NZX Growth Shares

[Lewylewylewy]

Hi folks,

Thought I'd do a new thread so we can keep track of, and share growth shares that we're aware of. In my personal list are:

FPH (Trump risk, but I'm not that worried. I spoke to the company and there are contingencies. I suspect that contingencies will be less profitable)
RBD (Not sure what the growth plans are for next year. I need to do more research, something I'd be expediting if the divie wasn't so good - this keeps me from a profit taking exit)
SUM (Concerns of property industry make me worried about a drop in price, which wouldn't be a problem if the divie was better)

[trader_jackson]

Agree with the above... in my list, which is possibly slightly different as more for "growth + dividend companies" (ie double digit growth + a dividend that isn't peanuts and preferably with DRP)
HBL (good niche bank expanding well, and in some cases going where the bigger banks can't be bothered going)
ARV (written off by most, but a great smaller operator with good management and good locations across the nation)
OCA (similar to ARV, hoping they can follow ARV's lead and get a good development track record, mostly in North Island, with quality locations & villages)
TRA (growing well, FY18 to be particularly interesting)

Disclosure: Holding ARV & OCA, holding TNR bonds

[Leftfield]

If you are looking beyond Dividend earning stocks what about ATM and XRO? (up 64% and 29% this yr respectively.... Plus ATM a possible Div in FY18)

Disc; Hold both.

[Oliver Mander]

Some good picks above, but I would say that wouldn't I...
I also would consider both MPG and MFT to be growth stocks; more in line with trader jackson in that they also pay a good dividend. I know MFT might not be considered a "classic" growth story if you just look at this year, but has a good track record for it plus plenty more potential to come from growing EU operations and sorting their s*** out in US.

Disc; hold both + FPH + ATM (+ HBL, ARV)
have been quietly purring away...

[Lewylewylewy]

What growth plans do ATM have in the pipeline? Or is it just successful BAU?

[iceman]

THL & PPH come to mind

[Oliver Mander]

yip, good point iceman. Have some THL as well, good divvy too.
Given the plethora of shares we're discussing here, is it a fair assumption to make that the NZX as a market could be considered a 'growth' market? Or is that a bridge too far...?

[trader_jackson]

yip, good point iceman. Have some THL as well, good divvy too.
Given the plethora of shares we're discussing here, is it a fair assumption to make that the NZX as a market could be considered a 'growth' market? Or is that a bridge too far...?

The NZX as a whole is definitely not a growth oriented market!
But there are some high quality growth companies listed that is for sure... certainly not enough of them in my view.
(datacom comes to mind...)

[hamish]

Hi folks,

Thought I'd do a new thread so we can keep track of, and share growth shares that we're aware of. In my personal list are:

FPH (Trump risk, but I'm not that worried. I spoke to the company and there are contingencies. I suspect that contingencies will be less profitable)
RBD (Not sure what the growth plans are for next year. I need to do more research, something I'd be expediting if the divie wasn't so good - this keeps me from a profit taking exit)
SUM (Concerns of property industry make me worried about a drop in price, which wouldn't be a problem if the divie was better)

For Growth - I'm liking the look of CBL. Expanding astutely into new markets. Accretive plays. Their product portfolio is lower risk than the General Insurers. Management seems to really know and understand their business model SWOT

[iceman]

For Growth - I'm liking the look of CBL. Expanding astutely into new markets. Accretive plays. Their product portfolio is lower risk than the General Insurers. Management seems to really know and understand their business model SWOT

Sounds like you´re describing my biggest holding HBL, where I expect ongoing double digit growth for a few more years through capital gain and steadily increasing dividends

[Major von Tempsky]

You've missed GFL, Geneva Finance Ltd. Low cost model, just 2 branches and very computerised, explosive recent growth in profit growth, dividends and share price, lotsa good ideas, check the News function by code in the Direct Broking site.

[Lola]

You've missed GFL, Geneva Finance Ltd. Low cost model, just 2 branches and very computerised, explosive recent growth in profit growth, dividends and share price, lotsa good ideas, check the News function by code in the Direct Broking site.

SML gotta be considered too

[000831]

ARV and THL

[Absolute144]

SML If it breaks 4.05 I reckon it'll go to 4.20. $4 may become support. It'll should be good with westpac out.

[janner]

SML If it breaks 4.05 I reckon it'll go to 4.20. $4 may become support. It'll should be good with westpac out.

SML is a good stock IMHO.. and may well become a good growth stock..

However your expectation of 5 % is not what I would expect from a " Growth Stock ".

[Absolute144]

SML is a good stock IMHO.. and may well become a good growth stock..

However your expectation of 5 % is not what I would expect from a " Growth Stock ".

This is my near term expectation. around 20% by years end, ($4.80 ish) unless they do another capital raise.

[iceman]

SML is a good stock IMHO.. and may well become a good growth stock..

However your expectation of 5 % is not what I would expect from a " Growth Stock ".

That´s a very good point. People probably have very different views on what is a "growth" stock. My rule of thumb is 25% PA in EPS growth and dividend yield combined

[Valuegrowth]

Growth companies generate significant positive cash flows or earnings, which increase at faster rates than the overall economy. There are value companies with growth potential as well. Can we find companies generating cash flow in a significant way?

http://www.investopedia.com/university/stockpicking/stockpicking4.asp

[Oliver Mander]

The NZX as a whole is definitely not a growth oriented market!
But there are some high quality growth companies listed that is for sure... certainly not enough of them in my view.
(datacom comes to mind...)

Trader J's comment piqued my interest a bit...I realise there's a whole perception around the performance of NZ markets versus our overseas friends. And like TJ, would LOVE to see some more growth companies come to market. So...the cat dragged his claws through the annals of history to come up with the following two charts. There's a couple of assumptions here;
- firstly, that when we are talking about 'growth', we investors are not bothered how that growth is returned to us - be it in the form of dividends or share price growth.
- secondly, this excludes any tax implication. (In NZ, of course, we aim to see growth in dividends in the long term...we are not investing for the sole purpose of a capital return - but that isn't allowed for in this analysis)
- thirdly, this is a commentary on the general characteristics of markets - not companies in them

This chart compares the performance of various "Total Return" indices around the world since Jan 1st 2012. Its not the classic FTSE or Nikkei quote, because those only account for share price movements, not dividends. Interestingly, Germany's DAX is the only major one quoting on a 'total return' basis. S&P500 makes allowance for special dividends, but not 'ordinary' dividends. So the indices I have used as proxies for market are NZ50, SP500TR (US S&P), PX1GR (Paris), GDAXI (Frankfurt), UKX.T (London), AXNT (Australia) and N225 TR (Japan).

8884

The main conclusion from this is that the NZX is at least as good a place to invest for growth as any other major world market - with the notable exception of Japan. Of course, there may be some other specific markets/countries that may beat it, so it might be interesting to extend this across other markets.

Of course, this is not the whole story though. As NZ'ers, lets assume that most of us like our returns (ultimately) in NZ$. So what happens if you allow for the impact of the mighty Kiwi on the market performance...?

8885

That changes things somewhat...as you can see, the Nikkei suddenly looks a bit ordinary, while the AU market joins the UK at the bottom of the pack. At the top of the pack, the NZX and US S&P are pretty close together.

Of course, this is all subject to timing - when we choose to invest. This analysis runs a 5 year timeframe...perhaps the picture looks different on shorter timeframes. The other conclusion to draw is that each market has its share of "growth" companies and legacy-type lumbering giants that hold back overall market growth...but NZ is no worse than any other.

I should say that I DON'T work for NZX or have anything to do with it!!

Thoughts?

[trader_jackson]

Very interesting SylvesterCat, you make some good points.

I, along with many others, would not argue with you regarding total share holder return (which is very different to capital growth only return), the NZX has done very well, relatively to its peers.

The problem (for me) is that it has only done so well (well maybe not only, but one of the key reasons) because NZX 50 companies would rather hand back cash than try to invest it in themselves to grow... look at the power companies (who, collectively, would have a powerful effect on your graph)... many of them have low single digit 'growth' on any measure, but are fantastic at handing back cash... no DRP, no 'real' aim for double digit growth over the long term.

True growth companies have a conservative payout ratio because they believe they can generate higher returns if the money was invested in them, rather than handing it back to shareholders.... F&P Healthcare, Ryman... just to name a few (of a few).

Comparing it on a total return basis doesn't really show that the NZX is a growth market, it just shows we are good at squeezing a lemon (and giving back to shareholders the juice it provides), but don't know how to produce alot more lemons... share prices (ie capital value) today is about the same as before 1987 crash, it is just unfortunate that a fair few of our top NZ companies have no real ambition for growth, and those with growth ambition would rather either not be listed, list on the asx, or be sold off.
(and those that are listed and low growth: hand back cash in the form of share buy backs, special dividends or ordinary dividends etc)

[Oliver Mander]

Thanks TJ. I might re-run the analysis on a 'price-index' only basis - that would align a little with what you're saying.

But I would also say that there's no difference (to an investor) between dividends and share price increase - its all return, and we can choose whether to reinvest (I always do). There might be some brokerage to pay on the way.

Also, every market has its share of "dividend payers" versus "retainers"...for example, BP plc in the FTSE is probably the equivalent of our Meridian for example. Share price has gone nowhere for 10 years, but the dividend remains strong. I think that's the point I was trying to make - it comes down to individual companies, and the ability to choose capital growth companies if that's what you ant to do. As an overall market, NZ dividend yield of around 3.5% is very close the FTSE yield or the ASX yield...so it would tend to say that there's no real difference between those markets in terms of whether they can be characterised as 'growth'.

I like the lemon analogy by the way - and fundamentally agree with your philosophy. Would much prefer it that a company keeps the cash and grows, assuming it has good opportunities to do so. I invest in companies and their stories - not indexes :-)!

[iceman]

Growth companies generate significant positive cash flows or earnings, which increase at faster rates than the overall economy. There are value companies with growth potential as well. Can we find companies generating cash flow in a significant way?

http://www.investopedia.com/university/stockpicking/stockpicking4.asp

But most or all growth companies do not generate significant positive cahsflows until they mature somewhat. My best investments in growth companies have been investing in them before they become cashflow positive (DIL & ATM for example) but obviously they are also a lot riskier that early in their development.

[Lewylewylewy]

For me a growth company is one that has plans for growth... Which oddly enough doesn't include all companies.

I listed RBD because they're expanding abroad, SUM because they're developing additional properties and FPH because they're growing sales.

[hardt]

Abano - Solid double digit growth, low risk industry with a good yield n DRP, what's not to love?

A2Milk - consistent outperformance, market share in China has skyrocketed and so have their margins, doesn't look like they are slowing down. The best is yet to come.