The markets might be volatile right now, but if I had a spare $50,000 to invest, I would be happy to put that money to work right about now.
Of course, I would want to spread that $50,000 over several stocks and over different sectors. Accordingly, here is how I would split up that $50,000 over five stocks:
1. Ainsworth Game Technology Limited (ASX: AGI) – $7,500 – Ainsworth's FY15 profits were better than expected with earnings per share increasing by 16% mainly as a result of foreign currency gains. Sales revenue growth was flat, but the company is expecting a much stronger FY16 as its pipeline of new machines and games drive increased sales domestically and abroad. With the shares trading at around 13x FY15 earnings, there could be some good gains to be made if Ainsworth delivers in FY16.
2. Slater & Gordon Limited (ASX: SGH) – $5,000 – Of all the stocks I have listed, Slater & Gordon carries by far the highest risk. At current levels, however, I would be happy to buy a parcel of shares with the risk-reward ratio looking quite attractive right now. Although there is still a lot of uncertainty regarding the ASIC investigation and how well its major UK acquisition will perform, I think the market has probably over-sold the shares and is now just waiting on some further direction. Once this occurs, I think the shares will easily head back towards $4 and new investors will be rewarded handsomely.
3. QBE Insurance Group Ltd (ASX: QBE) – $12,500 – QBE has a number of factors outside of its control that can impact its earnings from year to year. From natural disasters to US interest rate movements, these factors make it difficult to confidently forecast what earnings will look like in one year let alone in five years. With that in mind, however, I think QBE is showing good signs of earnings momentum after several years of disappointing results. The company has also decided to lift its dividend payout ratio to 65% of cash profits which could see a dividend yield of around 4% at current prices. With the full benefits of its restructuring program to be realised over the next couple of years, QBE could easily surprise to the upside if earnings momentum continues.
4. CSL Limited (ASX: CSL) – $15,000 – The share price of CSL has declined in line with the rest of the market over the past few months, but I believe this has presented a wonderful buying opportunity for long-term investors. CSL is a global leader in vaccines and specialised blood treatments with a strong pipeline of new treatments set to be launched over the next couple of years. Although earnings growth is expected to be below average for the year ahead, the strong pipeline of new products means growth will increase substantially once these products are approved. The shares are still not 'cheap' compared to the broader market, trading at 22x FY15 earnings, but CSL's proven track record and exceptional growth potential means investors could do far worse than consider an investment in this healthcare leader.
5. M2 Group Ltd (ASX: MTU)- $10,000 – M2 Group would have to be my preferred stock in the telecommunications sector for a number of reasons. Firstly, the company has proven itself over a long period of time as a company that can grow earnings organically and through acquisition. In FY15, the company increased underlying earnings per share by 16% and more importantly for investors, the positive earnings momentum is forecast to continue in FY16, with management guiding for revenue growth of around 25% and NPAT growth of between 30%-35%. I think the shares are currently undervalued, trading on a forward price-to-earnings ratio of around 13 and offering a dividend yield of more than 4%.
Looking for more stocks to add to your portfolio?
