Читать книгу Top Stocks 2016 - Roth Martin - Страница 3

Our stock market is volatile, the currency is weak and there is talk that the country might fall into recession. Yet this new edition of Top Stocks presents as many exciting companies as I have seen in 22 years of compiling this book.

Most of these are smaller or medium-sized companies. Some will be unfamiliar to investors. Yet all meet the stringent Top Stocks criteria, including solid profits and moderate debt levels.

Here are just five examples, all companies that have never previously appeared in the book. (Interestingly, four are based in Brisbane.)

• Corporate Travel Management. A series of offshore acquisitions – with more possible – have transformed this company into a global business. Profits rose 66 per cent in June 2015, and the company's forecast is for a further 25 per cent to 30 per cent increase in the June 2016 year.

• ERM Power. In a highly regulated industry, electricity provider ERM is realising solid growth, thanks to an emphasis on reliability and service to its corporate customers. It has moved into the US market and believes it can replicate its success there.

• GBST Holdings. Surging British demand for the company's financial software saw profits up 52 per cent, and growth continues.

• Magellan Financial Group. Funds management operation Magellan has achieved renown for its international funds, at a time when demand for these is growing among Australian investors. Profits more than doubled in the June 2015 year.

• Vita Group. This specialist retailer of mobile phones and computers is enjoying excellent growth as it opens new stores and diversifies into fresh areas of business. Profits more than doubled in June 2015.

As noted above, this is the 22nd edition of Top Stocks, and guiding investors towards value stocks has been one of the paramount aims of the book from the very first edition. Indeed, one of the rationales for the book has always been to highlight the truth that Australia boasts many excellent companies that enjoy high profits – and growing profits – regardless of the direction of the markets.

Despite the title, Top Stocks is actually a book about companies. So right from the start it has been an attempt to help investors find the best public companies in Australia, using strict criteria.

These criteria are explained fully later. But, in essence, all companies in the book must have been publicly listed for at least five years and must have been making a profit and paying a dividend for each of those five years. They must also meet tough benchmarks of profitability and debt levels. It is completely objective. My own personal views count for nothing. In addition, share prices have never been relevant.

Of the 94 companies in Top Stocks 2016 – two fewer than in last year's edition – fully 64 reported higher profits in the latest financial year (June 2015 for most of them), while 60 achieved higher earnings per share and 63 paid a higher dividend.

Of the 64 companies reporting higher profits, 46 achieved double-digit profit growth, with four companies reporting a triple-digit increase. In addition, 51 of them saw profits growing at a faster rate than revenues, implying that their profit margins were expanding.

Although, as noted, share prices are not relevant for selection to Top Stocks, 57 of the 94 companies in the book have provided investor returns – share price appreciation plus dividends – of an average of at least 10 per cent per year over five years. In fact, of these 57 companies, more than half have provided a return of over 20 per cent.

And 11 of them – Corporate Travel Management, Greencross, Domino's Pizza, G8 Education, GBST Holdings, Integrated Research, Magellan Financial, Objective Corporation, Sirtex Medical, TPG and Vita Group – have provided an annual average return over five years of more than 40 per cent.

High dividend yields

With interest rates low, many investors have been seeking stocks offering high dividend yields. These are still a worthy target, as they should offer a degree of protection if the market is falling.

Two years ago, when investors were looking for smaller companies with high dividend yields, I included a list of smaller companies (having a market capitalisation of below $450 million) with a dividend yield of at least 5 per cent.

There were 22 such companies in Top Stocks 2014. Repeating the exercise last year produced 15 stocks. In this latest edition of the book there are 16.

Dividend yield: small companies