With interest rates being so low, it feels as though investors are demanding a lot more from their stock holdings. After all, if their cash is giving them next to no real return and bond yields are being compressed by low interest rates, it's only natural that investors are looking for shares to make up the difference.
However, with the ASX being down 3% since the start of the year, they've been left sorely disappointed by the performance of their portfolios in recent months.
Despite this, there is scope for optimism because a number of ASX stocks could be worth buying right now due to long-term growth potential. In fact, here are three prime examples of companies that could, in time, help you to beat the ASX.
Amcor Limited
One feature of a low interest rate environment is a weaker currency. So, with the RBA seemingly set to move interest rates down rather than up in 2015, one strategy that could be worth pursuing is to focus on companies that generate a significant proportion of their earnings outside of Australia.
One such example is Amcor Limited (ASX: AMC) and, although its shares have risen by 22% since the turn of the year, they still seem to offer good value for money.
For example, Amcor trades on a P/E ratio of 17.9, which given its superb track record of bottom line growth (earnings have risen by over 8% per annum during the last ten years), seems to be a price worth paying.
Furthermore, with a strong strategic presence in high-growth markets across the emerging world, Amcor could deliver excellent earnings growth over the medium term, with additional scope for a positive surprise in the shorter term if interest rates are slashed again.
Westpac Banking Corp
Also likely to benefit from a lower interest rate is Westpac Banking Corp (ASX: WBC), with it having considerable exposure to the Aussie mortgage market. Of course, over the medium term its earnings growth may be held back somewhat by more onerous capital controls, as highlighted in the Murray Inquiry.
However, Westpac could still outperform the ASX. After all, it continues to trade at a discount to the wider index, with it having a P/E ratio of 12.8 versus 14.8 for the ASX. As a result, an upward re-rating could send shares in the bank higher, and although investor sentiment may be somewhat more volatile in 2015 as the new CEO takes the helm, a fully franked dividend yield of 5.9% should help to keep investor interest in the stock alive.
Fortescue Metals Group Limited
With the price of iron ore being forecast to remain low over the near term, it may seem rather surprising to be talking about Fortescue Metals Group Limited (ASX: FMG) as a potential buy at the moment. After all, it could be argued that if the price of iron ore does fall further, then the price of Fortescue's shares will continue to decline and potential investors may be able to buy in at a lower price.
However, the market appears to already be pricing in continued falls in the price of the commodity. This means that, for long-term investors, now could be a great time to buy Fortescue since a stabilisation in the price of iron ore could lead to improved sentiment in Fortescue in the near term.
Also with Chinese interest rate reductions apparently on the way, the medium term outlook for iron ore could be a little brighter than is currently being priced in. So, with Fortescue having a price to book ratio of just 0.96, now could be a sound time to buy a slice of it – as long as investors can live with considerable uncertainty in the short to medium term.
Clearly, finding stocks that could beat the ASX next year and, in doing so, give your portfolio a boost is no easy task.
