Tom Richardson | June 21, 2017 | More on: CGFDDRIREMNFMQGNVLREARFF
In Chinese culture the number 8 is regarded as rather lucky and given that financial year 2018 will soon be upon us I thought it might be worthwhile identifying 8 stocks that may perform well over the financial year ahead.
Of course one-year is a short time horizon when it comes to share investing, as in the market time is your friend, but only if you buy good quality companies on reasonable valuations.
In fact two of the commonest mistakes investors make is buying cheap stocks unaware their best days are behind them, or paying too much for fast-growing companies.
As such the best returns are delivered by finding good quality and growing companies on reasonable valuations.
Below I name 8 shares that could perform well in FY 2018. Dicker Data Ltd (ASXL DDR) is the IT hardware distribution business that continues to sign-up new suppliers at healthy rates and appears well run by a stable founder-led management team. The group offers a 7% dividend yield when selling for $2.40 per share and is expecting single-digit profit growth over the course of this financial year. The valuation is also reasonable on around 14x earnings and this stock could deliver good total returns in FY 2018 and beyond. Challenger Ltd(ASX: CGF) is the annuity provider that has a tailwind as more wealthy baby boomers enter retirement and seek out the security that its guaranteed income products offer. The stock also offers a decent yield above 3% and given its growth rates the stock looks reasonable value under $13. National Veterinary Care Ltd(ASX: NVL) is the veterinary practice aggregator with an experienced management team, reasonable valuation and room to grow much further. The stock sells for $2.58 and management expect to pay a maiden dividend in the not-too-distant future. Rural Funds Group(ASX: RFF) is the agricultural investment trust that leases farmland on a long-term basis across a diversified group of farming sectors. It has solid fundamentals, a 5.5% dividend yield, and could deliver market-beating total returns from today’s price of $1.88. MNF Group Ltd(ASX: MNF) is an online voice communications and software specialist mainly servicing business clients, with some business in the residential internet space. This business is also founder-led and although the shares are on the expensive side at $4.46 it is a high-quality business. As such it may offer good returns if it delivers on its overseas growth plans. Macquarie Group Ltd’s(ASX: MQG) asset and debt management businesses may enjoy a decent FY 2018 given the strength of the US economy and signs of a recovery across some major European economies. The bank also offers a trailing 5.2% partly franked dividend yield and is forecasting that its FY 2018 should be “broadly in line” with the prior year. Over the long term this company has the potential to easily outperform the wider ASX’s returns. REA Group Limited(ASX: REA) might be a controversial pick given its big valuation, but property listings have been surging and the bottom of the lending-rate cycle means more properties are likely to come to market over the next 12-18 months. As such REA Group is a prime beneficiary and given management’s track record I would not bet against it outperforming the market even from today’s lofty share price valuations. Iress Group Ltd(ASX: IRE) is a high-quality software company that offers investors defensive recurring revenues and solid long-term growth prospects. Its current valuation means it has some big growth expectations built into its share price of $12.10, although if the stock were to get 10% cheaper I think it’s an excellent business to own for income and steady earnings growth.
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