buy the stock. However, I can give several reasons why the company is worth buying and holding for a long time. For financial strength, earnings growth and business development, it is a leading performer among the big ASX companies.

Balance sheet strength

First, take a look at the strong balance sheet. Its cash position rose to $1 billion as of December 2014, up from $608 million. It has taken on more long-term debt recently, yet the current level of $2.3 billion is less than 2 times more than its financial year 2014 earnings of $1.37 billion. With its cash and earnings capability, the company should have no problem with managing and paying its debt, making it financially rock-solid.

Earnings growth and profitability

Annual earnings per share (EPS) growth has been trending up for the past ten years, rising an average annual 21% for a solid performance. Its blood-related medical supplies like albumin and its viral and bacterial disease treatments are in high demand from healthcare providers.

In addition, these specialised products can command a premium price. Net profits are usually 20% – 24%, so this is no commodity-producer business. That gives the company protective "moats" around its business against competition.

                          CSL Limited     Annual earnings per share  10-year chart

    Data from Morningstar

Growing world-class business

CSL is the largest ASX-listed biopharmaceutical company in Australia, but in the last 5-10 years its overseas business has grown dramatically. About 90% of its revenue is generated internationally, with its single biggest market being the US.

The company now has production facilities in the US, Germany, Switzerland and Australia to meet the rising demand. CSL sees China as the next big market as the highly populated country urbanises over the next 20 years. Already it is expanding its Melbourne production facilities to meet the expected demand.

On top of that, CSL will now become the second largest producer of influenza vaccine in the world with its latest acquisition of the vaccine business of multinational pharma company Novartis.

Together, these three reasons make CSL a strong long-term investment opportunity. Healthcare needs will always rise and specialised products will keep CSL in the black for years to come.

The post Here's why you should stick with your CSL Limited shares appeared first on The Motley Fool Australia.

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Are some people just better investors? Could you improve your own investing by having the right personality?

Legendary investor Warren Buffett, who has amassed a US$72 billion fortune, said, "Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ." A lot of it comes down to temperament rather than academic or mental skills.

What personality traits will help you be a successful investor?

1. Patience– You may have found a good company with tantalising prospects, but it's already too expensive. Impulsive buying may make you buy high and sell low when the hot stock's share price tanks. Waiting for the "fat pitch"- a juicy investment opportunity – could increase your returns because you paid a lot less.
2. Inquisitiveness– Your curious nature drives you to know more. What makes Company A better than Company B? You don't just take things at face value and you are willing to put in the extra effort to find out for yourself.
3. Humility– You don't believe you are incredibly talented and way above others. Also, you realise you could be wrong in your decision making, so you don't become a victim of your own biases and pre-conceived ideas.
4. Integrity– You stick to your plan for investing and don't buy stocks that fail to meet your requirements. Consistent stock picking can help you make consistently good returns.

This combination of traits can help you locate stocks with a particular value that may be downplayed or overlooked by the market.

For example, Cochlear Limited (ASX: COH), the market leader in cochlear implants in the US for the hearing impaired, has had an attractive boost in earnings thanks to a number of new products hitting the market recently.

Its stock is trading at 35 times earnings, which may make some investors say it is too expensive.

Yet forecast earnings growth is an average 38% annually over the next several years. That level of high growth makes the price reasonable and over a longer time period the value of the stock reveals itself.

I think Cochlear could generate steady returns for patient, long-term investors.

The post Do you have the personality traits to help you become a better investor? appeared first on The Motley Fool Australia.

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ASX investors should be like wide-eyed children on Christmas Day when the dividend payments roll in this month. Dividends on average were higher for the first half than a year before.

The S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) over the past year is up 8.84%, which is close to the index's long-term average gain. Yet what would the rate of return be if you included reinvested dividends?

For that, you can use the S&P/ASX 200 Accumulation Index, also known as the S&P/ASX 200 Net Total Return Index (ASX: XNT) (Index: ^AXNT). This shows the accumulated index gain plus the extra return generated from reinvesting all dividends.

Some investors may be focused entirely on chasing share price gains, but don't pay as much mind to the long-term profit potential of dividend income. For example, if you owned 1,000 shares of Insurance Australia Group Ltd (ASX: IAG), you'd get $0.13 in interim dividends for each share, or $130. That's great to get, but it won't make you rich.

Or will it?

If you reinvested that money back into IAG stock consistently over many years, owning those shares, as well as a number of other dividend-paying stocks could create wealth for you.

Take a look at the gain of ASX 200 Total Return Index compared to the ASX 200 Index.

Over the past four years, the ASX 200 Index has risen about 25%, yet the Total Return Index climbed about 48%. The wide gap is from the growth in dividends of the ASX 200 companies and the extra gains from reinvesting those dividends.

ASX 200 Index vs ASX 200 Total Return Index   4-year chart

Source: Google Finance

That's why Foolish investors reinvest as much of their received dividends as possible back into more shares. The power of compounding returns is the secret behind building long-term wealth.

Here are the total shareholder returns (TSR) of several other ASX 200 stocks.

Don't fret over missing out on these gains. All four of these stocks are still attractive choices for future returns as well. CBA will be in business for a long time, paying dividends along the way. SEEK, CSL and TPG Telecom are solid growth stocks with double-digit earnings growth forecast over the next several years.

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Both the property and steel sectors are indicators of flat iron ore demand in the face of a severe supply glut.

More pain coming

Investment bank Goldman Sachs sees only a worse future over the next three years. The Australian Financial Review reported the bank lowered iron ore forecast prices down into the US$40 per tonne range for the near term.

Even Federal Treasurer Joe Hockey is considering using a guide price of US$35 per tonne for the next budget projections, significantly down from the 2014 budget.

So, what's the prognosis? Goldman Sachs estimates the 2015 average iron ore price to be 20% down from its earlier forecast, reaching US$52 per tonne. 2016 and 2017 should be worse, with a forecast average of US$44 and US$40 per tonne, respectively.

Since these are averages, actual prices could fall even lower to levels that could pinch the two biggest iron ore companies BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

At the mercy of the market

As for Fortescue Metals Group Limited (ASX: FMG), that trend would have the third-largest Aussie iron ore producer underwater since its all-in costs are estimated to be in the US$50s.

Likewise, the next lower tier of producers have even less hope if prices don't recover soon. Atlas Iron Limited (ASX: AGO) will be ceasing mining operations to conserve cash. BC Iron Limited (ASX: BCI) continues working, but said this week it wouldn't shy away from suspending operations if it's best for shareholders.

As you can see, if the investment bank's projections turn out to be correct, we're still far from a market bottom. That's why investors shouldn't be bargain hunting in the iron ore sector.

Better stock picks

Easier gains could be achieved in growth industries like telecommunications and healthcare, with companies such as Telstra Corporation Ltd (ASX: TLS) or ResMed Inc (CHESS) (ASX: RMD). Both are expanding overseas and have good long-term prospects, so I would suggest these much more than any iron ore miner.

The post Iron ore prices heading down says Goldman Sachs: Is it time to dump the iron ore miners? appeared first on The Motley Fool Australia.

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The time when big miners drove the ASX higher is past. Investors can't rely on energy stocks as much, either. Some of the big resources stocks in the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) are holding back the index's gains with their poor performance.

However, there is always a bull market somewhere and even within the ASX there are still pockets of growth investors can take advantage of. Just look for the catalysts for change in the market leaders you know already.

Here are four rising stocks to consider for your next portfolio picks.

Coca-Cola Amatil Ltd (ASX: CCL) is slowly working its way back up in share price to where it was before the company announced earnings would slide 15% almost a year ago. Its restructuring plan should create $100 million in cost savings and the company negotiated a big investment in its Indonesian bottling and distribution business with The Coca-Cola Company. The extra funds will help make the turnaround easier.

Harvey Norman Holdings Limited (ASX: HVN) seems to be picking up momentum in sales. The retailer also changed the way it financially supports franchises, leaving the company with more interim earnings. The rising housing market is lifting home furnishing and appliance purchases. Further rate cuts should be a plus to this situation.

Flight Centre Travel Group Ltd (ASX: FLT) may have some domestic weakness if Australians have less money to travel with, but the travel agency's growing business overseas is making strong gains. Combined overseas earnings before interest and tax (EBIT) rose 25% in the first half. Earnings generated in foreign currencies may get a boost when translated back into weaker Aussie dollars, providing some lift under Flight Centre's wings.

Perpetual Limited (ASX: PPT), the fund management company, racked up high double-digit growth in half-year earnings and raised its interim dividend 44%. Net investment inflows for the half year climbed to $1.6 billion, about $1 billion more than a year ago. More funds means Perpetual has more firepower to grow investments and potential returns. The fund manager can also pursue stronger returns in foreign markets with its new international equities funds.

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Will the newly designated CEO of Suncorp Group Ltd (ASX: SUN) attempt to put his own mark on the company and send it on a new direction?

Shareholders can rest assured that the next group CEO, Michael Cameron, will stay the course and fulfil the growth strategy put in place by the current management. In a conference call, Cameron directly told the media and financial community that he will continue the plans already set in place and that he is a conservative leader who strives to be consistent.

Cameron has been on the Suncorp board for three years now, so he intimately knows what still needs to be done. When asked what his number one priority would be at Suncorp, he replied,

"The key thing is to continue the good work that's been done to date and just to maintain stability in the business and keep the momentum going."

Insurance companies restructuring

Among the top insurance companies, restructuring is a common theme recently. QBE Insurance Group Ltd (ASX: QBE) is recovering from the troubles brought on by its failed US businesses by selling related assets. AMP Limited (ASX: AMP) is in the middle of revitalising its wealth management business and cutting costs. This started in early 2014.

Suncorp also needs to adapt its business as more competitors enter the market and consumers switch or even cancel insurance coverage quicker than ever before. The program to shift its computer systems to cloud applications for better customer service and produce cost savings of about $265 million by 2016, isn't complete.

Conservative leadership consistently applied

Designated CEO Cameron will take over in October after the current group CEO Patrick Snowball leaves the post. He has said he is not going to chase acquisitions to drive growth.

He will bring the consistent leadership he applied to the turnaround of GPT Group (ASX: GPT), where he performed as CEO for the past six years. The property group was previously leveraged from excessive acquisitions before the GFC and Cameron steered it out of trouble with conservative decision making.

That experience will be a great benefit to Suncorp. Business has been improving and annual dividends have doubled since 2011, not including the three special dividends the company has paid in the past three years. Suncorp looks to be a safer proposition for dividend investors in the years to come.

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To consistently beat the market return, you have to be consistent yourself. Sometimes investors jump at a stock because it popped up in share price suddenly. There's not much reasoning behind how they choose stocks and that can lead to not just underperformance, but straight up losses.

Having investing discipline and following a set of your own stock picking rules may keep you out of large number of stocks, but it will narrow the pack down to the better performers. Each investor is going to be different in goals and risk tolerance, so know why you chose a stock before investing the first dollar.

Lastly, the share price has to make business sense in purchasing the stock. Most stocks are a bargain at a certain price. Equally, some great companies can rise just too far above their value. That could set you up for frustration or loss if they sell off and you did your buying at the top.

If I had an extra $10,000 for investing, I would choose the stocks below because of their high performance and attractive value.

1) REA Group Limited (ASX: REA) has been a strong earner for quite a number of years. Its realestate.com.au website is the clear market leader in property advertising and search portals. Because property vendors want their homes to look their best in the real estate listings and attract the most potential buyers, REA Group garners a premium value for its services. Other websites like domain.com.au have their strengths, but there is still a wide gap between realestate.com.au and its competitors. Low debt and strong cash flows keep REA Group in the lead.

2) Domino's Pizza Enterprises Ltd (ASX: DMP) is now the world's largest franchisee group of the Domino's Pizza brand with over 600 stores in Australia and growing markets in Japan and Europe. Earnings growth is usually above 20% annually. Takeaway pizza can be considered a defensive business because even in weak economies, people still eat pizza. The Australian pizza market hasn't become saturated yet, so the company has room to grow. The fast food retailer is even devising ways to take market share from restaurant leaders like McDonald's and KFC. This stock is a solid grower for your portfolio.

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Retail kings Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW) continue their fight for hardware market share, but around them other retailers are struggling. General retail trade has been subdued since the mining pullback. Compared to the 9.4% gain of the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) in the past 12 months, Wesfarmers trudged along with a 1.1% share price rise. Woolworths fared worse, with an embarrassing 18.9% fall.

The strong competition between the two has squeezed independent hardware store operators, forcing some to close their doors. Others were bought out by the two retail giants in their drive for market share. The Australian Financial Review reported the number of independent stores fell 12.6% over the past two years.

Part of Woolworths' problem is the ongoing losses generated from its Masters home improvement and hardware stores. Despite racking up double-digit revenue growth in the first half, this division lost about $40 million more than the $71.9 million loss in the same period a year ago.

The fast rollout of new Masters stores has now been slowed to reduce losses until the business model can start turning an operating profit. There are about 34 Masters stores open now, going up against 324 Bunnings Hardware stores operated by Wesfarmers.

As much as Bunnings is successfully holding the market leader position, it only accounts for about 18% of the home improvement market, which is estimated to generate about $45 billion in revenue. Masters comes in at just under 2% of market share. Metcash Limited (ASX: MTS), the operator of the Mitre-10 and True Value hardware store chains, holds less than that.

Woolworths' drive to build up a rival DIY hardware chain over the long term is costing it heavily now. One retail analyst from BAML was recently reported by The Australian as suggesting the retailer get rid of the Big W and Masters store chains and concentrate on its successful supermarket business. If it did, the analyst estimated Woolworths stock would be trading around $67 instead of near the current $30 level.

I think over the long term Woolworths can work out its Masters earnings problems, but in the short term it has to start showing shareholders the rate of loss is shrinking, not expanding. Woolworths' plan to cut about $500 million in costs to make its supermarkets more competitive could be part of that turnaround.

Long-term investors will still want to hold Woolworths shares and even add to positions while the stock is down. Still, I favour Wesfarmers more since the conglomerate is said to have plans to expand into financial services, which may generate another income stream with decent returns.

The post Woolworths Limited or Wesfarmers Ltd: Which should you buy? appeared first on The Motley Fool Australia.

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The Aussie dollar is teetering on the edge, under pressure on two fronts. It could be on its way down to around US69 cents by the end of this year, according to a Morgan Stanley forecast. It did slip briefly to US75.95 cents on Monday from weakening economic data from China, our biggest economic trade partner for exports.

When iron ore and coal were hot commodities, a tick up for the Chinese economy boosted the Aussie, Now, it's the same relationship on the way down. If that wasn't enough, the continuing talk of the US Fed raising interest rates also keeps the Aussie down. When the Fed starts tightening, international currency traders and investors will move to buy US financial instruments. They'll sell Aussies for greenbacks.

Further RBA rate cuts will make the Aussie less attractive as well. A hot housing market is tempering the central bank's decision to reduce its cash target rate, yet the rest of the economy needs lower rates to support growth in retail trade and private services.

The Aussie doesn't have many options out at this point, but fortunately ASX investors do. Australian exporters and companies operating abroad benefit the most from a falling dollar.

I would be following companies like Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL). These healthcare sector leaders have the advantage of being defensive stocks, while at the same they are expanding business in large healthcare markets like the US. Cochlear is forecast for strong earnings growth thanks to a number of new hearing aid and cochlear implant products that came onto the market in 2014. Likewise, CSL has developed and acquired new production facilities to keep up with the high demand for its blood-related medical supplies.

They'll book the majority of their operating earnings overseas in relatively stronger US dollars and euros. On top of regular earnings growth, net profits should get a boost when converted into Aussie dollars. Both are expected to raise earnings in the double digits over the next several years.

With strong-performing stocks like these, it wouldn't be strange if some investors cheered on the Aussie to fall even more. Foolish investors don't get mired down in the market's gloom. They look for angles to get ahead because if one side seems to be losing, another side is gaining. Follow the winners.

The post Here's why you should own CSL Limited and Cochlear Limited as the Aussie dollar falls appeared first on The Motley Fool Australia.

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How are your dividends looking in April? This month is when most of the companies send out dividend payments to shareholders and the recent growth in average dividends has been attractive.

If you're just starting out in investing and don't have a lot of dividend income built up, you will want to devote a certain part of your portfolio and planning to this goal. New investors will be drawn towards high yields, but low-yield stocks that grow dividends at above average rates can be just as profitable.

You should also check a company's dividend payout ratio. That's the percentage of earnings per share (EPS) paid out as dividends. A company will keep a certain proportion of earnings to grow the business, but they usually stick with a regular level of dividend payout as well.

A company with a steady payout ratio and solid earnings growth should have comparatively good dividend growth.

Here are two growth stocks with good track records for dividend growth that could be good additions to your expanding income portfolio.

Private hospital operator Ramsay Health Care Limited (ASX: RHC) has raised annual earnings in the double digits over the past five years. Several overseas acquisitions in France, and business development in its Australian hospital network, have kept earnings growth high. Likewise, since 2009 dividends have more than doubled. Its next major step is expanding into the Chinese healthcare sector, so this growth story can keep on going. The stock pays a 1.4% yield fully franked and dividends are forecast to grow in the high teens for the next several years.

Suncorp Group Ltd (ASX: SUN) is another attractive dividend grower. The insurer and banker operates brands like AAMI, Vero, GIO and Shannons car insurance, which cover a wide variety of life and general insurance. What makes Suncorp especially good for dividend investors is its record for paying special dividends along with its regular dividend increases. It has paid three special dividends in as many years. There could be more to come because Suncorp intends to return surplus capital in excess of its conservative operating targets to shareholders. In the last five years, the insurer has raised dividends on average about 11% annually. The stock currently yields a whopping 6.1% fully franked. Suncorp could be a solid dividend generator for your long-term portfolio.

The post Suncorp Group Ltd and Ramsay Health Care Limited: 2 strong dividend growers appeared first on The Motley Fool Australia.

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Billionaire investor Warren Buffett once said, "Games are won by players who focus on the playing field- not by those whose eyes are glued to the scoreboard."

Investors can be winners in the same way if they pay less attention to the rise and fall of the ASX and concentrate on quality companies that are steadily improving business. Since the beginning of the year, the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) has made a respectable 10.3% gain.

However, I know of two stocks that have more than doubled that increase and should continue growing over the next several years. Could they be good fits for your portfolio?

—  Ansell Limited (ASX: ANN)

The protective wear and glove manufacturer had a strong rally over the past 12 months, up about 49%. The combined benefits of acquisitions, organic growth and recent restructuring lead to high-double digit growth in half-year earnings before interest and tax (EBIT), according to the company. Interim earnings per share and dividends rose 16% and 18%, respectively.

In March, Ansell announced yet another acquisition of UK-based Microgard, which specialises in chemical protective clothing. Microgard has production facilities in China and had about US$40 million in sales in 2014. Already a global leader in protective wear, Ansell's breadth of products for industrial uses will expand further with this acquisition. Long-term investors can benefit from having this steady grower and solid dividend payer in their portfolio.

Ansell    1-year stock chart

—  Super Retail Group Ltd (ASX: SUL)

Retailers have slowly picked up sales momentum over the past year and Super Retail Group, the operator of Supercheap Auto, BCF, Rebel Sports and Amart Sports is no exception. Its sports stores have led the way in same store sales, up 6.1% in the first half. Auto accessories and parts followed with a decent rise, but outdoor and leisure equipment lagged.

The company expects its leisure division to improve as it restructures its Ray's Outdoors brand stores and closes its poorly performing FCO (Fishing, Camping, Outdoors) stores. The first part of the second half has seen this division's same store sales expand about 6.5%, so that's a good sign for total group sales to improve.

The stock pays a 3.8% yield fully franked and has recovered from a depressed share price since the start of the year.  I would suggest picking up this stock as the further benefits of lower interest rates and cheaper petrol boost general retail trade.

Super Retail Group   1-year stock chart

Source: Google Finance

The post Super Retail Group Ltd and Ansell Limited: Should you buy? appeared first on The Motley Fool Australia.

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No, this is not some get-rich-quick scheme. It's the investing track record of the legendary Peter Lynch, a former Fidelity Investments fund manager in the US. Being kind of a technophobe like another legendary investor, Warren Buffett, he missed out on investing in big tech names like Microsoft and Apple in the 1980s because he just didn't know how they worked.

Rather, he searched for businesses that were easy to understand and avoided hot stocks with sky-high price-earnings multiples. He made some of his best investments with up-and-coming companies growing at a fast pace. Some of them were perhaps not widely followed by many institutional investors, or they had fallen in share price from some short-term setback.

If Lynch were to visit Australia and look over the list of ASX stocks, what gems might he uncover?

One might be G8 Education Ltd (ASX: GEM), the childcare centre operator that owns more than 437 centres across Australia and in Singapore. Since 2010, it has steadily acquired privately held centres and raised earnings per share four times. From September 2014, the stock has trailed down 33% to $3.71. That's perhaps partly from "taking a breather" after a long share price rally. Another part is concern by the market that the company is growing too fast and acquisitions are getting heavy. This pullback has brought the share price attractively in line with forecast growth. Also, the stock pays a big 5.9% yield fully franked. This strong growth stock with such a high yield makes for a good investing opportunity, so put it on your buy list.

Another impressive stock story is REA Group Limited (ASX:REA). Although tech-related due to its online business, I think Lynch would look past the computers to see the advantages of being the market leader of what boils down to property listings and advertisement on the realestate.com.au website. The stock's high 34 price-earnings ratio could put him off, but after checking REA Group's earnings history and company performance, he'd see strong, steady growth in the high double digits. In addition, he would like the very strong grasp the company has on its industry. Lynch liked monopoly-like businesses that could charge a premium for their services and keep profit margins high. REA Group's price-earnings to growth (PEG) ratio is reasonable at current prices, so I would suggest making this stock a part of your growth portfolio.

The post Invest like a legend and buy REA Group Limited and G8 Education Ltd appeared first on The Motley Fool Australia.

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How many times have you had a stock in your portfolio that doubled or even tripled in share price? "Not enough" might be a common reply. It does happen, though. Those investors fortunate and patient enough to have such stocks can sometimes completely erase the poor returns of several other stocks just with one excellent performer.

Since share prices are mostly driven by earnings growth, a company that annually increases its earnings around 7% could see net profits double in about 10 years. Now if it can raise earnings 15% each year, you have a fast grower that doubles earnings in around five years.

Just one good year of earnings growth isn't enough. Any company could have a one-off good year, but then sink right back down to where it usually is in performance.

But not these stocks below. They have proven themselves with exemplary profit growth over the last five years and are still looking towards double-digit growth in the near future.

Telecommunications company TPG Telecom Ltd (ASX: TPM) is attempting to become number two in mobile phone and broadband service (after industry leader Telstra Corporation Ltd (ASX: TLS)) by putting together an extensive network of telecom infrastructure. It is currently in the midst of a takeover offer for iiNet Limited (ASX: IIN). If successful, it will see its subscription customers greatly increase, especially among NBN high-speed users, and iiNet's network will widen TPG Telecom's infrastructure that much more. Compared to the company's expected growth forecast, current share prices are not that expensive. TPG Telecom could be one solid stock to have in your portfolio.

Ramsay Health Care Limited (ASX: RHC) is another fast grower that could keep growing independently from the general rise or fall of the ASX. It has a stable base of operations as owner of the largest number of private hospitals in Australia. That's a good cash flow generator for its overseas expansion. In financial year 2014, Ramsay Health Care bought a controlling share in one of France's leading private hospital operators and now has become France's number one private hospital operator. Further expansion opportunities in China are opening up recently as the health care provider has agreed to be a joint venture partner in operating five hospitals in China. That could set Ramsay Health Care up for high growth over the next several years at least, so I would suggest having a position in this quality company now.

The post Ramsay Health Care Limited and TPG Telecom Ltd: 2 fast growers to buy now appeared first on The Motley Fool Australia.

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The first of the junior iron ore miners has dropped. After the ASX closed on Friday, Atlas Iron Limited (ASX: AGO) announced it will stop iron ore production and mothball its WA mines. The stock had already halted trading on Tuesday, 7 April, as the company considered its options.

Ceasing mining operations

There aren't too many options for continuing work with iron ore prices now in the US$40s a tonne. In the company's release, it said mining and crushing will cease within 14 days and then all Atlas projects will be put on care and maintenance. Unless iron ore prices return to about US$65-$70 per tonne, it is estimated Atlas wouldn't have a large enough margin.

Iron ore stood at around US$48 per tonne on Friday.

More could follow

Writing about Atlas Iron now saddens me, but commodity market busts are unavoidable. I previously wrote that investors should avoid the junior miners because the iron ore industry is still a falling knife. Other smaller, high-cost producers could follow because they are price-takers and there doesn't seem to be much let-up in the decline of iron ore.

Most of the commodity markets like copper, coal and gold are down as well, which indicates overall world economic strength is still not good. The US stock market is making new highs because of the near-zero interest rates pushing share prices up. That the US Fed is still hesitant about even beginning to raise interest rates tells you the US is economically shaky. Europe is just starting its own quantitative easing and won't be fully back on its feet for some time.

Better investing alternatives

Since I write about companies from an investor's perspective, amongst the gloom I look for opportunities for good returns. The internationally expanding biopharmaceutical CSL Limited (ASX: CSL) is one for long-term growth. Earnings are expected to rise an average 20% annually over the next several years and dividends should also increase steadily.

Another promising stock is Greencross Limited (ASX: GXL), the company with an expanding network of veterinary practices, as well as Petbarn and City Farmer pet supplies stores. Like a growing restaurant chain, investors getting in at the early stages of store expansion have better chances of very pleasing returns.

The post Will other junior iron ore miners follow Atlas Iron Limited out of business? appeared first on The Motley Fool Australia.

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Junior miners that sprung up during iron ore market highs have some real troubles on their hands.

Major iron ore miners have the luxury of looking past the current market downturn as just another mining bust to live through. The mining industry is playing out a textbook scenario of attrition. Even closing a mine costs a lot of money, so companies like Atlas Iron Limited (ASX: AGO), Arrium Ltd (ASX: ARI) and BC Iron Limited (ASX: BCI) are forced to produce as much as possible, despite earnings taking a beating.

Three more years of pain

Investment bank Goldman Sachs didn't paint a pretty picture by saying the market will drive more high-cost miners out of business over the next three years, according to The Australian Financial Review. Up until now, there have been more Chinese iron ore miners leaving the market, but they will be getting some relief from the Chinese government's recent decision to cut taxes on production for domestic miners.

The fact that China buys almost 70% of seabourne iron ore exports means there aren't many other importers that can take up the slack. India may grow into such a consumer nation as it modernises, but that won't happen suddenly.

Mergers & Acquisitions in oil and iron ore

Interestingly, we are seeing more M&A activity in the oil and gas sector recently, brought on by the swift and deep oil price plunge. Apache Corporation's quick exit from Australian LNG and Royal Dutch Shell's sudden takeover offer for BG Group (which will make it the majority owner and operator of the QCLNG project in Queensland) is in contrast to the drawn-out iron ore drama.

Iron ore M&A hasn't happened much yet, so it makes me think that the big miners BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) consider iron ore still a "falling knife" that hasn't hit the true bottom yet. Fortescue Metals Group Limited (ASX: FMG) management said it would consider buy-ins to some of its mines for outside investments. Nobody is rushing in just yet.

Track record of survival needed

I have written this before recently, but Foolish investors should stay clear of the iron ore juniors because you just don't know which could actually survive a prolonged downturn. They don't have the track record of BHP and Rio Tinto. Now is not the time to test their longevity or profitability.

The post Don't catch falling knives: Junior iron ore miners may get squeezed more appeared first on The Motley Fool Australia.

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