Companies with a material exposure to the Irish economy but which also appear cheap relative to their peers will be the best performers next year, according to Goodbody Stockbrokers.

The brokers predict that the pace of growth in the Irish economy will accelerate over the next two years from its 2004 rate of 5 per cent. This will be reflected in earnings growth across the Irish market, which Goodbody are predicting will be 12 per cent in 2005.

Companies that grew their earnings faster than the market predicted were the outperformers in 2004, and the trend will continue this year, according to the broker.

Goodbody has picked five stocks which it believes offer diversity across a range of sectors and also sizes. The firms are AIB, CRH, Eircom, Independent News & Media and IAWS.

AIB - which is Goodbody's parent - will benefit from the growth in the small and medium-sized business sector expected next year and with "all its core franchises starting to deliver", there is potential for further upgrades. The shares could hit €14.85 next year, say Goodbody.

CRH outperformed the building materials sector last year and will benefit in 2005 from its diversified earnings base, superior returns, strong balance sheet and progressive dividends. Goodbody has set a 12 month price target of €23.

Eircom, which rejoined the stock market this year, has been rerated by the market, helped by the improved outlook for broadband revenue growth and "its imminent re-entry into the mobile market". The broker's price target is €2

Independent News & Media has "entered a unique period in its cycle where all of its operations are performing strongly". The recovery in the UK is driven the by the successful relaunch of the Independent in compact format, while growth in Ireland will come from the "ongoing recovery in advertising and the improved economic outlook". Goodbody have set a target price of €2.65.

IAWS remains one of the fastest growing food companies globally, and is successfully growing consumer brands on both sides of the Atlantic. The brokers have set a share price target of €13.