How To Beat The FTSE 100 by 20%+ By The End Of 2015!

This Fool investigates whether there are any better investments than the FTSE 100 (INDEXFTSE:UKX) right now.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I don’t have a crystal ball, so my estimates here may be well off the mark. Yet I am ready to play the “best guess” game, betting on short-term upside for certain stocks while taking into account the long-term potential of value candidates that could be grossly undervalued at the present time. 

Assumptions & Risk

I am working under the assumption that the FTSE 100 will close some 5-10% higher at the end of year — a scenario that is surely possible, at least according to bond market prices worldwide. 

So, I am looking for targets that will deliver pre-tax gains of at least 25% in less than four months. 

If Warren Buffett read this article, he’d likely say I am a fool to try and get my Christmas shopping paid by equities!

I wouldn’t blame him, but he’d surely agree with part of my story: the current market weakness presents one of the best opportunities to buy stock since the onset of the credit crunch.

So, the biggest risk here is that you may not be able to cash in by the end of 2015 if you are aiming for a four-month, 20% pre-tax return over the FTSE 100, but remember that at The Motley Fool we recommend to take positions in companies that deliver value over the long term.

Combining these two aspects, I think I have minimised short-term risk. With this in mind, these are the names. 

Bombed-Out Stocks Promising 25%+ Returns

The first company that you should keep on the radar is Centrica. Here, I’d bet on a much stronger cash conversion cycle and asset disposals, without ruling out a takeover. A bounce is overdue, based on its assets base and its restructuring plans. In early January, its stock surged 13% in less than two weeks in the wake of the announcement of a new strategy. Only a few pence away from its 52-week low, its stock trades around the lows of 2009. If I am right, you’d be prepared to bet on a price target of 300p. 

For similar reasons, I’d choose Tesco in the food retail sector. Elsewhere, I see Brent at between $70 and $80 a barrel by the end of the year, so BP is an obvious choice, while Petrofac also ranks high on my wish list.  The riskiest bet of all would be the mining sector, where Antofagasta stands out — I like its fundamentals and its balance sheet.

Forget about all the banks and the insurers, I’d argue — regulatory and headline risks are high, while capital appreciation would take time to show in these sectors now. Be selective, meanwhile, with homebuilders and telecoms companies, where regulatory and headline risks are perceived as being low in spite of relatively high valuations, which is never a nice combination. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

6.9% dividend yield! 2 cheap stocks to consider for a £1,380 passive income

Looking for a market-beating passive income? These FTSE 100 and FTSE 250 dividend stocks could provide a healthy second income…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

Potentially 34% undervalued, should I be watching the boohoo share price?

The boohoo share price has seen a rocky few years, but with signs that the economy is improving, could this…

Read more »

Investing Articles

Is the Amazon share price primed for a drop?

The Amazon share price has been on a tear for the last year, but can this trend continue? Gordon Best…

Read more »

Photo of a man going through financial problems
Investing Articles

Down 15% in a week! What’s gone wrong with the National Grid share price?

The National Grid share price isn't supposed to crash but now it has. Harvey Jones is wondering whether to take…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »

A pastel colored growing graph with rising rocket.
Value Shares

These FTSE 250 shares are tipped to rise 14% to 18% in the next year!

Looking for the best FTSE 250 momentum shares to buy? Here are two that City analysts expect to soar in…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Lloyds’ share price is up 20% in 3 months! How high can it go?

Lloyds’ share price has ripped higher recently. Here, Edward Sheldon provides his view on the level it could potentially climb…

Read more »

Investing Articles

Why the Rolls-Royce share price could continue to outperform

The Rolls-Royce share price keeps moving forward, but this Fool thinks it's still behind where it ought to be after…

Read more »