Within the last month, the S&P ASX 200 Index (ASX: ^XJO) has gained about 1.5% as it inches forward to new multi-year highs. However, there are two big name stocks that have shot ahead with gains over 5% in the same time. This may be a good sign just before the next reporting season. If they don't disappoint in results and give brighter guidance for 2015, there could be more upside to follow.
— The world's largest miner, BHP Billiton Limited (ASX: BHP), along with its perennial rival Rio Tinto Limited (ASX: RIO) are both ramping up iron ore production in the face of weakening commodity prices. Operating margins may thin out some, yet with increasing sales volumes BHP could still pull off higher earnings. It looks like the miner will handily exceed its FY 2014 export target.
Being a low cost producer, it can weather the low iron ore prices better than smaller rivals and still has its growing oil and gas business to shore up other earnings weakness. After iron ore slipped down to around $90/ metric tonne, it has rebounded and forecasts point to over $100 within a week. The stock offers a fully franked 3.4% dividend yield. With savings from cost cutting and business scale-backs, the company may be in a position to have a capital return to shareholders as well. The worst in mining has probably passed us, so having some BHP in your portfolio now could be a good move for mid-term returns growth.
— Carsales.com Ltd (ASX: CRZ), the number one car sales website, has been busy building up its vehicle related services by recently buying a 50.1% stake in vehicle and equipment finance company Stratton Finance Pty Ltd. The move will widen the website's service offerings as it expands itself to cover boats, caravans and even motorcycle sales online, making it more of a "one-stop shop" for vehicle loving buyers.
This follows other investments into overseas car sales websites operating in such countries as South Korea, Malaysia, Indonesia and Brazil. Just like a chain restaurant spreading out over a region, it is transplanting its successful business model internationally to maintain higher rates of revenue and profit growth. The current 2.7% fully franked yield is attractive for a fast growing company. It would be a good business to have a piece of in your portfolio, but it may be fully priced right now with a price/earnings ratio of 27.