With the ASX having risen by just 3% this year, many Aussie investors will be sitting on similar gains at the present time. Clearly, though, a number of stocks have beaten the wider index this year. Among them are CSL Limited (ASX: CSL), Oil Search Limited (ASX: OSH) and Commonwealth Bank of Australia (ASX: CBA). They have risen by 15%, 9% and 6% respectively year-to-date. More importantly, though, all three stocks could beat the ASX in 2015, thereby helping to boost your portfolio returns. Here’s why. CSL With shares in CSL sitting close to all-time highs, it’s little wonder that…
To keep reading, enter your email address or login below.
With the ASX having risen by just 3% this year, many Aussie investors will be sitting on similar gains at the present time.
Clearly, though, a number of stocks have beaten the wider index this year.
More importantly, though, all three stocks could beat the ASX in 2015, thereby helping to boost your portfolio returns. Here’s why.
With shares in CSL sitting close to all-time highs, it’s little wonder that they have a very rich P/E ratio. Indeed, while the ASX has a P/E ratio of 15.4, CSL’s is a whopping 25.6. That’s almost two thirds higher than that of the wider index.
Despite this, CSL could make higher highs in 2015 and beyond. That’s because it is still recording superb rates of earnings growth that look set to drive sentiment (and its share price) even higher. For example, deals such as the $320 million acquisition of Novartis’ influenza vaccine unit are forecast to increase the company’s bottom line at an annualised rate of 15.8% over the next two years.
Indeed, even with a rich P/E ratio, such a strong growth rate means that CSL trades on a PEG ratio of 1.62. For a major pharmaceutical that has a superb track record of top and bottom line growth, that seems to be a reasonable price to pay.
As with CSL, Oil Search also has a very high P/E ratio. Its rating currently stands at 24.3 and it has not been hit too hard by a declining oil price that has shed around a quarter of its value during 2014.
Of course, the market seems to be more focused on the LNG export market, which could be on the cusp of a strong growth period. With Oil Search having a slice of the PNG LNG project, it looks set to benefit from continued strong demand from Asia, with the company’s bottom line expected to rise at an annualised rate of 86.3% over the next two years.
Suddenly, a P/E ratio of 24.3 seems rather attractive, especially when you consider than Oil Search has a PEG ratio of just 0.28. As a result, it could beat the ASX in 2015.
Commonwealth Bank of Australia
Despite rising by a fairly moderate 6% this year, CBA has still delivered twice the capital gains of the ASX. Add to that a yield of 5% (fully franked) and a double-digit total return has been received by investors in the stock in 2014.
However, there could be more to come in 2015 and CBA could beat the index. That’s because it continues to offer highly appealing income prospects, with its dividend yield of 5% set to expand over the next couple of years (assuming a constant share price). Indeed, dividends per share are forecast to rise at an annualised rate of 5.3% over the next two years, which means that CBA could be yielding 5.4% in FY 2016.
With interest rates likely to remain low in 2015, this could increase investor demand for shares in CBA and help it continue its outperformance of the ASX next year.
Despite this, there is another ASX stock that our analysts think could be the top performing share of 2015.
In fact, they've recently named it as The Motley Fool's Top Stock For 2015 and its potent mix of exciting growth potential and highly enticing valuation could help it to smash the ASX next year.
You can find out all the details by simply clicking here and entering your email address. It's completely FREE and comes without any further obligation.
Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.