Legendary investor Peter Lynch once said, "In this business, if you're good, you're right six times out of ten. You're never going to be right nine times out of ten."
Most investors spend their time looking for the next big winner, but pay too little attention to avoiding the 'losers'. Given that the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is hovering near a seven-year high, that is perhaps especially the case right now – particularly when it comes to some of the nation's most popular stocks.
With that in mind, here are four stocks that I believe you should ignore today.
Four stocks to avoid
- Commonwealth Bank of Australia (ASX: CBA) has retreated in price in recent weeks after the Reserve Bank elected to leave interest rates on hold, rather than cutting them further. It is the bank's generous dividend yield that has kept investors so interested in recent years, but the shares themselves have become overpriced. From their current price tag of $92.10, it is very difficult to see them generating long-term market beating returns.
- Medibank Private Ltd (ASX: MPL) has also fallen considerably in price since February when it reported its first-half earnings results. However, it appears that there is still quite a large element of hype built into the share price which doesn't necessarily reflect the downside risk also facing the business. There could well come a time where Medibank deserves a position in your portfolio, but not at this price.
- BHP Billiton Limited (ASX: BHP) has rallied recently thanks to the surging iron ore and oil prices. Despite the recent strength however, the outlook for both commodities remains unclear and a sudden reversal in price could have a painful effect on the miner's shares.
- Fortescue Metals Group Limited (ASX: FMG) is in the same boat as BHP Billiton. The miner's shares recently hit a multi-year low but have shot up in price as a result of the rebounding iron ore price, and a successful bond issue which has eased pressure on its balance sheet. While the outlook remains unclear; Fortescue is a risky bet for your money.
Six stocks to buy in 2015
- Coca-Cola Amatil Ltd (ASX: CCL) endured a tough run between 2013 and 2014 but management appears to have turned the ship around. A keener focus on marketing and product development, together with further investment in Indonesia, could reap enormous returns for investors in the long run.
- ResMed Inc. (CHESS) (ASX: RMD) fell by nearly 10% on Friday following its quarterly results, despite having reported a 13% increase in revenues (on a constant currency basis) for the period. The company, which develops products for the treatment of sleep apnea, is a good bet for investors looking to benefit from a weaker Australian dollar and a world-wide trend towards greater spending on healthcare.
- XERO FPO NZ (ASX: XRO) was also sold off on Friday after it reported a sizeable net loss for the 2015 financial year. However, subscription revenue and its subscriber base both grew strongly year-over-year while its gross profit margin ballooned out to 70%, indicating great things to come.
- Woolworths Limited (ASX: WOW) could be the best stock investors buy in 2015. The stock has been sold en masse in light of fresh concerns about its ability to maintain its position at the head of Australia's $88 billion grocery industry, but those concerns appear to have been overplayed. Long-term investors are being given the opportunity to buy a great company at a discounted price, while they will also benefit from its forecast 4.8% fully franked dividend yield.
- Greencross Limited (ASX: GXL) enjoyed a stellar run between 2011 and 2014 (over which time it surged 1,516%), but has since retreated considerably. The company, which is Australia's leading provider of veterinary services and retail, has strong growth prospects and could certainly generate market-beating returns in the long run.
- Collection House Limited (ASX: CLH) is another great investment at its current price tag of $2.27. The debt collection agency has a terrific track record for revenue and earnings growth, while it also offers a generous dividend. It is expected to yield 4% this financial year, fully franked, which is excellent for a growth stock.
The BEST stock to buy in 2015
