Why GlaxoSmithKline plc, United Utilities Group PLC And Domino’s Pizza Group PLC Can Beat The Index In 2016!

With the FTSE 100 coming under severe pressure due to concerns surrounding China, many investors are naturally seeking out safer stocks. That’s a key reason why water services company United Utilities (LSE: UU) has posted a rise of 0.5% in its share price since the turn of the year, which puts it 4.5% ahead of the wider index thus far in 2016.

Such outperformance shouldn’t really be a surprise, since United Utilities has beaten the FTSE 100 by 55% in the last five years. And with a high level of volatility set to be a feature of 2016 as US interest rate rises, slowing Chinese growth and a weak oil price cause uncertainty, United Utilities seems likely to beat the FTSE 100 yet again this year.

That’s at least partly because it offers a very visible, robust and resilient income stream, as well as a track record of relatively solid earnings growth performance in recent years. Allied to this is a yield of 4.2%, which makes United Utilities seem like a top notch total return play for the long run.

Priced to go

Also having the potential to beat the market is Domino’s Pizza (LSE: DOM). While a number of other fast food companies have stood still in recent years, with limited innovation and menu changes, Domino’s has been able to steadily increase its share of the global fast food industry.

Changes such as being able to create your own pizza, a diversification into non-pizza products and a slick ordering system have created a significant amount of customer loyalty that’s set to propel Domino’s bottom line upwards by 12% in the current year. And with the scope to further diversify its menu as well as grab additional market share in non-pizza categories, Domino’s has a healthy long-term growth outlook.

Although it trades on a price-to-earnings growth (PEG) ratio of 2.3, Domino’s has posted five consecutive years of strong profit growth. With a high degree of uncertainty being present among investors at the present time, reliable earnings growth appears to be worth paying for.

Can do better

Meanwhile, GlaxoSmithKline (LSE: GSK) has been a perennial underperformer in recent years, with its shares falling by 7% in the last decade. Clearly, that’s hugely disappointing but looking ahead, the pharmaceutical major has a very bright future.

In fact, in 2016 its cost savings initiative is expected to have a positive impact on its earnings, with GlaxoSmithKline due to report a rise in net profit of 11% in the current year. This puts it on a PEG ratio of only 1.5 which, given its strong and diversified pipeline as well as scope to cut costs in future years, seems to be an extremely appealing price to pay.

Moreover, GlaxoSmithKline yields around 6%, and although dividend growth is expected to be lacking over the medium term as the company refocuses on long-term growth, its income appeal remains very high. Furthermore, with its earnings being less positively correlated to the macroeconomic outlook than is the case for most stocks, it could be seen as a defensive option and continue to beat the index as it has done by 4% year-to-date.

Despite this, there's another stock that could be an even better buy. In fact it's been named as A Top Growth Share From The Motley Fool.

The company in question could make a real impact on your bottom line in 2016 and beyond. And in time, it could help you retire early, pay off your mortgage, or simply enjoy a more abundant lifestyle.

Click here to find out all about it – doing so is completely free and comes without any obligation.

Peter Stephens owns shares of Domino's Pizza, GlaxoSmithKline, and United Utilities. The Motley Fool UK has recommended Domino's Pizza 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.