One of the difficulties of being a good investor is knowing when to 'stick' and when to 'twist'. In other words, do you buy shares when the outlook is bleak (as it is at the moment), or wait for an even lower price before buying a slice of your favourite company?
Similarly, when prices are high and the market is anticipating further gains, it can be difficult to hold off and wait for a price drop. However, logic says that is exactly the right course of action, since the idea of 'buying low' and 'selling high' remains the most obvious route to a rising portfolio value in the long run.
The problem, though, is that shares are rarely (if ever) low without good reason. And, at the present time, the potential for a recession as well as an uncertain outlook for China are causing the ASX to fall. In fact, in the last year it has fallen by 7%. This, then, could be the right time for long term investors to 'twist' and take advantage of discounted prices.
One company which has beaten the ASX is Telstra Corporation Ltd (ASX: TLS). Its shares are up 1% in the last year, although this is perhaps unsurprising since Telstra is a highly defensive stock and is viewed as a core holding by many investors, thereby making it seem safer compared to a number of its index peers.
Looking ahead, Telstra is likely to be less reliant on the Aussie economy for its sales and profitability, since a goal of the company is to generate a third of revenue from outside of the domestic economy within five years. This is a shrewd move, since it will provide greater growth opportunities and spread the risk more evenly between different economies.
Of course, it is set to continue to be a top notch income stock, with dividends due to rise by over 3% per annum during the next two years. This puts it on a forward yield of 5.8% (fully franked), which should help its shares remain in-demand as interest rates fall and prove to be a positive catalyst for its future share price.
Similarly, Origin Energy Ltd (ASX: ORG) also has a very bright future, with its bottom line due to bounce back following a tough current year. In fact, with a cost-cutting drive set to begin to positively impact earnings from next year onwards as well as the potential for completion of the Australia Pacific liquefied natural gas (LNG) project, Origin Energy's bottom line is due to rise by as much as 31% in financial year 2017.
This puts the company on a price to earnings growth (PEG) ratio of only 0.4 and, with it having a yield of 7.1%, its total returns could easily beat the wider index in 2016 and beyond.
Meanwhile, Super Retail Group Ltd (ASX: SUL) has avoided the ASX's poor recent performance. Its shares have soared by 26% since the turn of the year despite it reporting a rather mixed set of results. They showed a somewhat patchy performance between its different divisions but, despite a challenging outlook for the economy, Super Retail plans to open between 20 and 30 new stores and focus on efficiencies in an attempt to counter higher purchase costs.
And, with the company's earnings due to rise by over 15% per annum during the next two years, improved efficiencies are set to have a positive impact on Super Retail's performance. With its shares trading on a PEG ratio of 1.05 versus 1.49 for the ASX, they appear to be all set to continue their excellent run in 2015 thus far.
