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.
