It's always challenging to find stocks that can outperform the ASX. Of course, when the ASX has a disappointing year (as it has done in 2014, being down 1% year-to-date), beating it becomes all the more important as investors seek a positive total return.
Clearly, uncertainty among investors remains relatively high and, while this has been a major contributor to a disappointing 2014, it could provide an opportunity to buy high quality companies at relatively attractive prices.
With this in mind, here are three stocks that could beat the ASX in 2015.
Amcor Limited
Having risen by 18% since the turn of the year, investors in Amcor Limited (ASX: AMC) should be feeling pretty pleased with the performance of their business. After all, Amcor has successfully tweaked its strategy to incorporate higher margin, niche business that seems to not only be aiding the company's bottom line growth prospects, but is also causing investor optimism and sentiment to improve, too.
Although earnings are forecast to grow by just 3.7% next year, the company's longer term potential seems to be very appealing. For example, Amcor is considering M&A activity in emerging markets so as to increase its footprint in higher growth regions and, with the Aussie Dollar looking set to weaken, this could be positive news for Amcor as a significant proportion of its earnings are in foreign currencies.
With a P/E ratio of 17, Amcor is hardly cheap. However, 2015 could prove to be another strong year for its shares.
Commonwealth Bank of Australia
Having risen by 4% in 2014, Commonwealth Bank of Australia (ASX: CBA) has made steady, albeit slow, progress since the turn of the year. However, where the stock really appeals is with regard to its total return, since a dividend yield of 5.2% means that a double digit return in 2014 is well within its sights.
Indeed, if interest rates do fall in 2015 (which is a very real possibility), sentiment towards high yield stocks (such as CBA) could increase and lead to relative strength in its share price. And, with CBA having a beta of just 0.78, it could outperform a falling ASX in 2015 – just as it has done in 2014.
So, while there are doubts surrounding the valuations of many of our banking stocks, with CBA having a P/E ratio of 14.7 for example, it still appears to be a buy based on its superb yield and relatively defensive qualities. As a result, it could beat the ASX in 2015.
Origin Energy Ltd
While there are concerns regarding a potential overspend on the Australia-Pacific LNG project, the future seems bright for investors in the project's upstream operator, Origin Energy Ltd (ASX: ORG). That's because the company's current share price appears to include a significant margin of safety that could indicate share price gains are on offer.
For example, Origin currently trades on a PEG ratio of just 0.52, which is less than a third of the ASX's PEG ratio of 1.8. In addition, Origin currently yields an impressive, although unfranked, 4.3%. Together these numbers indicate that an impressive total return could be on offer for investors in the stock in 2015 and, while shares in Origin have fallen by 17% in the last month alone, now could prove to be a great time to buy them in anticipation of improved performance in 2015.
