Although shares in Lloyds (LSE: LLOY) have risen by just 1% in 2014, next year could see them deliver much stronger performance. That’s because continued low interest rates may cause investor demand for high yield shares to increase, thereby pushing their prices northwards. And, with Lloyds forecast to yield an impressive 3.7% in 2015, it could be classed as a relatively appealing income play in the coming months.
Furthermore, with Lloyds still trading at a relatively appealing valuation, it appears as though capital gains could be on offer in 2015, too. For example, it has a price to earnings (P/E) ratio of just 9.8, which is far less than the FTSE 100’s P/E ratio of 15.4. As such, Lloyds could considerably outperform the FTSE 100 next year.
While a lower oil price could be a feature of the early part of 2015, Shell’s (LSE: RDSB) current valuation appears to adequately price in more pain in this regard. For example, it trades on a P/E ratio of just 9.9 and this indicates that there is a considerable margin of safety currently included in its share price. In other words, even if oil stays relatively low over the coming months, Shell could still offer some share price upside moving forward.
In addition, Shell’s dividend remains well-covered at 1.9 times and, with shares in the oil major currently yielding 5.3%, their total return in 2015 could be impressive. As such, and despite being likely to be volatile, shares in Shell could outperform the wider index over the next year.
While the various political parties may not agree on stamp duty and mansion tax, one thing they are all in favour of is more house building. As such, house builders such as Persimmon (LSE: PSN) could be great buys for the year ahead.
In Persimmon’s case, its bottom line is forecast to rise by a whopping 43% in the current year, and by a further 22% next year. These are stunning growth rates and show that, while the housing market may be cooling somewhat, demand for new homes still massively exceeds supply and this bodes well for Persimmon over the long run.
With shares in the company having a P/E ratio of just 13.4, this equates to a price to earnings growth (PEG) ratio of just 0.4, which indicates that growth is on offer at a very reasonable price. Therefore, Persimmon could beat the FTSE 100 in 2015.
When it comes to dividend yields, Direct Line (LSE: DLG) is tough to beat. That’s because its shares currently yield an incredible 7.7%. That’s more than twice the FTSE 100’s yield of 3.3% and means that, with interest rates set to stay low, Direct Line could see its share price move higher in 2015.
Of course, many investors may be wary about buying shares in a company that has seen its share price rise by 85% in 2014. However, Direct Line still seems to offer excellent value for money, since it has a P/E ratio of 11.9, which indicates that there is still upside potential on offer for 2015.
In addition, a beta of just 0.7 means that even if the FTSE has another disappointing year, Direct Line could still deliver a positive total return over the next twelve months.
The London hotel market continues to boom. In fact, both of Whitbread’s (LSE: WTB) key businesses, Premier Inn and Costa Coffee are enjoying an economic tailwind which means that the company’s bottom line is expected to grow by 14% in each of the next two years.
This is roughly in-line with the average annual growth rate of the last four years, where Whitbread’s bottom line has risen at an average rate of 17% per annum.
Such impressive growth potential, as well as a relatively consistent track record of growth, means that Whitbread appears to offer good value for money even though its P/E ratio is rather rich at 22.7. For example, its PEG ratio of 1.6 seems to indicate reliable growth is on offer at a reasonable price and, as such, Whitbread could beat the FTSE 100 next year.
Of course, finding stocks that can beat the FTSE 100 is not an easy task – especially if you don’t want to spend most of your evenings and weekends trawling through the list of FTSE 350 constituents!
Peter Stephens owns shares of Lloyds Banking Group, Persimmon, and Royal Dutch Shell. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.