3 stocks with huge potential for 2015

For Aussie investors who are disappointed with the performance of the ASX in 2014, the good news is that things could get much better in 2015. Indeed, with the global economy picking up momentum and the RBA seemingly willing to keep rates low over the medium term, the ASX could make some serious ground next year.

The bad news, though, is that the leading index is likely to remain volatile, as investors remain wary of bad news and react negatively to any sign of a slowdown. Despite this, there are a number of stocks that could deliver strong gains whatever the economic weather. Here are three top examples.

Insurance Australia Group 

With a beta of just 0.53, Insurance Australia Group Ltd (ASX: IAG) is likely to offer investors a far less volatile experience than the ASX over the medium term. Should the ASX fall by 1%, for example, shares in IAG should (in theory) fall just 0.53%. This means that they could act as a strong defensive play moving forward.

However, IAG also has scope for an upward re-rating to its valuation, with shares in the company having a P/E ratio of just 12.2. This seems rather low when the ASX has a P/E ratio of 15.5 and the insurance sector has a P/E ratio of 17.6.

IAG also recently confirmed its full year guidance to deliver gross written premium growth of up to 20% this year, suggesting it could prove to be a top notch stock in 2015.

QBE Insurance Group 

Like IAG, QBE Insurance Group Ltd (ASX: QBE) is a low beta stock that could prove to be a sound defensive play. Its beta of 0.57 should prove to be an asset during highly volatile periods. However, in recent years, QBE’s bottom line has been anything but stable.

For example, it made a loss last year but, crucially, is expected to return to profitability in the current year before increasing earnings by 29.6% next year. This puts it on a PEG ratio of just 0.11 and shows that, as well as offering a less volatile experience, its shares could also outperform the ASX in 2015 in terms of their capital gains.

Meanwhile, a fully franked yield of 3.2% means that QBE’s total return could prove to be highly appealing over the next year.

Ramsay Health Care

Also having attractive defensive qualities is Ramsay Health Care Limited (ASX: RHC). Its beta of 0.5 is exceptionally low and, with its earnings being less dependent upon the performance of the Australian and global economies, it could deliver defensive-growth characteristics moving forward.

That’s because as the largest provider of private hospitals in the country, demand for its services remains relatively stable. It also has further acquisitions on the cards after successful M&A activity in recent years, such as the group of psychiatric hospitals acquired from France’s Medipsy.

Sure, a P/E ratio of 30 may seem excessive, but with a superb track record of growth (earnings have increased at an annualised rate of 17.2% over the last five years) and strong future potential, Ramsay seems to more than deserve its current premium.

Indeed, all three shares could have a great 2015. Their mix of income, growth and impressive valuation prospects make them excellent buys in my view, but there is another ASX stock that could beat all three of them.

In fact, the company in question has recently been named The Motley Fool's Top Stock For 2015. It may have flown under your investment radar until now, but it could make a huge difference to your portfolio returns next year.

Click here to find out all about it - it's completely FREE and without any obligation to do so. 

Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.