Rio Tinto Limited
Although Rio Tinto Limited (ASX: RIO) this week reported its worst half-year profit in two years, it still announced a $2.6bn share buyback and a rise in dividends of 12%. In addition, it managed to cut net debt to $16.2bn and has stated that capital expenditure will be less than $9.1bn this year, as opposed to the $10.4bn that was previously expected. This, it is envisaged, will provide it with greater financial flexibility moving forward.
Of course, the share buyback plan seems to be very logical, since Rio Tinto's share price is exceptionally low. In fact, it has declined by 9% in the last year, while the ASX is up 12% and now trades on a price to earnings (P/E) ratio of just 10. As such, it appears to offer great value for money and could beat the ASX as a result of improved sentiment and an upward adjustment to its rating.
National Australia Bank Ltd.
Although shares in National Australia Bank Ltd. (ASX: NAB) are up 10% in the last year, they have still lagged the performance of the ASX by 2%. However, looking ahead, they could outperform the wider index during the next year as a result of a very appealing growth and valuation profile.
In fact, NAB trades on a price to earnings growth (PEG) ratio of just 0.9, which indicates that growth is on offer at a very reasonable price. Furthermore, its PEG ratio is much more appealing than the ASX's 2.1 or the wider banking sector's 1.8 and, as such, NAB could beat both its sector and the wider index moving forward.
In addition, NAB also has a beta of 1.24 and this means that for every 1% change in the price level of the ASX, NAB's share price should move by 1.24%. As such, with further interest rate cuts likely to boost the ASX, NAB could be a stock worth owning right now.
Wesfarmers Ltd
Over the course of the last year, Wesfarmers Ltd (ASX: WES) has disappointed its investors, since its share price has risen by just 1%. A key reason for this is continued concern regarding higher levels of competition from the likes of no-frills operators such as Aldi and Costco. In fact, with unemployment hitting 6.4% and the Aussie economy going through a challenging period, price is becoming a more important consideration for shoppers and this could lead to lower margins for the likes of Wesfarmers.
However, Wesfarmers could deliver much better performance than is currently anticipated. That's because it continues to offer a great yield of 4.6% (fully franked) and, with interest rates falling, its shares could become more in-demand as a result of higher desire for yields among investors. As such, it could outperform the ASX over the next year – especially since its shares have considerable appeal due to a PEG ratio of just 1.5.
