Peter Lynch, a former fund manager who turned $18 million into $14 billion in 13 years and pushed the investment strategy "invest in what you know" believes that in investing: "If you're good, you're right six times out of ten."
What he means is, you're not going to get every stock pick right, but if you on average get six of ten correct, then you're on your way to being a successful investor. Although it doesn't sound hard, it is.
Finding hundreds of companies and conducting meticulous research and valuations is a daunting task. That's why it takes a whole office to come up with only a few stock ideas every month or two. The market doesn't always offer the best stocks at reasonable prices. So sometimes, no matter how much research you do, you'll be unable to find a true bargain.
However at the end of each year it can be a good time reassess your portfolio weightings and add some stocks to your watch list and/or portfolio. Here are my top five growth stocks for 2014.
#5 ANZ (ASX: ANZ) is possibly the most pricey on my list but holds great long-term value for investors. Although it may not be a standout buy at current prices, if it drops in price I will definitely be adding it to my portfolio. Its investment in Asia and relative under-representation in the Australian mortgage market give it more upside potential than its competitors.
#4 NIB Holdings (ASX: NHF) is one of a number of insurers to have performed well in the past two years but I believe it still has potential for growth in the short to medium term. Morningstar are predicting EPS growth of 20% in FY14 and dividends to increase 10%.
#3 Senex Energy (ASX: SXY) has a 10 year average annual shareholder return of 17.8%, but its next few years could be even more exciting. Senex will benefit from a lower Australian dollar in 2014 and is currently in the process of drilling 30 more wells to increase oil production in coming years. Since June 30, Senex has drilled 13 wells and 11 have been successful. Morningstar predicts EPS to grow by 34% in FY14.
#2 Newsat (ASX: NWT) is a satellite communications company which will look to launch the first of its Jabiru satellites in 2014. Although it trades on an earnings multiple of 81, a successful launch will significantly lift earnings. Its clients are, and will be, governments and multinational corporations who will deliver stable long-term contracts for the company – locking in shareholder wealth.
#1 Collection House (ASX: CLH) is a recession proof business that, surprisingly, trades quite cheap despite the fact the company has a five-year average annual shareholder return of 41.9%. It pays a 4.3% dividend and is forecasted to grow earnings by 9% in FY14.
