Shares in Wesfarmers Ltd (ASX: WES) have delivered a surprisingly strong result thus far in 2015. Certainly, they have risen by just 0.5% since the turn of the year, but this is a better result than the ASX's decline of 1% year-to-date.
Wesfarmers' performance is somewhat surprising since it coincides with an increasingly challenging supermarket sector. Competition from no-frills operators such as Aldi and Costco is causing Wesfarmers to be drawn into a price war where the cost of products, rather than their quality or other factors such as customer service, carries the most weight for consumers.
A further surprise, though, is that Wesfarmers is forecast to increase its bottom line at an annualised rate of 6.6% during the next two years. A reason for this is its conglomerate structure which provides it with diversification benefits, while the company has also focused on productivity improvements and in becoming more efficient via store network optimisation.
Clearly, Wesfarmers is set to endure a challenging period, with the Australian economy likely to offer little in the way of growth over the coming months. But, as the company's recent first quarter sales figures showed, it continues to post positive retail sales growth numbers and, with its shares trading on a price to sales (P/S) ratio of just 0.76 versus 1.42 for the wider ASX, now appears to be a good opportunity to buy Wesfarmers for the long term.
Similarly, toll road and tunnel operator Transurban Group (ASX: TCL) has outperformed the ASX since the turn of the year. Its shares are up by 21% and of great appeal to investors is Transurban's relatively stable growth outlook and resilient track record of growing earnings. For example, Transurban has increased its bottom line at an annualised rate of 15.5% during the last decade and, over the next year, is expected to raise net profit by over 11%.
In addition, Transurban presently yields 4.1%, and with double-digit dividend growth forecast for the next two years, it is set to yield as much as 4.7% in financial year 2017. And, with its exposure to the US set to benefit from a stronger US$ and also from pricing improvements over the medium term as well as cost savings across its portfolio, Transurban appears set to soar.
Meanwhile, property business Goodman Group (ASX: GMG) has posted a share price rise of 6% since the turn of the year. Partly because of this, it now trades at a small premium to the ASX, with it having a price to earnings (P/E) ratio of 16.2 versus 15.9 for the wider index.
However, Goodman Group has considerable long term growth potential and it is currently restructuring its property portfolio to take advantage of pricing opportunities. For example, it is reorganising its exposure from lower grade assets to higher grade ones, thereby improving its long term income visibility as well as capital growth potential. And, with its shares offering a dividend yield of 3.8% which is covered 1.6x by profit, it appears to offer a potent mix of growth and income potential at a fair price.
