While 2014 got off to a disappointing start for investors in Unilever (LSE: ULVR), with concerns surrounding the sustainability of the emerging market growth story holding its shares back, it has recovered to easily outperform the FTSE 100 year-to-date.
More could follow in 2015, since the cut in Chinese interest rates could stimulate demand for consumer goods across Asia and, with Unilever relying on the developing world for most of its sales, this could provide its bottom line with a major boost.
While shares in Unilever historically trade on a relatively high valuation, earnings growth forecasts for the long run are very upbeat. And, with the company’s bottom line set to be 7% higher next year, 2015 could see a continuation of Unilever’s impressive 2014 share price performance, as investors seek out companies with sound long term growth prospects.
Also making a poor start to the year were shares in BAE (LSE: BA). It issued a profit warning and its share price promptly fell by over 10% before beginning a superb recovery that has put them well ahead of the wider index this year.
Although the defence industry is going through a difficult period, with budgets being cut across the developed world, BAE is still expected to post an increase in earnings of 6% next year. This is hugely impressive and, if BAE can deliver such a brisk rate of growth amidst challenging trading conditions, it bodes well for its medium to long term future – especially as the global economy continues to recover.
With shares in BAE trading at a discount to the wider index, there is still considerable scope for an upward rerating during the course of 2015.
The purchase of the USA’s bestselling e-cigarette, Blu, could prove to be a masterstroke by Imperial Tobacco (LSE: IMT). After all, e-cigarettes are rapidly gaining in popularity and seem to benefit governments in terms of being less bad for consumers than cigarettes, and also allow smokers to enjoy better health while still obtaining their nicotine fix.
So, while a Labour victory at the General Election could cause sentiment in Imperial Tobacco to weaken in 2015 (as Ed Miliband is proposing a tobacco tax based on market share), the company’s medium to long term prospects appear to be very bright.
Despite this, shares in Imperial still trade at a discount to the wider index and, with a dividend yield of 5%, they appear to be well-worth buying right now.
Having risen by 61% in 2013, the last year has been a major disappointment for investors in Lloyds (LSE: LLOY). That’s because its shares are flat year-to-date even though it is on course to post its first profit since the start of the credit crunch.
Furthermore, with interest rates set to remain low throughout 2015 (even if they rise it is highly unlikely that will be anything more than 1% in a year’s time), Lloyds’ income potential could stimulate investor interest in the stock. That’s because Lloyds is on-target to yield a mightily impressive 3.7% in 2015, which puts it deep into income investor territory.
In addition, with Lloyds still trading at a discount to the FTSE 100, there is scope for an upward adjustment to its valuation in 2015, too.
It may seem rather strange to talk about a company that recently had a profit warning as being a potential ‘hit’ for 2015. However, Supergroup’s (LSE: SGP) profit warning was almost entirely due to unseasonable weather, which hit sales numbers in the short run.
For the long run, though, the company seems to be well-positioned for growth. It has a great brand, loyal customer base, and the appointment of Euan Sutherland as CEO is a positive for investors, given his excellent track record at Kingfisher.
With Supergroup forecast to grow its bottom line by around 18% next year, it appears to be a strong growth play that doesn’t yet trade at a premium valuation. Therefore, share price gains could lie ahead.
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Peter Stephens owns shares of BAE Systems, Imperial Tobacco Group, Lloyds Banking Group, Kingfisher and Unilever. The Motley Fool UK owns shares of Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.