The end of the financial year has finally passed and investors everywhere are looking for which stocks will be the big winners over the next 12 months. The big winners last financial year were the big banks, some select mining stocks exposed to the nickel price, and consistent performers with sustainable business models.
Turnaround stocks
Warren Buffett famously said that he avoided 'turnaround' stocks as 'turnarounds seldom turn'. While this may be true, some of the companies most heavily sold off over the past 12 months are also some of the biggest and most important in Australia. Could 2015 turn out to be a much better year for them?
Graincorp Ltd (ASX: GNC) was the worst-performing stock on the ASX 200 in the 12 months to June 30. The 33% fall was primarily a result of the blocking of a takeover offer by Archer Daniels Midland, but also came at a time when the company warned about the impact of drought on harvest yields. Investors appear to have little faith that conditions will change meaningfully over the next 12 months, but there could be huge upside if Graincorp can turn it around.
QBE Insurance Group Ltd (ASX: QBE) is one of my favourite stocks at the moment, as the market appears to have lost all faith in it. The company reported a cash profit of nearly $1 billion last financial year but recorded a net loss of $250 million due to writedowns. The company remains profitable, despite the paper loss, and is actively increasing investment risk to improve shareholder returns during this time of extremely low global interest rates. The next 12 months should be good, assuming there aren't any further demons discovered in the company's U.S. business.
Coca-Cola Amatil Ltd (ASX: CCL) is a company that really could go either way. New CEO Alison Watkins has set about shaking up the company to halt sliding sales and generally disappointing results from the past few years. Ms Watkins brings extensive global experience from her previous job and will need to make serious progress on improving the competitiveness of Coca-Cola's products. Currently at bargain prices, Coca Cola could be a great performer over the long term and in the meantime will provide a solid dividend yield to investors.
