For many UK investors, 2014 has been a major disappointment. After all, following such a strong 2013 when it rose by 14%, the performance of the FTSE 100 has been well below many investors’ expectations year-to-date.
Some stocks, though, have fared worse than others and left shareholders in them nursing double-digit losses. However, just because they performed poorly in 2014 does not necessarily mean that 2015 will prove to be another year of being in the red.
With that in mind, here are three shares that have endured a challenging 2014, but which could be about to deliver stunning gains over the next year.
BP
Although the oil price may remain relatively weak during at least the early part of 2015, BP (LSE: BP) (NYSE: BP.US) could prove to be a winning investment over the next year. That’s because its valuation appears to simply be too low even when its present challenges are taken into account.
For example, BP trades on a price to earnings (P/E) ratio of around 10 which, for an oil major with a highly attractive asset base, seems difficult to justify. Certainly, a lower oil price, Russian sanctions and the fallout from the Deepwater Horizon oil spill could hurt its profitability moving forward. However, BP seems to have a sufficient margin of safety built into its current share price to indicate upside potential.
Furthermore, with BP having a yield of over 5%, it continues to appeal as an income play, which could lift sentiment while interest rates remain at a low ebb.
Standard Chartered
Also having a tough 2014 was Standard Chartered (LSE: STAN), with shares in the Asia-focused bank being hit by the double whammy of profit warnings and allegations of wrongdoing by regulators. As such, sentiment in the bank has weakened considerably and, as with BP, has left shares trading at a super-low valuation.
While China’s interest rate cut could prove to be good news for the region, there may be a time lag before its full impact is felt. So, in the meantime, Standard Chartered’s impressive earnings growth for 2015 (its bottom line is forecast to grow in-line with the wider index) and relatively low valuation (it has a P/E ratio of around 10), could combine to stimulate investor interest in the stock and push it higher.
In addition, with a yield of around 5.5%, Standard Chartered continues to offer impressive income potential, which means that its total return in 2015 could be highly appealing.
J Sainsbury
As investors in J Sainsbury (LSE: SBRY) (NASDAQOTH: JSAIY.US) are all too aware, 2014 has been a very tough year for the supermarket. It has led to shares in the company trading at less than net asset value which, when you consider how much property and cash it holds on its balance sheet, is difficult to justify even at a time when its top and bottom lines are under pressure.
Of course, there is light at the end of the tunnel. J Sainsbury’s joint venture with Netto could ease the pressure on its top line and help to shift investor sentiment in the company. It also means that J Sainsbury is freed up to promote its service and quality (rather than just price), thereby extending its appeal to the mid to upper price point customers that have flocked to stores such as Waitrose in recent years.
So, while J Sainsbury’s bottom line may come under more pressure in the early part of 2015, its dirt cheap valuation, longer term turnaround prospects and dividend yield of over 5% could combine to lift investor sentiment, and J Sainsbury’s share price, in 2015.
