With the ASX having been a major disappointment during the course of the year, being down 3% year-to-date, many investors are understandably cautious in regard to buying shares at the present time.
That’s a natural view to take, since the global and Australian economies have highly uncertain outlooks at the present time.
However, most investors would agree that the long term is still very bright for the ASX. Looking back at history, disappointing periods have always been followed by strong share price growth, and vice versa.
Therefore, now could be a great time to buy high quality companies trading at relatively attractive prices. And, if you are bullish on the longer term prospects for the ASX, these three stocks could prove to be excellent additions to your portfolio at the present time.
With a beta of 1.75, shares in AMP Limited (ASX: AMP) should (in theory) move by 1.75% for every 1% move in the ASX. This means that, if you are upbeat about the wider index’s future, then AMP could be a good stock to hold, since it should outperform the index during bull markets.
Of course, a high beta also means that AMP’s share price should fall by more than that of the ASX, too. However, in 2014 the opposite has been true, with AMP being up 21% since the turn of the year, versus a fall of 3% for the ASX.
Despite this rise, AMP still trades on a hugely appealing PEG ratio of just 0.49, which indicates that growth is on offer at a reasonable price. As such, AMP could make further gains next year.
Scentre Group Ltd
Also making gains in 2014 have been shares in Scentre Group Ltd (ASX: SCG), with them being up by 15% year-to-date. As with AMP, Scentre has a relatively high beta of 1.33 and should outperform the wider index during periods of growth.
In addition, Scentre appears to be well placed to benefit from changes in the macroeconomic outlook in the short to medium term. For example, the RBA seems likely to drop interest rates next year in an attempt to stave off ever-increasing unemployment levels, and this could give a boost to the economy and encourage consumers to spend more.
Clearly, this would be good news for Scentre and, looking ahead, its bottom line could be subject to upgrades as we move through 2015 and this could drive sentiment (and its share price) even higher.
Origin Energy Ltd
Despite having its rating outlook downgraded to ‘negative’ from ‘stable’ by Moody’s, Origin Energy Ltd (ASX: ORG) still seems to be worth buying a slice of. Certainly, it should outperform a rising ASX over the medium to long term due to its beta of 1.38 but, in recent months, its share price has been hurt by a lower oil price and this could continue in the near term.
Of course, strong earnings growth is still being forecast for Origin, with its APLNG project nearing completion. The company is forecast to post bottom line growth of 25.2% per annum over the next two years, which alongside a P/E ratio of 16.7 works out as an appealing PEG ratio of 0.66.
So, while further lumps and bumps may lie ahead over the short term for Origin, it seems to be a strong buy – especially for investors who are bullish on the future prospects of the ASX.
Clearly, picking the best performing shares is no easy task. What makes it harder for private investors, though, is a lack of time to trawl through the ASX looking for the most profitable investment opportunities.
Where to invest $1,000 right now
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Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.
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