As all investors are well aware, diversifying your portfolio is an important part of investing. For example, if you had only held oil or mining companies over the last year, your returns would probably be heavily in the red, with falls in the price levels of a wide range of commodities hurting their profitability and investor sentiment.
As such, it makes sense to buy stocks from a wide range of sectors so as to limit your risk, but also improve your potential return. For example, buying a slice of diversified financial company, Suncorp Group Ltd (ASX: SUN), provides investors with access to a strong growth rate at a reasonable price. That's because Suncorp is expected to increase its bottom line by 7.7% in financial year 2016, which puts it on a price to earnings growth (PEG) ratio of only 0.45, which is much lower than the ASX's PEG ratio of 1.44.
Certainly, the future for Suncorp appears to be much more competitive than its past. That's because the Aussie insurance marketplace is set to be subject to increased competition moving forward, with margins being relatively appealing compared to other markets across the globe and likely to attract new entrants. However, with Suncorp announcing that around $170m in cost cuts are set to be achieved by 2018, its margins may hold up better than many investors currently expect, thereby allowing it to meet its upbeat earnings growth prospects even in the face of greater competition.
Similarly, Domino's Pizza Enterprises Ltd. (ASX: DMP) remains a superb growth play, with it having increased its bottom line at an annualised rate of 20.1% during the last five years. And, encouragingly for its investors, Domino's has a beta of just 0.82 and this means that its shares should be less volatile than the wider index over the medium term.
Furthermore, Domino's is at the forefront of the latest ordering technology, which looks set to improve sales through allowing the company to better connect with its key demographic: teenagers and young adults. For example, Domino's makes full use of social media, offers a GPS tracker so that customers know how far away their pizzas are, and also has a slick online ordering portal. This means that, looking ahead, the company's bottom line is expected to rise by 28.3% per annum during the next two years.
Clearly, though, the sale of pizzas is not as consistent as the use of toll roads. And, while the Aussie economy may be struggling somewhat, the lower oil price is generally a positive thing for toll road operator, Transurban Group (ASX: TCL). It remains a top notch income play, with dividends per share rising by 10.1% per annum during the last five years and being forecast to increase by 12.2% per annum during the next two years.
This puts Transurban on a forward yield of 4.5% and, with a number of new roads set to be integrated into its business over the next few years, there is a clear catalyst for its bottom line and also for investor sentiment. In fact, Transurban's earnings are due to rise by 31% per annum during the next two years, as it begins the process of bringing its Queensland motorway investment onstream. And, with a PEG ratio of 1.14, it appears to offer growth at a reasonable price despite a share price that is up 15% already this year.
