3 finance stocks that could shine in 2015: Australia and New Zealand Banking Group, QBE Insurance Group Ltd and AMP Limited

These 3 financials could be worth buying: Australia and New Zealand Banking Group (ASX:ANZ), QBE Insurance Group Ltd (ASX:QBE) and AMP Limited (ASX:AMP).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With many of our banks and financial stocks having posted significant gains over the last few years, it's of little surprise that many Aussie investors are beginning to question their valuations. After all, no stock price goes up forever and, after such a strong period of performance, a pullback seems like a logical next move.

However, that doesn't mean that their long-term futures are any less appealing, with a number of financial stocks having considerable potential.

With that in mind, here are three finance companies that, after a period of lacklustre share price performance, could be set to make strong gains over the medium term.

Australia and New Zealand Banking Group

With shares in Australia and New Zealand Banking Group (ASX: ANZ) having fallen by 6% in the last six months, their valuation has eased somewhat. This means that, even though ANZ has risen by an index-beating 40% in the last five years, it could be worth buying at the present time.

For example, ANZ trades on a price to earnings (P/E) ratio of just 11.8, which is considerably lower than the rating of either the ASX (14.9) or the wider banking sector, which has a P/E ratio of 13.7. This means that an upward rerating could take place, thereby pushing ANZ's shares higher.

And, with ANZ rumoured to be all set to kick-off the sale of its vehicle and equipment finance business, Esanda, it could receive a short term cash boost of around $2 billion. This could improve investor sentiment in ANZ as well as its cash flow, and help its share price to move higher this year.

QBE Insurance Group Ltd

Also making headlines regarding mergers and acquisition (M&A) activity is QBE Insurance Group Ltd (ASX: QBE), with it being in the process of selling agency businesses in North America to Alliant Insurance Services for around $366 million. This fits in with QBE's strategy of simplifying its business and disposing of non-core activities, thereby helping it to become more efficient and, ultimately, more profitable.

Unlike many of its finance sector peers, QBE's share price performance has disappointed in recent years, with it posting a total shareholder return of minus 10.2% per annum over the last five years. However, looking ahead, QBE could be a strong performer since it offers a price to earnings growth (PEG) ratio of just 0.09, which indicates that its share price could move sharply higher during the course of 2015.

AMP Limited

Although its shares are down 3% in the last month, AMP Limited (ASX: AMP) has still posted total shareholder returns of 13.3% per annum over the last three years. That's a superb return and has been aided considerably by AMP's excellent dividends.

For example, AMP currently yields a very enticing (and partially franked) 4.6%, but it's the company's future income prospects that really hold appeal for investors. That's because it is forecast to increase dividends per share at an annualised rate of 11.3% over the next two years, which could mean that shares in AMP yield as much as 5.4% next year.

And, although AMP does trade at a premium to the ASX when it comes to the P/E ratio (15.3 versus 14.9), its excellent income prospects should help to keep investor sentiment buoyant and push its share price higher during the course of the year.

Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »