‘High margin business’: Expert names 2 ASX 200 shares to buy now at sharp discount

Regardless of what the economic conditions are, it’s wise to back businesses that have some unique competitive advantage.

With interest rate rises starting to depress consumers and businesses, that boost is even more important in 2023.

Shaw and Partners investment advisor Jed Richards this week named two S&P/ASX 200 Index (ASX: XJO) shares he would buy right now — one with a near-monopoly in its industry and the other with a massive portfolio of assets:

‘A good buying opportunity’ for market leader

Amid all the talk about ASX shares, one can easily forget that the stock exchange itself is a publicly listed company.

With very little competition for trading volumes in Australia, ASX Ltd (ASX: ASX) is playing in a league of its own.

And the stock is going for dirt cheap at the moment.

“The share price [is] significantly down from its August 2022 highs,” Richards told The Bull.

“This represents a good buying opportunity, as the ASX is a market leader with limited competition.”

ASX Limited shares traded for as much as $93.75 in late 2021, but has cooled off to around the $66 mark after its technology replacement project failed last year.

But from here it’s all gravy for the stock exchange operator.

“Our analysis shows ASX is a high margin business that’s grown earnings at a modest but consistent rate over time,” said Richards.

“We like the recent grossed up dividend yield of about 5% and defensive characteristics in today’s market conditions.”

A retailer undervalued for its real estate

Physical retailers may not be in fashion in modern times, but Richards likes what he sees in Harvey Norman Holdings Limited (ASX: HVN).

But it’s actually not the retailing that’s captured his attention.

“In our view, the market is underestimating the value of Harvey Norman’s property portfolio, which represents a large portion of the company’s entire market capitalisation.”

This anomaly has become more accentuated over the past year as the share price has fallen almost 32%.

Richards urges investors to not be distracted by the latest numbers out of reporting season.

“The recently reported 2023 first half profit was down on the prior corresponding period. However, excess sales during the pandemic skew these numbers,” he said.

“The company is trading on a solid fully franked dividend yield.”

Indeed, Harvey Norman shares are currently handing out a fat dividend yield of 8.2%.

The post ‘High margin business’: Expert names 2 ASX 200 shares to buy now at sharp discount appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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