2 stocks set to beat the ASX: CSL Limited and Macquarie Group Ltd

These 2 stocks appear to be worth buying right now: CSL Limited (ASX:CSL) and Macquarie Group Ltd (ASX:MQG)

| More on:
a woman

As investors, we’re always seeking out stocks that can perform better than the ASX. After all, we want the best stocks offering the highest returns and, while in the long run the wider index should offer excellent total returns, if better performance is on offer then it would, of course, be preferable.

However, finding stocks that can considerably outperform the wider index can be tough. Do you seek out the companies offering the best growth rates? Or, focus on the cheapest stocks that could be the subject of a significant rerating? Moreover, are income shares the most likely to beat the wider index – especially with interest rates on the slide?

Clearly, there are opportunities to beat the ASX in all of these spaces. However, finding stocks that offer strong growth prospects at a reasonable price appears to be a sound move, with the likes of pharmaceutical company, CSL Limited (ASX: CSL), and investment company, Macquarie Group Ltd (ASX: MQG), scoring well on both these areas and having beaten the ASX by 38% and 35% respectively during the last 12 months.

Looking ahead, further outperformance seems to be on the cards, with CSL’s historic earnings growth rate of 21.4% per annum during the last 10 years set to continue over the next couple of years. In fact, it is expected to deliver a bottom line that is 45% higher in financial year 2016 than it was in 2014, which could stimulate investor sentiment moving forward. And, with CSL trading on a price to earnings growth (PEG) ratio of just 1.22, it seems to offer excellent value for money, too.

Furthermore, CSL could benefit from a weakening Aussie dollar over the medium term. That’s because most of its sales are derived from outside the domestic market and, with interest rates set to fall below 2% in 2015 and beyond, its growth rate could surpass that of the last decade.

Meanwhile, investment company, Macquarie Group, gained a boost last week with a trading update that was warmly received by the market. That’s because the company stated at its AGM that its business is performing well and that it should not have any major issues in adhering to the new higher reserve requirement that was recently announced by regulators. This had hurt sentiment in major banks but, with Macquarie apparently having it under control, sentiment in the company could pick up over the coming months.

Furthermore, Macquarie is forecast to increase its earnings at an annualised rate of 8.8% during the next two years. This, alongside a price to earnings (P/E) ratio of 16.4, equates to a PEG ratio of 1.86. This may not be particularly low but, with Macquarie having a strong track record in recent years (net profit has risen by 9.2% per annum during the last five years), it appears to be trading at a fair price. And, while it and CSL have both soared in the last year, more share price growth appears to be on the cards in the medium to long run.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor Peter Stephens has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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 »

asx share price competitions represented by businessmen arm wrestling
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 »

person reading news on mobile phone
⏸️ 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 »