As all investors are well aware, having a diversified portfolio of stocks helps to spread the risk and means that the inevitable lumps and bumps of investing are somewhat smoothed out over the long run.
Furthermore, a mix of growth, income and great value stocks can prove to be a winning combination, as can a range of stocks from different sectors.
With that in mind, here are three companies from different sectors that offer contrasting investment cases for the year ahead.
QBE Insurance Group Ltd
After a number of challenging years, things seem to be on the up for QBE Insurance Group Ltd (ASX: QBE). For example, it is planning to rationalise its business via the divestment of the US agency business, as well as part of its European operations. In addition, it is now on a financially stronger footing after raising capital from shareholders and debt holders in recent weeks.
These changes are set to make an impact on the company's profitability in the long run and, looking a little nearer-term, QBE is also forecast to make significant progress. For example, its bottom line is expected to grow by 29.8% next year, which puts it on a forward P/E ratio of just 10.7.
With the ASX having a P/E ratio of 15, QBE seems to offer excellent value on a relative basis. And, with its future arguably brighter than it has been for many years, now could be a good time to buy a slice of this potentially undervalued insurance play.
Oil Search Limited
Clearly, the present time is proving to be a major challenge for Oil Search Limited (ASX: OSH) and, looking at the next few months, things could get worse for the oil price. That's because there is still a major oversupply of oil, which means that there is a credible chance that the price of oil could sink to below its current $67.50 per barrel level.
However, the share prices of oil stocks such as Oil Search may already reflect future pessimism regarding the oil price. For example, Oil Search trades on a PEG ratio of just 0.23, which is far more attractive than the ASX's PEG of 1.88. This means that even if the oil price falls further and causes a drop in Oil Search's earnings, there could still be great value on offer.
Of course, holders of Oil Search must be accepting of short-term volatility (shares in the company are down 11% in the last month, for example), but they could be handsomely rewarded as a result of problems already being generously priced in.
Telstra Corporation Ltd
With Aussie interest rates being held steady this week, it seems as though the status quo could last until well into 2015. That's especially the case if commodity prices show little sign of strengthening, and the unemployment rate remains higher than the RBA would like it to be.
So, income stocks could still be worth holding, with their dividends helping to alleviate the derisory rate of return on cash and their headline yield also acting as a support for the share price as investor demand for high yield stocks remains relatively buoyant.
On the income front, Telstra Corporation Ltd (ASX: TLS) continues to impress. Its fully franked 5.2% yield easily beats the ASX's yield of 4.6% and, while dividends per share are not expected to grow in the next two years, there is considerable potential for them to rise over the medium term, as Telstra expands its Asian footprint and seeks to deliver improved bottom line numbers.
As such, Telstra's income appeal could mean that its share price continues the momentum that has seen it rise by 6% in the last six months.
