2014 has been pretty miserable for investors in Diageo (LSE: DGE), with shares in the alcoholic beverage company falling by 8% since the turn of the year. However, things could be a whole lot different next year, since Diageo is expected to arrest the decline in earnings from last year and, with a superb stable of top brands, has strong growth potential in emerging markets.
Indeed, with the European market having been the companys Achilles heel in recent years, the region has the potential to deliver growth due to its QE programme, which means that Diageos sales could move much higher over the medium term. With shares in the company having a price to earnings (P/E) ratio of 20, there is room for a rating expansion, since the companys current P/E ratio is not particularly high relative to historic levels.
Although Shells (LSE: RDSB) strategy of selling off non-core assets to leave a leaner, more efficient business is progressing well, the tumbling price of oil has hurt sentiment in the stock during 2014. Thats the major reason why shares in Shell have fallen by 6% in the last six months.
However, Shell could see investor enthusiasm for its stock improve next year, since its bottom line is expected to rise by a whopping 34% in the current year. Furthermore, with shares in Shell trading on a P/E ratio of just 10.6 and yielding a very appealing 4.9%, they seem to offer good value and strong income prospects to go alongside impressive growth potential.
Despite recent share price strength, ARM (LSE: ARM) is still down 17% this year, as investors have begun to question whether annual growth of 40% per annum over the last four years can be maintained.
However, with key products such as Apples iPhone and iPad set to see new versions released over the next few months (of which ARM is a key supplier), investor sentiment could pick up over the near term. And, with ARM now trading on a price to earnings growth (PEG) ratio of just 1.4, shares in the company seem to offer growth at a reasonable price.
In addition, ARM remains a relatively reliable growth play and, if the wider market outlook continues to be uncertain in 2015, investors could bid up the prices of companies that offer strong and consistent growth prospects, of which ARM is a prime example.
When it comes to reliable growth, SABMiller (LSE: SAB) takes some beating. Thats because sales of beer tend to be pretty consistent during all sorts of economic environments and, as such, SABMiller has seen its bottom line grow at an average rate of 12% per annum over the last five years.
Clearly, a P/E ratio of 22.1 hardly screams value, but investors could be willing to pay an even higher price for such strong, reliable growth and this means that share price gains could be on offer in 2015. With SABMillers earnings due to rise by 10% next year (and likely to meet expectations judging by the consistency of earnings forecasts in previous years), SABMiller could continue the share price strength in 2015 that has seen it rise by 13% in the current year.
Shares in Santander (LSE: BNC) appear to scream growth at a reasonable price, since the bank has a PEG ratio of just 0.5. This means that, while the its shares have risen by just 1% this year, Santander could deliver much better performance in 2015.
Furthermore, with Santander paying a very generous dividend, it means that shares are set to yield a whopping 7.2% next year. This is amongst the highest yields in the FTSE 100 and, with it looking increasingly likely that low interest rates are here to stay, it would be of little surprise if investor demand for Santanders top notch yield pushed its share price higher over the next year.
Of course, while all five stocks discussed above could deliver superb performance in 2015, unearthing top performing shares can prove to be somewhat challenging – especially if you lack the time, as most people do.
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Peter Stephens owns shares of Royal Dutch Shell B. The Motley Fool UK has recommended ARM 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.