Five growth stocks for fickle times

Whilst investor sentiment remains fickle, Julian Chillingworth of Rathbone Income and Growth Fund is focussing on quality businesses underpinned by long-term growth. Here he shares five such stocks from his portfolio.

Every week, a professional investor tells MoneyWeek where he'd put his money now. This week: Julian Chillingworth, manager of Rathbone Income and Growth Fund

We believe global growth will remain below trend into 2008 but that the underlying fundamentals remain strong. This has guided our recent trading. At present, investor sentiment is fickle, so we focus on high-quality businesses, underpinned by long-term growth stories, where fundamentals remain strong. We aim to get the bulk of our earnings from the underlying growth in these firms over long periods. Any short-term share-price weakness we see as a buying opportunity.

Aggreko (AGK), which provides temporary power units worldwide particularly to Africa has lots of growth potential. Increasing electricity consumption and years of underinvestment mean demand is strong. Since we bought it in July, Aggreko has issued a positive trading statement and been named exclusive supplier to the Beijing 2008 Olympic Games. The stock trades on a p/e of 22 and an estimated yield of 1.2%, but offers good long-term value.

Venture Production (VPC) is our newest holding. It reclaims oil from dated North Sea fields, where it is no longer sufficiently profitable for oil majors to operate. The cash flow therefore leaves more of an imprint on the balance sheet of a company of Venture's size. The firm benefits from good recovery techniques, as well as a sound understanding of the geography. This is a tried and tested business model, which provides us with a low-risk exposure to the sector. We believe growth will continue to impress. Venture trades on a p/e of 8.9 and an estimated yield of 1.49%.

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We bought Assura (AGR) back in April. The business harks back to the old cottage hospital of yesteryear by shifting some of the responsibility of mainstream hospitals back into the hands of primary care. Assura leases GP surgeries and clinics to the NHS, providing a growing, Government-backed annuity stream. It is also working with GPs to return certain healthcare services to the local community. The potential for this defensive business, which yields an estimated 2.5%, looks most interesting.

Bateman Litwin (BNLN) remains an obvious play on the long-term energy story. Recently, the stock has risen strongly amid a series of contract wins, and continues to prosper in a buoyant oil, gas, and energy procurement and construction market. High commodity prices have also lifted its share price. The proceeds of a recent fundraising are being used to acquire a bioethanol fuel-technology provider. This deal will transform Bateman into a more complete energy provider, while maintaining its core exposure to the oil and gas industries. The dividend is expected to rise by an estimated 64% by 2009.

Finally, International Power (IPR) is well positioned in the current environment because it is relatively immune from broader macroeconomics. The bulk of its growth continues to come from power generation and water desalination projects in the Middle East. These projects are based on long-term contracts with stable returns, unaffected by electricity price movements. Despite first-half figures beating consensus, we believe there is still growth potential to be unlocked in its project pipeline and the recently acquired Trinergy wind assets.

The stocks Julian Chillingworth likes

Stock, 12mth high, 12mth low, Now

Aggreko, 611.75p, 259p, 491.75p

Venture Production, 917.50p, 612p, 752p

Assura, 250p, 152.75p, 166p

Bateman Litwin, 330p, 138.25p, 300p

International Power, 472.25p, 297.25p, 402p