With concerns surrounding the global economy gathering pace, it is looking as though 2015 is going to prove to be a disappointing year for the ASX. Currently, it is down by nearly 4% since the turn of the year but, with the Aussie economy still facing uncertainty as a result of falling commodity prices and Chinese demand for raw materials seemingly on the slide, it is difficult to see a clear catalyst in the remaining four months of the year.
Investing for the short term, though, is rarely a great idea. That's because it can take a number of years for high quality stocks trading at fair prices to deliver strong total returns. And, for investors lacking patience, it is easy to rack up commission charges from overtrading, as well as miss out on the compounding effect of dividends over the long run.
Clearly, the present weakness in the ASX presents an opportunity to buy in at a lower price than at the turn of the year and, encouragingly, there appear to be a number of stocks that are worth buying for the long term. One notable example is Macquarie Group Ltd (ASX: MQG). It recently released an encouraging set of results which showed that it is moving from strength to strength and, looking ahead, Macquarie is forecast to post growth in its earnings of almost 14% in the current year.
Despite this growth rate, Macquarie still offers a relatively wide margin of safety. It has a price to earnings (P/E) ratio of 14.6, versus 15.2 for the ASX, and should it meet the current year's growth expectation, it would mean that Macquarie will trade on a P/E ratio of just 13.5 next year. This indicates that there is considerable upside potential so that Macquarie is able to continue the run that has seen it post share price gains of 28% since the turn of the year.
In addition, Macquarie is likely to benefit from a falling interest rate. That's because it has a beta of 2, which means that for every 1% move in the wider index, Macquarie's share price should (in theory) move by 2%. And, with a falling interest rate having the capacity to boost investor sentiment and push the ASX higher, Macquarie could outperform the wider index during a more positive long-term timeframe.
Similarly, shopping centre operator, Scentre Group Ltd (ASX: SCG), is also likely to benefit from a looser monetary policy, with consumer demand likely to gain a boost from cheaper credit. As a result, Scentre Group's earnings are forecast to rise from $0.06 per share in financial year 2014 to around $0.23 per share in financial year 2016. This puts the stock on a price to earnings growth (PEG) ratio of 0.24, which is significantly lower than the ASX's PEG ratio of 1.34.
Furthermore, Scentre Group also appears to offer good value for money based on the price to book (P/B) ratio, with it standing at 1.23 versus 1.29 for the wider index. And, with the company's dividend yield currently standing at 5.5%, it also has more appealing income prospects than the ASX, which has a yield of 4.7%. Certainly, consumer confidence may come under a degree of pressure in the short run but, with Scentre having gained 6% year-to-date, it appears to be a resilient as well as good value and high-yielding stock for the long term.
