Wouldn't you love to go back in time and buy up stocks you knew would become huge blue-chip companies like BHP Billiton Limited (ASX: BHP) or Commonwealth Bank of Australia (ASX: CBA)? That would be great, but unfortunately we have to look towards the future.
So what stocks could become blue-chips over the next 10 – 20 years? They should have healthy earnings growth and be financially solid companies. I have three mid-cap stocks that could be good candidates for the future.
1) One of my first picks would be Flight Centre Travel Group Ltd (ASX: FLT). With a market cap of $3.74 billion, it is the market leader in travel reservations in Australia and is expanding overseas in the US, the UK and Asia. Over the past ten years, Flight Centre has given shareholders a total annualised return of 12.6%, which is better than the long-term ASX average return. Corporate travel is also a growing, profitable business for the company. For a mid-cap, the stock offers an attractive 4.1% fully franked yield, so dividend investors would like it, too.
2) Sirtex Medical Limited (ASX: SRX) could be big healthcare stock in the future because the company may be on the verge of opening up a much larger market for its specialised liver cancer treatment in the US. It generates almost 75% of its revenue in the Americas and is already growing earnings in the double digits. This year, upcoming clinical trial results may suggest Sirtex's SIR-Spheres treatment should be used for a much wider group of cancer patients. That could greatly increase the demand for the treatment and grow the business over the next decade.
3) In the financials sector, Magellan Financial Group Ltd (ASX: MFG) has expanded rapidly into a $3.2 billion company. The fund manager specialises in international equities investments, which have played out well over the past five years. During that time, early shareholders have achieved a phenomenal 91.4% annualised total return. The fund manager's client funds under management (FUM) has increased greatly, now standing at around $33.2 billion. Overseas markets are performing better than the ASX, so the outlook is still attractive.
