Just entering December, everyone is making plans for the holiday season with presents and vacations, but what should investors have on their minds?
If the views of some market experts hold to be right, there may be as much as a 10% rise in the ASX over 2014, so perhaps while on the beach somewhere, they should be poring over business reports and news updates to see where that growth may come from.
Macquarie Private Wealth division director Martin Lakos recently said that fair value on the S&P/ASX 200 Index (ASX: XJO) would be around 5,894, based on upgraded total shareholder returns outlook for the Australian market. Currently, it's at 5,256, so that's a little more than 10% if that outlook is correct.
Although the mining industry will still be sorting itself out, the perceived slump may not be as severe as first thought if iron ore prices can hold up over the coming year. This year's recent rise in spot prices up to about $137/tonne after hitting a mid-year low in June has revived the outlook on some of the major iron ore miners.
Lower interest rates will be helping both consumers and business squeeze a little more out of transactions, so earnings of business may be better, possibly not fantastic, because revenues are up and costs are down. Pretty much every business cycle starts from the bottom and rises when interest rates get low. If they can stay that way long enough, then the economy can grow even more.
Investors then need to be on the lookout for companies involved in housing, household items and cars, logistics and shipping, and even digital/telecom based business. Here are some examples of stocks in those areas.
Housing:
- Reece (ASX: REH): plumbing and bathroom products supplier
- GWA (ASX: GWA): household fixtures and fittings for bathrooms/kitchens, heating and cooling
- REA Group (ASX: REA): operator of realestate.com.au, real estate listings portal
Household items and cars
- JB Hi-Fi (ASX: JBH): electronic goods
- McMillan Shakespeare (ASX: MMS): vehicle fleet management, salary packaging, and vehicle leasing
Logistics
- Toll Holdings (ASX: TOL): road and rail shipping
- Qube Holdings (ASX: QBE): freight container handling and port stevedoring
Digital/telecom
Twenty-First Century Fox (ASX: FOX): media and entertainment, pay TV, half owner of Foxtel
Telstra (ASX: TLS): telecommunications giant, the other half owner of Foxtel, broadband and mobile service provider
Foolish takeaway
Even if 2014 is slow, companies like these are in industries that generally gain as the market expands. Consumer spending rises as people feel they have more money to spend. During the down years, their average amount of spending is suppressed or pent up, so they make up for it strongly.
When it can be released and satisfied, more money flows through the system by way of salaries, expenses and fees.
