Santos Ltd
With the RBA having cut interest rates, the ASX has been given a boost in recent trading sessions. And, looking ahead, further cuts could be on the cards and may have a similar effect on the wider index. That's why cyclical stocks such as Santos Ltd (ASX: STO) could perform better than is currently being priced in, since they may react more positively than most companies to a more favourable interest rate environment.
This point is perhaps best evidenced by Santos' beta, which at 1.31 means that its share price should (in theory) move by 1.31% for every 1% change in the wider index's level. As a result of this, as well as the prospect of a stabilisation in energy prices, Santos could be a relatively impressive performer in 2015.
Woodside Petroleum Limited
While the resources sector is enduring a tough period, it may not last in the long run. In fact, all industries experience booms and busts and, in the long term, the higher quality companies tend to come through relatively well.
One example is Woodside Petroleum Limited (ASX: WPL) which, over the last 10 years, has been able to increase cash flow per share at an annualised rate of 9.7%. This is highly impressive and shows that it is able to sustain good performance over a relatively long period.
Interestingly, Woodside seems to be taking advantage of its relatively strong financial standing to increase its market share and, in the long run, it could be a winner from the period of low commodity prices, as it buys quality assets at low prices and improves its long run profitability even further.
Woolworths Limited
Shares in Woolworths Limited (ASX: WOW) have performed relatively poorly in the last six months, with them being down 9% while the ASX has risen by 6%. Part of the reason for this is concern regarding Woolworths' strategy, notably its decision to move into the home improvement space via Masters, which is dragging down the performance of the wider group at the present time.
However, Woolworths continues to offer a very appealing investment case. That's because it offers good value for money at the present time, with it having a price to sales (P/S) ratio of just 0.66, while the wider food and staples retailing sector has a P/S ratio of 0.99. As such, Woolworths could see its rating adjusted upwards – particularly as investors begin to realise that it remains a relatively consistent and well-diversified company.
