Many senior analysts and financial commentators are expecting a year of positive consolidation on the Australian market. That is, many are expecting the market to grow but not as rapidly as it did in 2013.
One reason for their contention may be the rapid rise of popular blue-chip stocks over the past year, making it harder for them to grow at the same pace in coming months. Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Wesfarmers Ltd (ASX: WES) and Telstra Corporation Ltd (ASX: TLS) each outperformed the index in 2013.
In 2014, it'll be up to investors to find the next round of growth in stocks lower down the index. Although some may not be included in the S&P/ASX 200 Index (ASX: XJO) (^AXJO), there are many which are still top quality investments. They may be smaller but boast healthy balance sheets and experienced management, making them better alternatives than the 'usual' suspects on the market.
Today, Collection House Limited (ASX: CLH) announced profit growth of 16.2% for the first half of 2013 to $9.4 million. Operating in the debt recovery sector, it has a reputation for growing dividends and earnings per share. It has a healthy debt position and recently formed agreements with Westpac and CBA. It pays a forecast dividend of 4.2% fully franked.
Australia's veterinary services sector is unconsolidated but potentially very lucrative. Greencross Limited (ASX: GXL) is a veterinary services provider who, on Monday, recorded revenue growth of 24% and NPAT growth of 47% for the half year to December 31. It also confirmed its previous guidance for FY14. Following the successful merger with Mammoth, it controls around 5% of the Australian market but intends to grow its market share to 20%. It yields 1.3% fully franked.
In the gold sector, Northern Star Resources Ltd (ASX: NST) is proving to be a market darling. Following the worst gold price fall in 30 years, miners' share prices fell hard. However, Northern Star managed to use its superior balance sheets and costs to make calculated investments in other gold miners to grow its level of production and reserves. Since 1 January it has climbed 36%. It has a trailing dividend yield of 3.3% fully franked.
Despite a strong pipeline of growth and the potential for a takeover, Senex Energy Ltd (ASX: SXY) trades cheaply. It is an oil and gas company with operations in Australia's highly sought-after Cooper Basin. A recent drilling program continued the miner's impeccable record as it announced a success rate of more than 89%. 17 of 19 oil wells drilled were cased and suspended for future production. Analysts are expecting earnings per share to almost double in the next three years. It currently does not pay a dividend.
Foolish takeaway
Its time investors started looking for growth stocks outside the big names on the market. As confidence increases and investors come to terms with how expensive some blue-chip stocks are, money will gradually flow down to smaller, expanding companies. And the best part is, some of them pay bigger dividends!
