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Here’s why the bull market may have further to run

Credit: Michael Devlin, Flickr.com

Whoever said investors should avoid the Australian stock market was dead wrong.

The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has delivered an incredible performance since last Tuesday, in which time it has climbed a remarkable 5.6% from a low of 5142 points to 5428 points today.

Oil prices have rebounded to be trading back above US$60 a barrel while the US Federal Reserve also provided a strong indication that interest rates would remain low for the foreseeable future. Add to that the recent speculation that the Reserve Bank could be forced to cut interest rates even lower in 2015 – which would likely attract more investors back to high yielding equities – and you’ve got yourself the recipe for a rising stock market.

In fact, Commonwealth Bank of Australia (ASX: CBA) has today risen to a record high, while Telstra Corporation Ltd (ASX: TLS) also set itself a fresh 13-year high at $5.99. Other stocks like BHP Billiton Limited (ASX: BHP) have also rebounded strongly.

As I noted last week, my personal portfolio has blossomed in that time. Do you want to know why?

It’s because I wasn’t panicking while everyone else in the market seemed to be running for their lives. Instead, I was buying stocks that had been hammered recently, even though their underlying businesses remained as strong as ever before. In fact, my portfolio has now risen around 7% in the space of just one week!

The two companies that I purchased – Collection House Limited (ASX: CLH) and TFS Corporation Limited (ASX: TFC) – have risen even more, giving me returns of 14% and 13.8% respectively.

Just imagine the returns you could make if you bought shares in every dip…

That’s not to say I was timing the market – far from it!

Instead, I had simply kept some cash on the sidelines and saw that it was the perfect opportunity to put it to work. While it’s paid off thus far, I’m expecting far greater returns in the coming years.

Although the stock market is rebounding (strongly!), there are still plenty of opportunities presenting themselves, including the stock our top investment advisor has just named his #1 stock pick for 2015. In fact, it's still sitting 17% below its 52-week high, making now the perfect time to stock up!

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Motley Fool contributor Ryan Newman owns shares in Collection House Limited and TFS Corporation Limited. You can follow Ryan on Twitter @ASXvalueinvest.

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