I’ve got my eye on Wesfarmers Ltd (ASX: WES) shares right now. The Wesfarmers share price is up 17.6% this year but I think it could climb further.
Why I like the Wesfarmers share price right now
One big reason I like Wesfarmers is its large-cap status. The Wesfarmers market capitalisation is $55.3 billion which makes it a heavy hitter within the S&P/ASX 200 Index (ASX: XJO).
Given the uncertainty we’re seeing right now, I like the safety of large companies like Wesfarmers.
It’s not just the sheer size of the company but also its earnings diversification. Wesfarmers reported solid earnings contributions from across its Bunnings, Kmart, Officeworks and Catch business units.
The Wesfarmers share price edged lower on Thursday after the full-year earnings result which showed strong earnings but a cautious FY21 outlook.
I think there was a lot to like about the result including a robust balance sheet with deep cash reserves. That was evidenced in the conglomerate’s 18 cents per share special dividend following its sale of another stake in Coles Group Ltd (ASX: COL).
That cash position is another reason why I like the Wesfarmers share price right now. Under normal circumstances, I would be worried about cash being a drag on performance.
However, the coronavirus pandemic has thrown a spanner in the works. I think holding cash could be a good idea right now, especially with inflation looking unlikely to head higher.
It leaves Wesfarmers well-placed to make some acquisitions when things settle down. Given the economic conditions are likely to worsen in the medium term, that could also present some undervalued buying opportunities.
When those opportunities present themselves, Wesfarmers will be waiting with a fistful of cash to snap up a bargain. That could be good news for the Wesfarmers share price and the company’s investors.
Foolish takeaway
The Wesfarmers share price has outperformed in 2020 but I think it has further to run.
Strong earnings, a healthy cash position and tactical buying opportunities on the horizon bode well for future growth.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
Find out the names of our 3 Post COVID Stocks – For FREE!
*Returns as of 6/8/2020
More reading
- 2 ASX 50 shares to buy for your retirement portfolio
- Real reason for Kmart’s empty shelves revealed
- Should you buy ASX shares before or after reporting season?
- Buy CSL and these quality ASX blue chip shares today
- ASX 200 down 0.8%, IDP Education soars
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post Why the Wesfarmers share price could surge in 2021 appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/3j64AcO
Leave a Reply