2014 has been a hugely disappointing year for investors in GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US). Shares in the pharmaceutical major have been down by as much as 18% during the course of the year and have shown little sign of life in recent months.
A major reason for this is a stalling bottom line, with GlaxoSmithKline forecast to report earnings that are 18% lower than they were last year, and then to follow this with growth of just 1% next year. Of course, a key reason for this is competition from generic drugs but, looking ahead, GlaxoSmithKline appears to have a very appealing pipeline of new drugs that could spur profitability higher over the medium to long term.
Furthermore, with shares in the company trading on a price to earnings (P/E) ratio that is roughly in-line with the wider market and yielding over 5%, they still have appeal in the short term to go alongside their longer term potential.
2015 could prove to be a ‘make or break’ year for Centrica (LSE: CNA). That’s because it has a new management team due to commence work at the company and is also facing a price freeze should Labour win the General Election.
Clearly, both of these issues could hold shares in the company back next year, as a new management team may seek to rationalise the business, while profit margins will inevitably be squeezed by a price freeze.
However, the current valuation of Centrica’s shares appears to price this in, since they trade on a P/E ratio that is below that of the FTSE 100 and have a yield of over 6%. As such, even if news flow is not hugely encouraging next year, Centrica could deliver an appealing total return in 2015 as its shares attract value and income seeking investors alike.
With the price of a range of commodities falling during 2014, even a relatively high degree of diversification has not made a huge difference to the performance of BHP Billiton (LSE: BLT) (NYSE: BBL.US). Its shares have been down by as much as 26% during the course of the year, although next year could see this turnaround massively.
That’s because BHP Billiton is currently priced for similar challenges in 2015 that it has experienced in 2014. For example, it trades on a P/E ratio that is considerably below that of the wider market and yields well in excess of 5%.
As a result, there appears to be a wide margin of safety included in BHP Billiton’s share price, which means that even a stabilisation in the price of commodities could equate to a share price rise next year. Therefore, BHP Billiton could be worth buying a slice of right now.
Of course, picking out potential turnaround plays like BHP Billiton, GlaxoSmithKline and Centrica is not an easy task – especially if, like most private investors, you lack the time to seek out the best value stocks.
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Peter Stephens owns shares of BHP Billiton, Centrica, and GlaxoSmithKline. The Motley Fool UK has recommended Centrica and GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.