The average Australian super fund returned 8.5% in 2014, comfortably beating the S&P/ASX200 total return index of 5.6%. The additional 2.9% return was generally attributed to super funds holding international equities that outperformed the ASX indices.
In 2014, my self-managed superannuation fund (SMSF) portfolio of ASX-listed companies delivered an impressive 13.1%. Two trends that helped my portfolio outperform the ASX during 2014 look likely to continue into 2015.
Holding high-quality, dividend–paying companies operating in non-cyclical and growth industries
With economists tipping the Australian official cash rate to drop further in 2015, the hunt for yield continues. Cash from low-yielding term deposits will continue to flow into equity markets. Companies that deliver strong and sustainable dividends will outperform in 2015. Additionally, the current volatility in world markets will attract investors seeking lower risk to non-cyclical and growth industries.
If you agree that this trend will continue, here are some ideas for further research:
M2 Group Ltd. (ASX: MTU) – As the internet expands its reach into all aspects of everyday life the telecommunications sector continues to boom. Offering a fully franked dividend yield of 3.0%, M2 provides investors with income and exposure to this growth industry.
Woolworths Limited (ASX: WOW) – The expansion of Aldi and Costco into the Aussie grocery market has alarmed investors and Woolworths' share price has taken a beating. With a vast network of leading stores providing consumer staples across Australia I believe these concerns are overstated and that Woolies will continue to provide investors with very healthy returns into the future.
Holding high-quality Australian companies with substantial international earnings
The depreciation of the Australian dollar in 2014 will provide an earnings boost to companies operating internationally when foreign cash is converted to Australian dollars. Analysts are tipping that our exchange rate has further to fall therefore it is very likely these stocks will continue to outperform in 2015.
If you agree with this, here are some ideas for further research:
CSL Limited (ASX: CSL) and ResMed Inc. (ASX: RMD) earn more than 90% of total revenues outside Australia and will benefit from the downturn in the Aussie dollar. The share price of both companies advanced over 25% in 2014 and may not provide compelling value at current prices. Investors would be wise to include these two companies on the watch list and pick them up at lower prices if the opportunity arises.
Computershare Limited (ASX: CPU) – Providing a lot more than just share registry services, Computershare is a global giant and derives 85% of its revenue internationally. Despite 40% of earnings coming from the U.S. the share price was flat in 2014. It offers a P/E ratio of 17 and a dividend yield of 2.6%. Currently unloved by investors chasing international earnings exposure, Computershare is a worthy contender for your 2015 portfolio.
