With the ASX dropping off from its recent highs, a number of shares have fallen enough that they now represent an opportunity to the acquisitive investor.
As nervousness around China's future increasingly creates uncertainty in the markets, investors should hedge their position by a) holding cash, and b) buying shares with strong prospects for sustained growth.
Shares with reliable growth aren't immune to price falls, but their continued earnings increases make them that much more appealing to the rest of the market in a downturn, thus offering some level of price support.
If you can manage to buy such shares at very low prices, so much the better.
Here's my take on the three best growth shares I'd buy right now with $5,000:
Coca-Cola Amatil Ltd (ASX: CCL) – last traded at $9.06, yields 5.4%, would invest $2,000
Coca-Cola's market beat-up was well publicised last year when it dropped over 25% after falling profits and a restructure of subsidiary SPC Ardmona.
Stiff competition combined with difficulties in Indonesia and Ardmona-associated restructuring costs were blamed for the beverage bottler's staggering 82.5% decline in profits in FY2014.
While difficult market conditions are expected to continue in the near term, Coca-Cola is a buy for several reasons.
Firstly an expected restructure is targeting $100 million in cost savings per year, which is a huge sum considering Coca-Cola earned only $80 million profit in 2014.
Secondly the business' defensive and pervasive nature underpins a considerable portion of its earnings despite market downturns and increasing consumer health consciousness.
Thirdly, I think it is highly unlikely that Coca-Cola's dividend will fall below 5% of its share price, so investors can sit pretty on a cheap, defensive income stock until cost savings and market improvements flow through to profits.
Ainsworth Game Technology Limited (ASX: AGI) – last traded at $3, yields 3.4%, would invest $1,000
Like Coca-Cola, Ainsworth Game Technology is trading within inches of its lowest point in 52-weeks, and it represents a considerable bargain at these prices.
Five-year compound annual revenue growth rates (CAGR) of 34% are likely to continue in future periods as a weakening Aussie dollar improves overseas earnings and Ainsworth transitions into untapped markets in South America and elsewhere.
Although Ainsworth is not as defensive a stock as Coca-Cola, it has been highly effective at competing with much larger companies like Aristocrat Leisure Limited (ASX: ALL) and growing its market share both domestically and internationally.
Its dividend is not stellar as most capital is reinvested in the business, however this is driving impressive growth metrics and investors should gain faster capital growth than the other two companies, with the possibility of a transition towards greater dividend payments in the future.
Collection House Limited (ASX: CLH) – last traded at $2.06, yields 4%, would invest $2,000
A small-cap debt collection business, Collection House buys debt from a number of customers for a discount and uses its highly trained staff to then collect those debts.
The results can stand on their own merit, with earnings growing in the ballpark of 20% every year for the past five years.
Given super-low interest rates at the moment, it's not hard to forecast an increase in bad debts, which gives Collection House a very visible avenue for growth for at least the next 3 to 5 years.
Better yet the company has announced plans to expand its Australian headquarters by adding another 100 staff which provides the footing for an increase in collection operations.
Despite paying the middle dividend of the three companies in this article, Collection House's future growth prospects are nearly as strong as Ainsworth's and it's one to watch for future years.
In fact Collection House has all of the hallmarks of a classic growth stock, and despite its small-cap nature is eminently suitable for investors looking to grow their wealth over the long term.
A strong focus on growth stocks is particularly important for young to middle-aged investors, but should be only one facet of your investment strategy.
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