The New Year is fast approaching and most investors are beginning the task of reassessing their portfolios for the ensuing 12 months, including which stocks to hold onto, which to buy and which to sell or avoid at all costs.
With just over five weeks remaining until the turn of the calendar, here's an idea of the good, the bad and the downright ugly stocks for 2015.
The Good
It has been suggested that the Reserve Bank of Australia may need to reduce interest rates even further over the coming 12 months in order to curb the rising unemployment rate. While this would likely help spur further corporate growth, it will be the stock market's big dividend payers who investors turn towards.
For dividends, I'd be looking at companies which also offer significant growth potential – or the ability to generate strong capital gains as well. Coca-Cola Amatil Ltd (ASX: CCL) and M2 Group Ltd (ASX: MTU) are two great examples. The pair offer a yield of 4.5% (partially franked) and 3.5% (fully franked) respectively, with plenty of room for their shares to rise in price, too.
The Bad
In light of the low interest rate environment, there's a good chance investors will continue to flock towards companies such as the big four banks and Telstra Corporation Ltd (ASX: TLS). Each of them offers a tantalising, fully franked yield, but their shares do not come cheap.
Although these companies have often been thought of as the "safest" investments, given their size and liquidity, they could certainly experience a sharp fall in price if their earnings growth doesn't live up to their lofty valuations.
The Ugly
Investors wanting to gain exposure to the iron ore sector in 2015 may want to think again. The commodity has endured a terrible year, having plunged from roughly US$135 a tonne to a five-year low of around US$70 a tonne – a 48% decline.
While massive profits could certainly be made should the iron ore price suddenly rebound, the common belief amongst market experts is that the commodity has even further to plunge in price – possibly into the US$50s. That's a risk I certainly wouldn't be willing to take.
In particular, investors should avoid companies which rely solely on iron ore for their revenues. That includes Fortescue Metals Group Limited (ASX: FMG), BC Iron Limited (ASX: BCI) and Atlas Iron Limited (ASX: AGO), amongst others.
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