2 shares to boost your portfolio returns: Ramsay Health Care Limited and Insurance Australia Group Ltd

These 2 stocks have significant long term appeal: Ramsay Health Care Limited (ASX:RHC) and Insurance Australia Group Ltd (ASX:IAG)

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For much of 2015, the outlook for the ASX has been hugely uncertain. A slowdown in China has been a key factor in commodity price falls which, in turn, have depressed the profitability of the Australian resources sector. This has caused a degree of uncertainty regarding the future of the domestic economy and, with the ASX having been down by as much as 9% at one point this year, it is clear that investor sentiment has been rather cautious.

Looking ahead, though, there are reasons to be optimistic. For example, Australian GDP growth was better than expected and the global economy continues to show signs of improvement – especially in Europe and the US. As such, investing now in high quality companies could be a shrewd move.

One stock which appears to be an enticing buy at the present time is private hospital operator Ramsay Health Care Limited (ASX: RHC). It remains one of the most reliable growth plays in the ASX, with its bottom line rising by 16.9% per annum during the last decade and being forecast to increase by 20.8% per annum during the next two years. And, with its shares trading on a price to earnings growth (PEG) ratio of 1.51, it trades at only a small premium to the somewhat less reliable ASX, which has a PEG ratio of 1.44.

Ramsay is, of course, investing in its long term growth, too, with $197m being approved in the last financial year for new developments on brownfield sites. Furthermore, Ramsay is targeting additional acquisitions following its $620m purchase of a controlling interest in France's GdS. Additionally, with expansion potential in China offering access to what could become the world's most lucrative health care market, Ramsay appears to be well positioned to continue to beat the market after its 13% rise year-to-date.

Meanwhile, Insurance Australia Group Ltd (ASX: IAG) is expected to increase its bottom line by 6.7% in the current financial year and this could act as a positive catalyst on its shares in 2016. In fact, with IAG trading on a price to earnings (P/E) ratio of 14.6 versus 15.7 for the ASX, there appears to be upward rerating potential – especially with interest rates set to remain low and IAG's yield of 5.1% (fully franked) being 50 basis points higher than that of the ASX.

A key reason for IAG's forecast improved financial performance is a $230m pretax synergy and benefit run rate in the current financial year. This is largely due to the integration of the Wesfarmers business unit, as well as an ambitious digitisation strategy. And, with IAG expected to turn its attention to the lucrative Asian economy where financial product penetration is relatively low, it has huge scope to increase its earnings from that region from the current $21m level.

Motley Fool contributor Peter Stephens has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

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