In 2014, two major themes for investing will be housing and energy. Both sectors are on the move already, but since we are closer to the beginning of a cyclically growing market, they haven't yet reached their heights.
These four companies have the opportunity to excel and take advantage of these two themes, so you should see how they might fit in your portfolio for 2014.
Woodside Petroleum Limited (ASX: WPL), the $30.9 billion oil and gas producer, operates energy developments like the Pluto, Northwest Shelf and Vincent projects. In 2012, it achieved $2.04 billion in NPAT before abnormals, making its 9-year compound annual earnings growth rate 16.3% for 2003-2012. 2013 half-year net profit margins were 30.8%.
Its offshore Browse project will be one of Australia's next major LNG production provinces, and a globally significant resource. The company has changed its plans for LNG processing by moving to a floating LNG plant rather than land-based facilities, which the company estimates will be much cheaper in production and operation.
Spark Infrastructure Group (ASX: SKI) is an infrastructure fund with investments in electricity and gas distribution and transmission, as well as regulated water and sewerage assets. It has a 6.31% dividend yield and from 2006-2012, NPAT has risen from $25.8 million to $173.8 million.
Total shareholder return for the past five years is an average annual 15.6%, and return on equity was 11.8% for FY 2012.
Lend Lease Group (ASX: LLC) is a major property and infrastructure developer, with 35% of total revenue coming from overseas operations. That means in addition to growing property demand domestically, it will have better business prospects from a general world economic improvement after the GFC.
Since 2003, the company has been growing NPAT before abnormals by an annual compound rate of 8.9%. Exposure to a stronger US$ will benefit the bottom line, as profits are translated back into Aussie dollars for reporting.
Iluka Resources Limited (ASX: ILU) mines mineral sands to produce zircon, rutile and synthetic rutile. It has operations in the US making up about 10% of total revenue. Its largest markets are Asia, North America and Europe.
Since 2010 earnings have improved significantly, from usually under $100 million in NPAT before abnormals to $506.8 million and $378 million in 2011 and 2012 respectively. Rutile, a form of titanium dioxide, is used in producing paint, so with the improving housing markets in Australia, the US and general economic growth of Asia, more of the company's products will be used.
Foolish takeaway
Investing ideas and themes don't have to be complicated. You don't need an advanced finance degree to understand how supply and demand impacts prices, earnings and business growth. Use your natural shopping instincts to see where markets are going, and where you should be positioning yourself for the future.
