Beating the market's returns should be the aim of every equity investor, but it is no easy feat. While you might handily outperform the market in one year, doing so consistently on a year-to-year basis is something very few investors manage to do.
While there are numerous barriers to achieving market-beating returns, amongst the top reasons are investment fees (that is, brokerage fees), taxes (think capital gains, particularly on investments held for under 12 months) as well as the psychology behind investing. Many people let emotions get to them and buy when prices are high and sell when they are low which can seriously hinder your returns as an investor.
It's worth noting that some of the analysts who have consistently achieved superior returns include Warren Buffett and his teacher, Benjamin Graham, as well as Peter Lynch, the man behind Fidelity's Magellan Fund. Notably, each of these legendary investors were in it for the long haul, thus limiting the impact of fees and taxes whilst also mastering their emotions, removing the risk of selling out of fear or buying in greed.
10 stocks for market-smashing returns
Right now, many investors will be thrown off by the rally experienced by the Australian share market. Indeed, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is sitting near a seven-year high having rallied more than 11% over the last month and many will fear that they've already missed the boat.
The great news is, it looks as though there could be plenty of money still to be made, provided that you know where to look. While the market is fixated on the nation's biggest and highest yielding stocks (think, the big four banks and Telstra Corporation Ltd (ASX: TLS)), the smart investors are instead going for those stocks which haven't yet been swarmed upon.
With that in mind, here are 10 stocks I believe could deliver superior returns in 2015 (and in the ensuing years), and the reason why I believe they could perform so strongly…
- Coca-Cola Amatil Ltd (ASX: CCL). The stock has been hammered but there are signs of a potential return to strength in 2015 for the beverage manufacturer which could see the stock jump strongly. Further, it offers a very generous 4.2% dividend yield, partially franked.
- Collection House Limited (ASX: CLH). The debt collection agency has shown strong and consistent growth yet the market doesn't appear to have caught on just yet. While it should continue to grow strongly over the coming years, it too offers a fully franked yield of 3.8%.
- Woolworths Limited (ASX: WOW). One of Australia's powerhouse companies trading at a handy 17% discount to its 52-week high. Competition concerns have been blown out of proportion and it offers a yield of 4.5% fully franked (or 6.4% when grossed up).
- Veda Group Ltd (ASX: VED). Credit reporting standards are becoming increasingly strict and Veda Group (which enjoys a monopolistic position in the market) is in the box seat to benefit. Strong growth is expected across the business this financial year and in the years to come.
- Cover-More Group Ltd (ASX: CVO). Australia's largest travel insurer has a huge growth runway ahead but fears of a slowdown in Australian outbound travel have got under the skin of investors. At $2 per share, Cover-More Group is sitting nearly 25% below its 52-week high and could grow strongly over the next few years.
- Slater & Gordon Limited (ASX: SGH). The legal eagle has solidified its position in the Australian market and is making strong progress in its expansion into the much larger UK market. With the way things are going, the stock could still have plenty of room left to run.
- Westfield Corp Ltd (ASX: WFD). The global shopping centre giant maintains excellent exposure to the recovering US and UK economies. As it reports its earnings in US dollars, Australian shareholders should also benefit from a weaker Australian dollar.
- Greencross Limited (ASX: GXL). The provider of veterinary services has done a wonderful job expanding its market share, but is still a long way off hitting its target of 20% market dominance. The shares have trended lower in recent months giving investors with a long-term perspective an excellent opportunity to stock up.
- oOh!Media Ltd (ASX: OML). Australia's largest 'Out Of Home' media company only recently debuted on the ASX so is still unknown by most investors. While the digitalisation of advertising billboards offers oOh!Media strong opportunities to grow earnings, the stock is still trading on a relatively low premium.
- Japara Healthcare Ltd (ASX: JHC). As one of the biggest players in the industry, the aged-care provider stands to benefit from Australia's rapidly growing and ageing population. While its shares have suffered as a result of a payroll blunder, the underlying business remains strong and could be a boon for investors who buy today.
There's one more company which could deliver even greater returns in 2015 and in the years to follow.
