Most of the media attention given to Australian equities is understandably focused on S&P/ASX 200 stocks, and blue chips in particular. However, once you move beyond the banks, big miners and national retailers, there are some real gems to be found at the smaller end of the market. These don't have to be high risk, ultra-speculative gambles either. With a little research it is possible to find smaller firms with sound business models and long growth runways. Collection House Limited (ASX: CLH) is one such company that many investors will not have heard of.

What does the company do?

Collection House is an Australian-based debt collection and receivables management company founded in 1992. It is headquartered in Brisbane, and employs more than 800 staff in offices throughout Australia, New Zealand and the Philippines. The company's full range of services includes:

• Purchased debt ledgers (PDLs) – buying delinquent debt at a discount which it then recovers to generate a profit
• Collection services – assisting businesses with recovery of delinquent debts on a commission basis
• Receivables management – complete outsourcing service for clients
• Legal & insolvency – provision of legal advice on recovery and insolvency related matters
• Credit management training – provides development and training to personnel in the collection industry

With a market capitalisation of $300 million and annual revenue of $107 million (FY14) it is the second biggest company in the local recoveries industry, behind Credit Corp Group Limited (ASX: CCP).

How has it performed?

The management team at Collection House has established an excellent track record when it comes to generating revenue, profit and dividend growth. Revenue has grown at an average rate of 10% per year over the past four years. Over the same period net profit has doubled. The needs of income investors have not been forgotten either – since 2011 dividends have increased by almost 30%.

The company's share price has benefited from this stellar operational performance. Shares in Collection House have outperformed the S&P/ASX 200 over the past 12 months by 21%. Over a five-year timeframe the margin is more heavily in Collection House's favour, beating the index by 155%. This reflects the market's view of both the past performance and future growth prospects of the business.

Current value?

Collection House currently trades on an attractive price-to-earnings (P/E) ratio of 15 with a fully-franked dividend approaching 4%. At current valuations it trades at a slight discount to Credit Corp Group, but with a significantly higher dividend yield. Furthermore, the company's growth prospects for the future remain strong. In recent months it was announced that Collection House has launched a new partnership trust, backed by Balbec Capital LP, which will enable it to participate in larger PDL opportunities and further boost revenues.

Foolish takeaway

In recent years, Collection House has been able to grow profit at a double-digit rate despite an environment of low interest rates and economic conditions that see the big banks reporting bad debts at or near record lows. In the event of an economic downturn, the rate of bade debts will increase, providing a significant tailwind to businesses in the recovery industry. Collection House is well placed to take advantage of such conditions. In the meantime, investors can enjoy a fully-franked dividend yield of just under 4%, which is both generous for a company with such growth prospects and likely to increase in the coming years.

The post Is Collection House Limited the best ASX-listed small cap stock?  appeared first on The Motley Fool Australia.

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The fall in commodity prices has resulted in sharp declines in the currencies of resource and agriculture-dominant economies such as ours. The Australian dollar (AUD) has fallen to US$0.74 from a recent high of over US$0.81 in May. Many prominent analysts and economists are predicting further significant falls. Leading investment firms BlackRock and UBS have forecast that the AUD will drop to US$0.70 by the end of 2015. Additional declines are expected into 2016, with Fairfax Media Limited outlets reporting that Morgan Stanley believes the AUD will slide to US$0.62 in 2016.

This downtrend in the AUD will produce winners and losers. Three companies that I expect to benefit from the declining AUD are Amcor Limited (ASX: AMC), CSL Limited (ASX: CSL) and Computershare Limited (ASX: CPU). Let's examine the case for each.

Amcor Limited is a global packaging company that derives around 95% of its earnings from operations outside of Australia, including 30% from the U.S. Amcor's results are reported in U.S. dollars, so a fall in the AUD can be expected to increase its share price. Another positive factor for Amcor is its healthy dividend yield. Currently standing at 3.5%, Amcor's dividends are forecast to increase at a rate of 12-14% across the next two years.

With the Reserve Bank of Australia (RBA) tipped to reduce interest rates further, I believe that the search for yield will further boost the price of Amcor's stock. Amcor continues to expand overseas, as evidenced by the acquisitions of Souza Cruz (Brazil) and Packaging India Private Limited (India) in recent months. The company is well paced to enjoy above average growth into the future.

CSL Limited is the world's largest supplier of blood products and has a growth record that is second to none. Over the past 10 years it has increased its net profit by more than 20% per annum, justifying the price-to-earnings premium that its share price attracts. CSL is a major player in the growing global healthcare market, with ageing populations in the developed world increasing demand for its products. Given that the company generates the bulk of its revenue overseas, its bottom line is set to improve with further declines in the AUD. CSL's position in a defensive industry with a strong record of growing shareholder returns only adds to its appeal.

Computershare Limited is a leading share registry and investor services firm. In addition to its activities in Australia and New Zealand, Computershare also operates share market registries in:

• Asia
• Africa
• Canada
• Europe
• United Kingdom
• United States

Computershare gives investors exposure to more than 20 countries. The U.S. market alone is responsible for almost 45% of the company's revenues. These offshore earnings streams will be a source of growing income if the AUD continues to fall.

Foolish takeaway

There is no science to forecasting changes in currency values. That said, for most of this year the AUD has hovered around its long-term average of US$0.76. Ongoing weakness in commodity prices, anticipation that the U.S. Federal Reserve will increase interest rates later this year and the expectation of further interest rate reductions by the RBA here at home suggests that the current AUD weakening cycle could continue for some time. Smart investors should make sure that they have exposure to companies with overseas income streams. A bias to U.S. dollar earnings is a good way to go, and Amcor, CSL and Computershare all fit that bill.

The post 3 stocks to benefit from a falling Australian dollar appeared first on The Motley Fool Australia.

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The share price of luxury resorts and gaming company Crown Resorts Ltd (ASX: CWN) has underperformed over the past year, lagging the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) by 15%. The main contributing factor has been the ongoing crackdown by the Chinese government to stamp out money laundering and corruption, which has negatively impacted gaming revenues generated by operators in Macau. Crown Resorts has a significant exposure to the Macau gaming market via its stake in joint venture partner Melco Crown. Assets located in Macau comprise approximately 35% of Crown Resorts' earnings.

The company has also faced some domestic headwinds, in the form of weaker consumer sentiment and a slowing economy in Western Australia as the mining boom fades. As a result, it is estimated that Crown Resorts will post declining earnings of around 5% in each of the next two years.

So why am I bullish about the company's growth prospects?

Despite the weaker trading conditions in Macau, Melco Crown has been able to increase its share of the mass-market gaming tables segment, leaving it well positioned for a rebound in gaming activity. For the longer term, Crown Resorts has a number of world-class resort developments scheduled to come on line over the next five years, with potential to significantly increase revenues. These include:

• The City of Dreams, Manila
• Studio City, Macau
• The Crown, Sydney
• Hotel upgrades in Melbourne and Perth

In addition to the projects listed above, Crown Resorts recently signed off on a $2 billion-plus bid to the Queensland government for the rights to develop the Queen's Wharf precinct in Brisbane. Its rival in this bid, Echo Entertainment Group Ltd (ASX: EGP), already holds Brisbane's only existing casino licence, for Treasury Casino. Whilst most commentators view Echo as the favourite, Crown Resorts has had previous success going head-to-head with Echo, having been awarded the rights to the second Sydney casino licence in 2013. This resulted in Echo losing its monopoly position in that market.

Another planned move by Crown Resorts involves a return to the Las Vegas gaming market. The company recently secured the services of Andrew Pascal, the executive who previously managed the Las Vegas operations of U.S. gambling tycoon Steve Wynn. In recent days news reports have broken that James Packer has also snared one of the U.S.'s most successful nightclub operators, Jesse Waits. Waits, who was responsible for setting up the highly popular XS and Tryst nightclubs for Wynn, reportedly resigned his position over the weekend.

Crown Resorts is also seeking to diversify its domestic revenue base by further developing the online gaming operations of sports bookmaker CrownBet. These factors, combined with the company's ability to capitalise on the growing Asian middle class tourism market and a stable dividend yield of around 3% (including 50% franking), make it a compelling growth stock for the long-term investor.

Foolish takeaway

The long-term prospects for Crown Resorts remain positive, with its development pipeline providing a strong platform for future growth. The international flavour of many of these projects also benefits local investors by providing exposure to overseas earnings against the backdrop of a weakening Australian dollar. Whilst there are execution risks associated with each of the company's proposed developments (especially overseas), I believe that the current share price represents good value for investors seeking a stock with exposure to a growing global gaming market.

The post Is Crown Resorts Ltd a good growth stock at current prices? appeared first on The Motley Fool Australia.

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A provider of telecommunications and budget internet services, M2 Group Ltd (ASX: MTU) is one of the fastest growing telco stocks listed on the S&P/ASX 200. Over a long period of time, company management has demonstrated a consistent track record of delivering market-beating returns, much to the enjoyment of M2 Group shareholders.

M2 Group's growth strategy has typically involved acquisitions, with the company buying the iPrimus and Dodo internet services brands in recent years, to name just two. It has also sought to expand its consumer offering by pushing into complementary utilities, such as electricity and gas.

In April, M2 Group grabbed headlines when it announced that it was expanding its New Zealand business by acquiring CallPlus, New Zealand's third biggest internet service provider (and related company 2Talk Limited) for a total of $245 million. Two weeks later, M2 Group made headlines again when it entered the battle for iiNet Limited (ASX: IIN), in response to an earlier bid made by TPG Telecom Ltd (ASX: TPM). Whilst it was the TPG bid that was ultimately recommended by iiNet's board of directors, the move by M2 Group demonstrated management's ongoing focus on aggressively growing the business via acquisition, provided that the numbers stack up.

M2 Group's acquisitive growth strategy has produced fantastic returns for its shareholders. When comparing the before-dividend returns of M2 Group to the S&P/ASX 200 and its telecommunications peers — Telstra Corporation Ltd (ASX: TLS), TPG Telecom and iiNet — M2 Group has consistently outperformed over 1-year, 5-year and 10-year timeframes.

M2 Group has been able to successfully achieve forecast synergies from its earlier acquisitions. In the company's most recent results, announced to the market in February, management reported:

• Revenue increased to $546.2 million (up 8%)
• Net profit after tax (NPAT) increased to $38.5 million (up 25%)
• Earnings per share (EPS) grew to 21.2 cents (up 23%)
• Subscriber numbers increased to 1.634 million (up 9%)

In more good news for shareholders, the company's fully franked interim dividend was increased to 15 cents (up 30%). It is important to note that just four years ago the annual dividend was 16 cents. With analysts expecting the full year dividend for FY15 to be 30 cents, patient investors have been rewarded not only with market beating capital growth, but also an increase in the annual dividend of 87.5% since 2011. In its half-year results M2 Group management reaffirmed full year guidance for revenue growth of 8-9% and NPAT growth of 15-20%.

The acquisition of CallPlus and 2Talk was completed last week, just in time for the end of the financial year. In an announcement to the market M2 Group advised that the acquisition was expected to contribute in excess of NZ$250 million in revenue and NZ$45 million in earnings before interest, taxes, depreciation and amortisation (EBITDA) for FY16. This will boost underlying EPS by a further 15%.

Foolish takeaway

M2 Group's management has successfully delivered investor returns that have significantly outperformed its peers and the broader market over various time frames. The company's solid track record of generating significant revenue growth and its history of returning capital to shareholders via growing dividends make it an ideal stock for consideration in your portfolio. Whilst the biggest gains may already have been banked, it is my view that M2 Group still has plenty of room to grow.

The post Is M2 Group Ltd the best telecommunications stock on the S&P/ASX 200? appeared first on The Motley Fool Australia.

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Financial services companies make up a key component of the S&P/ASX 200. Whilst this sector of the index is dominated by the 'Big Four' banks, there are numerous other firms with the potential to generate healthy returns for investors. One such company that has been on my watchlist recently is IOOF Holdings Limited (ASX: IFL).

IOOF provides a range of financial products and administrative services to approximately 650,000 clients, including superannuation, annuities, stock-broking, financial and estate planning and trustee services. Its diversified range of offerings, exposure to Australia's growing pool of superannuation funds and dividend yield of more than 5% should all be positive factors for the company's long-term success.

However, after performing well over the first half of this year (up 20%), IOOF's share price has taken a beating – giving back most of that year-to-date return – after Fairfax Media Limited outlets issued reports of alleged misconduct, front running, cheating by senior staff and misrepresenting performance numbers on some of its funds.

With a Federal Senate inquiry into the Australian banking sector already underway, the allegations against IOOF have been met with renewed calls for a royal commission. According to Senator John Williams, "the dominoes keep falling in the financial services sector. With IOOF the case keeps building for a royal commission." Senator Williams has also called for the Australian Securities and Investments Commission (ASIC) to investigate the latest allegations in relation to IOOF.

What does this mean for IOOF?

Whilst news like this is never pleasant, what does it really mean for investors in IOOF? Now is a good time to re-examine the underlying investment thesis. It was only a few months ago in February 2015 that the company released a bumper set of results to the market. The highlights included:

• Revenues increased to $458.5 million (up 34%)
• Net profit after tax (NPAT) – pre-amortisation – increased to $80.6 million (up 39%)
• Funds under management, advice and administration (FUMA) grew to $118.7 billion (up 26%)
• Underlying earnings increased to 29 cents per share (cps) (up 15%)
• The interim dividend was increased to 25 cps (up 11%)

Since these results, there have been no material changes to the underlying business. In response to the allegations of the past couple of days, IOOF management has issued a statement drawing attention to the company's strong compliance record. It has also responded directly to some of the claims. No doubt there will be more to follow.

Foolish takeaway

In one form or another, IOOF has operated since 1846 when it was formed as the Independent Order of Odd Fellows friendly society. It demutualised in 2002, before listing on the ASX in 2003. Bottom-line: it has been operating in the Australian market for almost 170 years. Furthermore, the company's exposure to the ongoing growth of the Australian superannuation and annuities sector gives it an increasing pool of funds in which to swim.

Whilst any governance concerns should not be dismissed lightly, I believe that the event-driven pullback in share price represents a good long-term entry point for investors thinking about opening a position in IOOF.

The post IOOF Holdings Limited takes a beating from the market  appeared first on The Motley Fool Australia.

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For long-term investors in the share market, it is important to identify secular trends when deciding which individual stocks to purchase. Whilst you must also be mindful of a number of other factors, such as the quality of the management team, the company's competitive position and any possible regulatory issues, selecting businesses that stand to benefit from broader economic tailwinds can go a long way towards helping you outperform the S&P/ASX 200.

Two Australian firms that I believe are in good shape to increase in value over the next 12 months are pharmaceutical company CSL Limited (ASX: CSL) and medical device maker ResMed Inc. (CHESS) (ASX: RMD). Both businesses enjoy growing overseas healthcare markets and would be significant beneficiaries of a declining Australian dollar, which some experts forecast to hit US$0.70 by the end of this year, down from its current level of US$0.77.

Let's examine them in more detail.

CSL Limited

CSL is the world's largest supplier of blood products. Over the course of the last five years, shares in the company have appreciated 194.9%, dramatically outperforming the 28.3% return of S&P/ASX 200. In the past 12 months investors in CSL have been rewarded by a more than 30% appreciation in share price.

The CSL board has an impressive track record when it comes to capital management and creating shareholder value. It has done this via various share buybacks and increasing dividends. In addition, the company's decision late last year to purchase Novartis' influenza vaccine business helps set it up to be the second largest player in a massive global market.

Whilst it trades at a price-to-earnings premium when compared to the broader ASX, this is simply recognition of the fact that over the past 10 years CSL has grown its net profit by more than 20% per annum. With ageing populations throughout the developed world increasing demand for its products and net profit growth expected to continue at this rate over at least the next two years, CSL represents a great long-term addition to your portfolio.

ResMed Inc.

ResMed is a global leader in developing and manufacturing treatments for sleep disordered breathing, with a particular emphasis on sleep apnea. The company experienced a recent setback as a consequence of an unsatisfactory clinical trial that saw its share price fall by 18% in a single trading session on 14 May 2015. The risk of unsuccessful trial results is inherent in the biotechnology sector. Whilst the result was disappointing, ResMed is a growing business that has a lot going for it.

Over the past 12 months ResMed has rewarded investors with a return of 39.1% (plus dividends), versus the S&P/ASX 200's return of 4.1%. For the most recent quarter, ending 31 March 2015, the company generated an operating profit of US$105.9 million on revenues of US$422 million. This represented revenue growth in excess of 10% on a constant currency basis. Importantly, revenues from key American markets increased 16% to US$251 million.

Given the significant percentage of ResMed's sales that are generated overseas, a lower Australian dollar will see a natural increase in revenues from the point of view of Australian investors. With the recent pullback in share price to the $7.50 area from its April high of $9.84, ResMed represents good long-term value.

Foolish takeaway

CSL and ResMed are both outstanding, durable, ASX-listed global healthcare stocks with impressive track records of growing revenues. Furthermore, both companies stand to benefit from further declines in the value of the Australian dollar. For investors keen to gain some exposure to overseas earnings and leverage increases in global healthcare spending, CSL and ResMed would make excellent additions to your portfolio.

The post 2 healthcare stocks to beat the ASX: CSL Limited and ResMed Inc. (CHESS)  appeared first on The Motley Fool Australia.

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