The Lovisa Holdings Ltd (ASX: LOV) share price tumbled on Friday along with its peers, but the costume jewellery retailer may continue to lag ahead of its profit results in August.

This is the prediction from Morgan Stanley who’s warning that there is a 70% to 80% chance the Lovisa share price will fall over the next 60 days.

The bearish prediction stands in contrast to the recent re-rating of ASX retail stocks as Australia emerges from the COVID-19 shutdown.

Retail re-rating

Some retailers like JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) have benefitted from increased demand for IT equipment and electronics from stuck-at-home consumers.

Meanwhile, other retailers like Baby Bunting Group Ltd (ASX: BBN) and Kathmandu Holdings Ltd (ASX: KMD) have experienced a spike in online sales.

The sector also got a boost on news that the economic fallout from the coronavirus pandemic isn’t half as bad as what experts were predicting.

Left behind

But Lovisa may be among the worst placed retailers to benefit from these tailwinds. Morgan Stanley sees near-term risk to its share price as its store rollout in the US, UK and France may take six to 12 months to ramp up again.

This is significant as new store openings in those key markets are a major earnings driver for the group.

But these countries are having more trouble than Australia in flattening the coronavirus curve. The US may be particularly hard hit on fears of a second wave of infections as the number of Americans catching the virus surpassed two million.

All glammed up and nowhere to go

This may not be the only thing to weigh on Lovisa’s share price. Morgan Stanley doesn’t think the small cap retailer will benefit so much from the rebound in consumer spending in Australia.

The reason is social events like weddings are a big driver for jewellery demand and there are still strict limits on the number of people who can attend such gatherings.

Disconnected from online sales

Finally, Lovisa may not benefit significantly from the big shift to online shopping because the company doesn’t have a strong presence in this channel, explained Morgan Stanley.

If the broker is right, the company’s full year result announcement in August may be a sombre affair!

Morgan Stanley’s recommendation on Lovisa is “equal weight” (equivalent to a “hold”) and its price target on the stock is $6.50 a share.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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The S&P/ASX 200 Index (ASX: XJO) seems to have had a rather dramatic mood swing. After some great gains early in the week, both Thursday and Friday have seen massive sell-offs, pushing the ASX 200 decisively back below 6,000 points.

With the global economy and the coronavirus pandemic still in very fluid situations, next week might well see the sell-off of ASX shares continue.

So with this in mind, here are 3 ASX shares that I think have defensive qualities and should be an asset to any portfolio if the sell-off continues next week.

Transurban Group (ASX: TCL)

Transurban is a gigantic owner and operator of tolled roads and motorways across Australia and North America. Transurban’s monopolistic grip on the roadways of our major capital cities is inescapable – both as a motorist and as an investor. Yes, Transurban did see a massive collapse in road usage during the height of the lockdown period over March and April. But I think with restrictions easing, this company will continue to bounce back and remain a great investment for the long-term.

BHP Group Ltd (ASX: BHP)

Miners are not normally my ‘go-to’ for a defensive holding. But I think the unique circumstances 2020 has brought us has changed the game somewhat. Commodity prices have held up remarkably well over the coronavirus pandemic. Chief amongst those has been iron ore, which has topped US$100 per tonne in recent weeks. Thus, I think a diversified commodity play like BHP is a prudent investment going forward. It’s one of the largest miners in the world, is diversified across coal, iron, copper and oil, and has some of the lowest extraction costs in the business. Therefore, I don’t think you can go wrong with Broken Hill Proprietary if the markets sell-off once more.

Metcash Limited (ASX: MTS)

Metcash is often overlooked for its larger rivals Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW). But I think this perpetual underdog is a great defensive investment if there is another ASX sell-off. Not only does it own the IGA network of grocers, but it also has in its stable hardware chains Mitre 10 and Home Timber & Hardware.

Both grocers and hardware stores have seen increased consumer spending during the coronavirus lockdowns, and I see these trends continuing well into the future. As such, I think Metcash is another great defensive share to look at if the ASX does indeed continue to shed value next week.

More reading

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• Woolworths facing fresh threat from Amazon.com
• 3 quality ASX dividend shares to solve your income needs
• 3 ASX 200 shares to add to your watchlist in 2020
• 2 top ASX dividend shares for income in 2020

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Transurban Group, and Woolworths 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.

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Despite the falls we have seen today, the S&P/ASX 200 Index (ASX: XJO) has still had a remarkable month and is up 7.8% over the past 4 weeks.

This is in no small part due to the ongoing easing of restrictions related to the coronavirus pandemic. Australia’s success so far in containing the disease is enabling the economy to slowly return to ‘normal’, which is obviously great news for ASX companies.

So with the coronavirus still looking to be the major market mover in 2020, it makes sense to position your portfolio accordingly. That’s what the fund managers at Spheria Asset Management are looking at anyway. Spheria runs a micro-cap fund that returned more than 15% in April – so I reckon we should at least have a look at what they’re doing.

Spheria’s top 4 ASX picks

In its April update, Spheria named 4 ASX picks for a COVID-19 recovery.

First off, we have G8 Education Ltd (ASX: GEM). Spheria notes that childcare providers like G8 have benefitted enormously from the government offering free childcare over the last few months. Although this support is scheduled to end soon, it’s still likely to have residual benefits for G8. The fundies also note that due to the successful capital raising G8 recently undertook, the company has fortified its balance sheet for the rest of the year.

Next, we have Ardent Leisure Group Ltd (ASX: ALG). Ardent runs a portfolio of theme parks including Dream World and WhiteWater World. Obviously, this company struggled immensely with the coronavirus outbreak with its parks forced to shut down. But Spheria thinks there is a lucrative potential recovery to be harnessed here, once restrictions are lifted and business can start to return to normal.

Village Roadshow Ltd (ASX: VRL) is next cab off the rank here. This company is another theme park operator, which owns Movie World, Sea World and Wet’n’Wild. Clearly, Spheria is making another bet on the easing restrictions, with Village Roadshow likely to benefit from the same potential tailwinds as Ardent Leisure. The fund notes that any increase in domestic tourism as a result of bans on international travel will likely benefit these 2 theme park operators as well.

Finally, we have Vista Group International Ltd (ASX: VGL). Vista provides exhibition software to cinemas – another industry that has been hit hard by the coronavirus restrictions. As people start returning to movie theatres around the country, Vista Group is an obvious beneficiary. Spheria is going for a value play on this one, noting it is priced well below its software-based peers when compared to its revenues (even if they don’t return to pre-COVID levels).

Foolish takeaway

Although we should never take fund managers’ picks as investment advice, it’s always interesting and illuminative to check out what ‘the professionals’ are buying!

More reading

• 3 ASX shares I’d buy if the market hits 23 March levels again
• ASX 200 falls 1.9%, big 4 ASX banks retreat
• Down 20% in 7 trading hours… Worse to come?
• The latest ASX shares to be hit by broker downgrades to “sell” today
• What would I rather buy today: TPG or Telstra shares?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Vista Group Intl. 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 Leading fund manager names 4 ASX stocks set to benefit from a faster re-opening of the Australian economy appeared first on Motley Fool Australia.

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