Rio Tinto Limited
Although mining stocks such as Rio Tinto Limited (ASX: RIO) are enduring a challenging period, in the long run they could prove to be excellent investments. That's because, in Rio Tinto's case, it has a superb track record when it comes to financial performance. For example, it has increased cash flow per share at an annualised rate of 15.3% during the last 10 years, which is an impressive rate of growth and has enabled it to raise dividends by 11.8% per annum during the same time period.
Certainly, the short to medium term may prove to be tough, as the iron ore price continues to be weak. However, with such a strong track record, Rio Tinto could become more in-demand as investors start to see value while its shares trade on a price to earnings (P/E) ratio of just 13.2, thereby allowing it to make a great comeback in 2015 and beyond.
Westpac Banking Corp
Over the last three years, investors in Westpac Banking Corp (ASX: WBC) have been well-rewarded for owning a slice of the bank. That's because total shareholder returns have been a highly impressive 28.8% per annum, which is above and beyond the ASX's return.
Looking ahead, Westpac could prove to be a surprisingly strong growth play. Certainly, its current earnings forecasts are nothing to get too excited about, with the bank being expected to increase its bottom line by 3.4% per annum over the next two years. However, with the RBA cutting interest rates and seemingly being relatively dovish, Westpac could surprise on the upside when it comes to bottom line growth.
And, with Westpac offering a fat, fully franked yield of 5%, it seems to offer an excellent income return as well as the scope for more capital gains. As such, its total returns could be highly enticing this year.
CSL Limited
Whether or not the RBA's loose monetary policy has the desired impact, investors in CSL Limited (ASX: CSL) may be less concerned than most. That's because its fortunes are less dependent upon the wider economy and, even while many of its global pharmaceutical peers are struggling with a loss of patents and generic competition, CSL continues to deliver excellent growth numbers.
For example, over the last five years, CSL has been able to increase cash flow per share at an annualised rate of 11.6%. That's a highly impressive rate of growth and it is expected to increase its net profit by 20.3% per annum over the next two years. If met, this would represent an extremely strong performance and could cause the company's share price to move considerably higher.
Certainly, it trades on what many investors would argue is a rich valuation (for example, it has a price to book (P/B) ratio of 12.5), but investors seem willing to continue to bid this up and it could move even higher.
