While investing in tracker funds can prove to be a low-cost means of gaining exposure to the ASX, it isn't fool proof.
That's especially the case when the ASX has a disappointing year and 2014 is definitely an example of this, with the ASX being flat year-to-date.
With that in mind, here are three stocks that could beat the ASX in 2015. Certainly, their share price performances in 2014 have been mixed, but all three of them could be worth buying right now. Here's why.
Westpac Banking Corp
While the banking sector may be viewed as fully valued by a number of investors, constituents such as Westpac Banking Corp (ASX: WBC) still hold a relatively large amount of appeal. That's because, in Westpac's case, it combines upward rating potential, a top yield and modest growth prospects to give a resounding investment case.
For example, Westpac has a fully franked yield of 5.6% and trades on a P/E ratio of 13.5. While not particularly low on an absolute basis, with the ASX trading on a P/E ratio of 15.4, there appears to be scope for an upward shift in Westpac's rating in 2015.
Furthermore, with its bottom line having risen by 15% per annum over the last five years, there could be more earnings growth to come over the medium term. Indeed, the wider banking sector could continue to benefit from a low interest rate environment even if, as The Murray Inquiry suggests, capital requirements become more onerous moving forward.
National Australia Bank Ltd.
Also appealing to investors are shares in National Australia Bank Ltd. (ASX: NAB). Although it trades on a higher P/E ratio than its sector peer, Westpac, NAB has the better growth forecasts over the near term and so appears to offer excellent value for money when this is factored in.
For example, NAB has a P/E ratio of 14.5 (versus 13.5 for Westpac), but NAB is expected to deliver earnings per share in the current year that are 27.5% higher than they were last year. That's a super rate of growth and could be aided further by low rates causing demand for new loans to rise, which could especially be the case if the RBA drops rates even further.
And, with NAB having a fully franked yield of 6.3%, it could give your income a major boost in 2015, too.
Oil Search Limited
While low interest rates are helping banks such as NAB and Westpac, low oil prices are doing the opposite to oil stocks such as Oil Search Limited (ASX: OSH). However, shares in Oil Search have not fallen by as much as many of its peers, since investors in the company have a lot to look forward to over the next couple of years.
With new LNG projects coming onstream, a lower oil price is unlikely to hurt Oil Search as much as some of its peers, which is partly why its share price has fallen by just 3% since the turn of the year.
In fact, Oil Search's share price could be due for a significant rise in 2015, since at its current price level it equates to a PEG ratio of just 0.27. That's an incredible 87% lower than the ASX's PEG ratio of 2, which means that even if there are delays to projects and further weakness in the oil price, Oil Search could still outperform the ASX during the course of 2015.
