3 cheap stocks you should put on your watchlist in 2015

Can JB Hi-Fi Limited (ASX:JBH) turn it around in 2015?

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2014 was a year in which experienced stock pickers thrived. Companies like Echo Entertainment Group Ltd (ASX: EGP) and Qantas Airways Limited (ASX: QAN) outperformed all expectations, while many others underperformed against the flat Australian indices.

I believe 2015 will be a similar story for investors. Those able to pick companies that deliver better-than-expected growth in the face of industry-wide pressure will likely be rewarded by investors. Here are three companies that I like for the year ahead:

  • STW Communications Group Ltd. (ASX: SGN) is in the notoriously tough advertising and communications industry. Aside from experience and brand recognition, most advertising firms hold no competitive advantage over peers, making long-term outperformance difficult. The industry is changing, but STW is Australia's largest advertising and marketing services company and appears to be adapting to the new environment well. Analysts believe it's a matter of when, not if, earnings materially recover from their multi-year slump. In the meantime, STW is expected to deliver a yield in excess of 9% this financial year!
  • JB Hi-Fi Limited (ASX: JBH) shareholders cheered a 120% return in 2013 but watched in horror as the share price plunged 27% in 2014 when investors and analysts became concerned over slowing same-store sales. Near-term catalysts for improving sales are limited but the company is trading on a forward price to earnings ratio of just 12.5 and a forward yield of 5.2%, fully franked. JB should benefit from a lower Australian dollar and a potential reduction in the GST-free threshold for online sales. In my view the downside from here should be limited.
  • G8 Education Ltd (ASX: GEM) shares started 2014 at $3 and ended at $4 having reached a high of $5.63 during the year. The company's aggressive growth strategy has seen its collection of company-owned childcare centres nearly double from 233 to 437 over the 2014 calendar year. With further growth and a dividend yield in excess of 5% expected during 2015, G8 is a stock that appears just one positive announcement away from a renewed push towards $6.
Motley Fool contributor Andrew Mudie does not own any stock mentioned. 

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