August's profit reporting season has given investors an insight as to how the majority of listed companies on the ASX are tracking with many people probably wondering where might be the best place to invest any spare cash now.
When investing it's important to look to spread the risk across multiple sectors and focus on the long term by buying companies with clear potential to consistently grow earnings over timeframes of greater than five years.
At the end of the day share prices will always follow earnings and dividends higher or lower as good-quality stocks are valued according to their potential to deliver cash flow streams to investors.
Below I have five companies I am confident can continue to grow earnings over a five to ten-year horizon. If I'm right I expect they will continue to deliver strong total returns to investors in terms of dividends and capital growth. Moreover, all of them still trade on reasonable valuations relative to their growth prospects in my opinion.
CSL Limited (ASX: CSL) is the blood plasma, vaccine and hospital treatments business that sells market-leading products that enjoy strong underlying demand thanks to the continual pressure for greater public spending in the global healthcare sector. Today the shares sell for $108.70, which looks a reasonable entry point for long-term investors. I would allocate $10,000.
Bellamy's Australia Ltd (ASX: BAL) is the fast-growing organic infant formula maker that possesses a strong brand and large consumer markets to sell into across China and South East Asia. It's growth potential is no secret, but given the opportunities ahead for this business I would allocate $5,000 to shares that sell for $14.50 this morning.
Macquarie Group Ltd (ASX: MQG) offers investors a trailing 5.3% yield an attractive valuation on around 13x trailing earnings and the potential to steadily grow earnings over the next decade. The bank is now largely an asset manager which provides greater earnings stability, while its reputation for innovation is well deserved and explains why it has consistently thumped the returns of the S&P/ASX 200 Index. Management and staff tend to stay over the long term with shareholder returns a key focus of the business. Given the valuation, I would allocate $15,000.
Westfield Corp Ltd (ASX: WFD) is an expertly managed shopping centre business that like CSL and Macquarie offers substantial overseas exposure to the strong US economy and US dollar in particular. It also trades on a reasonable valuation with a handy yield in the region of 3.4%. I expect it will deliver consistent earnings growth over the long term and would allocate $15,000.
MNF Group Ltd (ASX: MNF) is a fast-growing small cap that would give investors some exposure to the online and digital sector. It is also founder led and has a strong track record of double-digit earnings and dividend growth. Given the company's high quality the shares don't come cheap on around 30x trailing earnings, however, the company's market value of just $277 million means it has plenty of opportunity to grow significantly over the long term. Given my faith in management I would allocate $5,000 of my capital, despite the high valuation of the shares that sell for $4.15 this morning.
That portfolio should deliver a nice balance of yield and growth with some strong overseas exposure and well regarded management teams.
However, there are plenty of other ways to grow your wealth over time….
