Regional conflicts, the worldwide sell-off in the summer and the economic slowdown in China threatened to cast a pall over the global economy in 2015. But as European and emerging markets battled to revive growth, the US economy pulled ahead on the back of aggressive government intervention. The S&P 500 index posted a return of about 1.8 per cent for the year, the latest jobs report showed the labour market added 211,000 jobs in November and unemployment remained at a 7-year low of 5 per cent, while the US government expects GDP growth of 2.5 per cent in 2015 - a smidgeon ahead of last year. The nation's robust performance reflects a robust automotive market, the low price of oil, cheap financing, rising employment and a slew of other factors, offset by the stronger dollar and weaker overseas demand. Indeed, the Federal Reserve looks set to raise interest rates - which have been pegged at between 0 and 0.25 per cent for nearly seven years - as we go to press.
US companies made plenty of progress. Uber, Airbnb and Tesla continued to disrupt the taxi, hotel and petrol-powered vehicle industries, while search and advertising titan Google reorganised its business and rebranded as Alphabet. Shares in Amazon (US:AMZN) more than doubled as the e-commerce giant reached critical mass after years of investing in logistics and infrastructure and details emerged about the immense scale of its data storage business, Amazon Web Services. Given the constraints of the printed page, we've limited ourselves to discussing six companies that showcase key industry and macroeconomic trends.
Apple (US:AAPL) overtook Exxon Mobil to become the world's most valuable company in 2015. The consumer electronics giant posted strong sales and profit growth in the year due to insatiable demand for the larger-screen iPhone 6 - launched in September 2014 - as well as new products and services such as Apple Watch, Apply Pay, Apple Music and iPad Pro. However, Apple did contend with a slowing premium smartphone market, fears of an economic slowdown in China and a broader market sell-off.
We recently tipped Apple's shares once again ($121.20, 5 Nov 2015) and remain bullish on its prospects. New iPhones, a second-generation Apple Watch and a smaller, cheaper iPhone are all promising. Growing numbers of Android users are switching to iPhone, the majority of iPhone users are yet to upgrade to the iPhone 6 or iPhone 6s, and the group plans to draw new consumers into its ecosystem of hardware, software and services by opening 25 stores in China and tapping into the populations of smaller Chinese cities. Moreover, partnerships with Cisco and IBM should buoy the enterprise business, and a monthly payment programme - which offers the new iPhone, annual upgrades and damage insurance - should mean consumers replace their smartphones more regularly.
The unmatched track record of Warren Buffett and Berkshire Hathaway (US:BRK.A) means that many investors pay close attention to the investing guru and his conglomerate. The Sage of Omaha continued to focus on a handful of key holdings in 2015: American Express, Wells Fargo, IBM and Coca-Cola accounted for $64.1bn, or 58 per cent, of Berkshire's investment portfolio. The merger of Kraft and Heinz and growth in the railroad and utility businesses boosted the bottom line, but that was offset by weakness at Geico and other insurance businesses. Berkshire also announced its largest ever deal - the $32.4bn buyout of Precision Castparts - and the takeover of Procter & Gamble's Duracell business.
In his 50th letter to shareholders, Mr Buffett hinted that he could soon step down and a potential successor has been identified. The octogenarian also cautioned that Berkshire’s outsized returns would eventually become unsustainable as the numbers would simply grow too big, and warned that the group would eventually have too much capital to be able to reinvest intelligently. He also expressed contrition over being caught out by Tesco's recent accounting problems; he offloaded his stakes in the months after the news broke.
Disney (US:DIS) had another strong year. The media behemoth's highly integrated businesses allowed it to continue cashing in on smash-hit animated film Frozen by opening related rides at its theme parks, selling branded clothes and toys in its stores, introducing the film's characters into TV shows on its ABC network and its interactive video games, and green-lighting a sequel.
The shrewd acquisitions of Marvel, Pixar and Lucasfilm have given Disney control of franchises such as Star Wars, The Avengers and Toy Story, allowing it to move beyond Snow White and other storybook animated films aimed at young girls to movies with mass appeal. It has also benefited from a recovery in advertising revenues and its powerful brands have allowed it to hike hotel room and ticket prices at its theme parks while still increasing guest spending, attendance and occupancy rates. And the upcoming trilogy of Star Wars films bodes well for all of Disney's divisions.
Investors grilled McDonald's (US:MCD) chief Steve Easterbrook in 2015 as he rolled up his sleeves and began working to return the fast-food giant to long-term revenue growth of 3 to 5 per cent and operating-profit growth of 5 to 7 per cent. The company is keen to only own stores with robust margins and strong cash generation; it plans to refranchise 4,000 locations by the end of 2018, meaning an estimated 93 per cent of its outlets will be franchises. McDonald's also plans to unearth $500m in cost savings within two years through refranchising, reorganising the business and sharing back-office functions across divisions. And it intends to take on $10bn in debt to buy back $30bn of shares in 2016. Several operational changes have also driven growth: the company changed the ingredients and marketing of the Egg McMuffin in September, and introduced all-day breakfast in October - analysts at BTIG think the move could boost annual sales by up to 5 per cent. Next on the agenda is revamping the value menu to restore its appeal to thrifty diners.
Nike (US:NKE) benefited from the growing importance of health, wellness and athleticism among consumers in 2015 and remains on track. The apparel giant, which sponsors top athletes such as Lebron James and Cristiano Ronaldo, is betting on women's lines and online sales to drive top-line growth, supported by expansion into Canada, Switzerland, Norway and elsewhere. It is also focusing on its running business, promoting fledgling brands such as Flyknit shoes and plans to expand its Jordan brand beyond basketball to double sales there by 2020. Meanwhile, strong demand in China and other emerging markets, careful cost management and new direct-to-consumer offerings promise to underpin margin growth. Management has outlined plans to grow revenues by two-thirds to $50bn over the next five years. Broker JP Morgan predicts that EPS will double to $7.50 by the end of May 2020.
UK investors will be familiar with Pfizer (US:PFE), whose proposed takeover of AstraZeneca was nixed in 2014. The pharmaceuticals giant and Viagra creator recently announced a proposed $160bn merger with Botox-maker Allergan to create the world’s largest pharmaceuticals company, ahead of Johnson & Johnson and Novartis. Pfizer's management expects the deal to boost annual EPS by more than a tenth within five years, complement its drug portfolio, generate around $2bn in operating synergies within three years and provide it a domicile in Ireland that could reduce its tax rate from 26.5 per cent to 4.8 per cent.
Pfizer isn't solely reliant on deals. New products such as Ibrance, a breast cancer drug, and Prevnar 13, a vaccine for infants and the elderly against bacterial infection, posted strong growth in 2015. The company is also splitting up its innovative and more staid businesses to focus investment on key growth assets.
