Despite the sagging market in September, there are at least two stocks that outperformed the S&P/ASX 200 Index (ASX: XJO) (Index: ^XJO). Aristocrat Leisure Limited and Brambles Limited are both near 52-week highs and I think there is enough business momentum behind them to push them higher.
Aristocrat Leisure Limited (ASX: ALL) is the market-leading electronic gaming machine producer in Australia and has the largest market share in Asia-Pacific. New casino and integrated resort development across Asia will be rising outside of Macau, the "Las Vegas of Asia". If countries like Japan and South Korea change their gambling laws and open new markets, a new wave of casino construction could take off. That could drive Aristocrat's revenues.
The stock pays a 2.6% unfranked yield and is at a price-earnings ratio of 27. Earnings growth is forecast for an average 15% annually over the next two years. The growth potential is there, but I would like the price around $4 – $4.50 to start building a position.
Brambles Limited (ASX: BXB) is expecting FY 2015 underlying net profit to rise 7% – 10%. Its recent acquisitions are projected to keep contributing strongly following a solid performance in FY 2014. In December 2013, it spun off Recall Holdings Limited (ASX: REC), an information management solutions company, so that it could concentrate on its core supply-chain logistics business.
Consensus forecasts call for a 12% average annual increase in earnings in the next two years. Brambles is a leading global organisation that is constantly growing by acquisition. At a 22 PE, I think it probably has a reasonable price range for the expected growth. It is more of a long-term growth story, so it could be a good addition to your portfolio.
Both companies have good catalysts for growth. Investors should be able to see the long-term benefits of owning these market leaders. I believe Aristocrat has more potential, although it is pricey now.
For other stocks that may be smaller with more room to grow, I would suggest a small ASX company that our top analyst, Scott Phillips, recently identified as a cheap but growing stock with a 6% grossed-up dividend yield.
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