I think there are some great opportunities in the market now, mostly outside the ASX 100. Many investors are naturally drawn to the 'blue chip' companies based on historic metrics, divided yield, and a belief that blue-chip investments will always be a safe investment.
In my opinion, a portfolio of solely blue-chip shares may be more likely to erode value in the long term – Telstra Corporation Ltd (ASX: TLS) being a prime example. Large businesses in the telco, banking and retail space are especially prone to disruption from newer, more agile entrants.
If I had a handy $5,000 here is where I would invest. I already own some of these shares and the others are on my wish list.
Nearmap Ltd (ASX: NEA) – $1,000
Nearmap Ltd is an aerial imagery technology and location data company providing high-resolution images that are up to 6 times more detailed than satellite imagery. The company has a broad cross section of customers from government, solar, engineering and construction.
What I think is exciting about the company are the competitive advantages it brings to the market, the scalability and the growth opportunities in the US or one day Europe.
Nearmap is growing revenue at an impressive rate. For the first half of FY2018 group annualised contract value grew by 15% to $54.2 million. Net cash inflow from Australian operations was $11.3 million – most of which was used to fund the company's investment in the US. Nearmap is yet to make a profit after tax so there is an additional risk element to this investment. However, I think the additional risk is offset by the growth opportunities in North America and Europe.
Fisher and Paykel Healthcare Corp Ltd (ASX: FPH) – $1,500
The Fisher & Paykel Healthcare share price has had a great run in the past 12 months – up 33% to $14.04.
Fisher & Paykel makes and designs products for use in respiratory care, acute health care and treatment of sleep apnea.
The company is trading on a PE of about 43 which is not cheap but considerably less than another star performer Cochlear Limited (ASX: COH) in the medical device field which trades on a PE of around 50.
For FY 2018 (March 31) revenues increased by 10% to NZ$981 million for a net profit after tax of NZ$190 million.
What excites me about Fisher & Paykel is the growth opportunities in the years ahead with an ageing population in developed countries coupled with a rapidly growing number of respiratory cases in Asia.
Nextdc Ltd (ASX: NXT) – $1,500
Nextdc is an ASX200 listed technology company with large scale investments in data centre outsourcing solutions, connectivity services and infrastructure software.
Nextdc has had an amazing run in the past 12 months – up almost 64% to around $7.27 a share. The company posted a stellar result for the first half of FY18 with revenue up 32% to $77.5 million and underlying EBITA up 41% to $33.6 million.
With the growth of cloud-based SaaS to continue to accelerate and Nextdc opening new data centres in Sydney, Perth and Brisbane in 2018 and 2019, I think that it will continue to outperform the market.
Xero Limited (ASX: XRO) – $1,000
I am a big fan of Xero – even at the current price of $45.01 a share. The reason is that it is shaping up to be the world's best SaaS accounting solution for small to medium businesses.
The growth rate has been exceptional. As at 31 March Xero had 1.4 million subscribers – an increase of 351,000 from 2017. The UK growth has been particularly impressive with 47% subscriber growth to 312,000 and a revenue growth of 60% year on year. The company reported its first ever profit before interest, taxes, depreciation and allowances in FY 2018 of NZ$26 million.
Xero is shaping up to be a truly global player, dominant in its field with numerous growth channels in Australia, Asia, Europe and the Americas.
Foolish takeaway
Diversification is the key to any portfolio and understanding trends. It seems like only yesterday that Domino's Pizza Enterprises Ltd (ASX: DMP) was the darling of the stock market, yet it's now looking a questionable hold due to the rise of Uber eats, issues around fair wages, and rumblings from franchisees.
