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The Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and do not constitute advice to buy or sell.
2014 has not been a great year for the Beginners’ Portfolio, with Tesco, Quindell and Blinkx hitting the headlines for all the wrong reasons. But I’ve spent enough time talking about what went wrong with them, so today I’ll take a look forward to the three stocks that I think could be the portfolio’s winners in 2015.
Banking comeback
I added Barclays (LSE: BARC) (NYSE: BCS.US) to the portfolio in February at 245.2p, though my hopes for an early profit were dashed as evidence of further misbehaviour during the banking crisis emerged — and today we’re sitting on a 16% loss.
But Barclays eased through December’s Bank of England stress test (while Lloyds and TSB only just squeaked past), so its capital position looks strong enough to survive a very serious economic crunch.
What makes Barclays look good now is its 21% EPS growth forecast for 2014 followed by a further 29% next year, giving us a forward P/E of under 9 for 2015. And by that time, dividends should be recovering well and yielding more than 4%.
There are risks should any further wrongdoings emerge, but I reckon there’s enough safety margin in the share price.
Engineering recovery
BAE Systems (LSE: BA) has kept its EPS nicely stable through the recession, with a bit of volatility year-to-year, but that happens with intermittent payments over multi-year contracts.
With an order backlog of £39.7bn at the halfway stage in June, BAE has plenty of work lined up, and by Q3 time we heard the firm had won £7.9bn in new orders in the nine months to date.
BAE has kept its dividends rising throughout too, and there are yields of 4.6% and 4.7% expected for 2014 and 2015. The portfolio is up 28.5% on BAE so far, and with a forward P/E falling to a little over 11 for 2015 I can see another strong year ahead.
More houses!
And finally, after it has more than doubled in value since arrival in the portfolio, do I really think Persimmon (LSE: PSN) has more to come? I certainly do.
Interest rates look like they’ll be super low for some time yet and stamp duty has just been reduced, and all of our housebuilders are reporting rising sales quarter after quarter.
Persimmon is on a P/E for 2015 of just over 10, and it’s handing out big chunks of cash — we had a cash return of 70p per share in July 2014, and there’s a further 95p planned for 2015. I can see more growth to come.
