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How To Crack The Winning Secret for Secular Growth Stocks

  • November 12, 2019 11:50 PM AEDT
  • Team Kalkine
How To Crack The Winning Secret for Secular Growth Stocks

Anyone planning to invest in stock market, it becomes important for them to understand the fundamental principles of trading and should have an ability to judge companies’ performance under various market conditions. Depositors prefers investing in those stocks where a good return on their investment can be generated. Investors have a bend towards secular growth stocks as they have a defensive outlook to the economic activities.

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Secular Growth Stocks

Secular stocks refer to the shares that continue to move in one direction irrespective of ups and down in the market. It is a descriptive term, which refers to the market activities least affected by the short-term trends. The secular trends are not considered seasonal instead, they remain the same over the period and maintain a certain trajectory regardless of current economic changes.

Characteristics of Secular Growth Stock

Management Team

Secular growth companies have focus on improving their profits. The management team plays an important role in the performance of the company by incorporating their innovative thinking. The investors must do through research on the Management team before investing.

Strong Growth in Sales

The sales number of the company speaks a lot about the company. The company which have earnings and revenue growth accelerating for a long time can be a good option to invest in. The faster the growth rate, the more possibility of a stock price to rise. The companies having good track record is always considered the best investment option for the investor.

Invest in Mass Market

Companies catering to huge markets have a higher chance of success. The larger the pool of potential customers greater is the possibility of success. The product offering of the company must cater to the larger space to better its performance.

High-Profit Margins

Investor prefers to invest in those companies whose profit margin are kept high. The companies with a huge profit margin show not only their products are in demand but demonstrate that their business model is highly efficient.

Let us discuss two secular growth stocks i.e. ALU and KMD

Kathmandu Holdings Limited (ASX: KMD)

Kathmandu Holdings Limited, a manufacturer, distributor and retailer of clothing, footwear, and equipment for travel and adventure. KMD started its first store in 1987. The company’s product breakdown includes ~ 40 percent of equipment and 60 percent of apparel. Recently, on 23 October 2019, the company has announced that the securities will be placed on a trading halt.

Completion of Retail Entitlement offer

On 23 October 2019, the company is pleased to announce that it has successfully completed the Retail Entitlement Offer of its fully underwritten 1 for 4 pro-rata accelerated entitlement offer of new fully paid ordinary shares in the company as announced on 1 October 2019

The offer was closed on 21 October 2019 raising gross proceeds of approximately NZ$18.5 million. The Retail Entitlement Offer is supported by the retail shareholder, choosing to take up 59 per cent of their entitlements under the offer.

Highlights of Special Meeting Presentation

On 18 October 2019, the company has released a special investor presentation, few highlights of the presentation are as follow:

  • Rip Curl Acquisition

KMD announced that it has entered into a binding agreement to acquire a 100% stake in Rip Curl at an enterprise value of AUD$350 million on a debt-free, cash-free basis. The price of the acquisition denotes a 7.3x enterprise value to FY19 pro forma normalised EBITDA. The acquisition is expected to complete at the end of 2019, subject to approvals. As per the announcement, the above acquisition will be fully funded through a combination of debt and equity. Moreover, the combination of the two brands is likely to create a global outdoor and action sports company worth NZ$1 billion.

FY19 Financial Performance for the year ending 30 June 2019

Kathmandu Holdings Limited announced its full-year results for FY19 wherein the company reported sales of NZ$545.6 million, up 9.7% in FY18. Growth in sales was driven by added revenue from Oboz. In FY19, sales growth for Oboz was reported at 30%. KMD reported NPAT at NZ$57.6 million as compared to NZ$50.7 million in the previous financial year. EBITDA during FY19 stood at NZ$99.6 million, representing an increase of 10.9% on y-o-y basis. During the year, the business reported the introduction of 4 new stores and 12 refurbishments with an investment of NZ$10.3 million.

Stock Performance

The stock of KMD was last traded at $2.810 on ASX on 12 November 2019. The company has a market cap of A$10.42 million and approx. 294.7 million outstanding shares. The 52-week high value of the stock is at $3.050.

Altium Limited (ASX: ALU),

Altium Limited (ASX: ALU), is a provider of PCB design software. The company is primarily engaged in 3D Printed Circuit Board. Starting from the concept to PCB design followed by 3D modeling, and finally leading to the output generation, ALU offers an efficient workflow.

Change in Director’s interest

On 16 September 2019, the company announced a change in the interest of one of its directors named Mr Sergiy Kostynsky. The change has been effective since 13 September 2019. The number of securities held after the change was 2,402,468 fully paid ordinary shares.

Wendy Stops Update

On 6 September 2019, Wendy Stops, an ALU director, transferred few company stocks from his one personal holding to a new personal holding leading to no change in his total shareholding in the company.

Revenue increased by 23 per cent for the period ending 30 June 2019

  • The company’s revenue increased by 23 per cent to US$171.8 million compared to the corresponding year same period.
  • Operating cash flow increased by 42 per cent to US$69.1 million.
  • EBITDA of US$62.72 million, up by 40%.
  • The company’s earnings per share grew by 41 per cent to US$0.4057.
  • EBITDA margin of the company increased to 36.5 per cent.

Stock Performance

The stock of ALU closed lower at $33.030 on ASX on 12 November 2019, a dip by 0.811 per cent from its previous closing price. The company has a market cap of A$4.36 billion and approx. 130.97 million outstanding shares. The 52-week high and low value of the stock is at $38.490 and $19.730, respectively.


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