HSBA
It may seem somewhat surprising to be discussing HSBC (LSE: HSBA) (NYSE: HSBC.US) as a stock that could beat the FTSE 100 next year. After all, its share price has fallen by double the FTSE 100s 5% decline since the turn of the year and, with its costs spiralling to record highs, it is enduring a challenging period.
However, HSBC could be a surprisingly strong performer next year. Thats because it should benefit from lower Chinese interest rates which could spur demand for loans moving forward. In addition, it could see demand for its shares rise as a result of its top notch prospective yield of 5.9% in 2015 and, furthermore, there seems to be significant scope for an upward rerating to its valuation, with HSBC having a price to earnings (P/E) ratio of just 10.5.
So, while forecast earnings growth of 6% next year may be only in line with the wider market, HSBCs low valuation and income prospects could be enough to improve sentiment and push its share price higher.
Centrica
With a new management team set to start imminently, the next few months could be a rather uncertain period for Centrica (LSE: CNA). And, with shares in the company having fallen by 23% this year, its of little surprise for most investors to be rather downbeat regarding its future prospects.
However, with Centrica forecast to increase its bottom line by an impressive 8% next year and trading on a P/E ratio of just 13.6, there could be capital gains on offer. In addition, when Centricas yield of 6.7% is taken into account, its total return could prove to be very appealing over the next twelve months.
Certainly, there are likely to be lumps and bumps ahead and sentiment may remain relatively low as the companys new management begin to shape their strategy. However, over the course of next year, Centrica could outperform the FTSE 100 on a total return basis.
Prudential
Unlike HSBC and Centrica, shares in Prudential (LSE: PRU) have performed well this year, being up 11% since the turn of the year. However, this doesnt mean they are due a pullback, since Prudential is forecast to increase earnings by an impressive 13% next year. Thats twice the rate of growth of the wider index and, despite this, Prudential still trades on a very appealing price to earnings growth (PEG) ratio of 1.2.
This highlights that growth could be on offer at a very reasonable price and, when you consider that Prudential is expected to increase dividends per share by 9.5% next year, it could start to generate demand from income investors. As a result, 2015 could prove to be yet another excellent year for Prudential, with it having a good chance of beating the FTSE 100 yet again.
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Peter Stephens owns shares of Centrica and HSBC Holdings. The Motley Fool UK has recommended Centrica and HSBC Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
