Warren Buffett has an exceptional track record of outperforming the share market over a long time period. Buffett’s investing strategy aims to buy high-quality companies when they offer wide margins of safety, and hold them over the long term.

As such, it could be a useful strategy for investors to adopt as a means of benefitting from the recent market volatility. It may not produce high returns in the short run, but could significantly improve your financial prospects over the coming years.

Warren Buffett’s investing strategy

One of the most notable aspects of Warren Buffett’s investing strategy is its simplicity. He does not use a plethora of complicated formulas in deciding when or where to invest. He simply seeks to buy stocks when they are trading at attractive prices. This method allowed him to buy a range of companies following the last global recession in 2008/09. Many of those holdings produced high returns as the world economy recovered.

With many stocks currently trading on low valuations, using a value investing strategy could improve your long-term returns. It may enable you to take advantage of the cyclicality of the stock market, and generate high returns during its likely recovery.

Economic moats

As well as seeking to buy stocks when they offer wide margins of safety, Warren Buffett also seeks to purchase companies with economic moats. An economic moat is essentially a competitive advantage that one company has over its sector peers. Examples include a lower cost base, a unique product or strong customer loyalty. These help to protect a company’s financial performance during a downturn and deliver relatively high profitability during economic growth.

At the present time, a number of companies with wide economic moats are trading on low valuations. Therefore, investors have a significant amount of choice. Choice in building a diverse portfolio of companies that produce relatively high returns in the long term.

Holding period

Warren Buffett’s investment strategy also seeks to hold stocks for the long term. In fact, his favoured holding period is apparently ‘forever’.

This attitude could be beneficial given the current outlook for the world economy. A global recession seems highly likely this year. And it could take place over a sustained time period depending on monetary policy, fiscal policy and whether there is a second wave of the coronavirus.

As such, investors who are able to take a long-term view of their holdings could be among those who generate the highest returns. They may be able to overcome short-term market volatility to benefit from the eventual recoveries of their holdings.

Although this may not lead to a portfolio size which rivals Warren Buffett’s, it could, nevertheless, boost your returns in the long run.

More reading

• These were the best performing shares on the ASX 200 last week
• These were the worst performing shares on the ASX 200 last week
• Why the Nearmap share price and one other are on my buy list
• 2 defensive ASX shares to protect your portfolio
• 3 ASX dividend kings to buy and hold forever

Motley Fool contributor Peter Stephens 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.

The post Will Warren Buffett’s investing strategy help you get rich in today’s market? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/30E7fo7

I think that defensive ASX shares could be the best way to protect your portfolio.

Businesses with robust business models should hopefully not see much of a hit to their earnings during this COVID-19 period. If the earnings don’t fall much then theoretically the share prices shouldn’t drop too much compared to a riskier cyclical share.

I believe the best defensive ASX shares are the ones that won’t see much of a change in demand for their product or service.

Here are two of the most defensive ASX shares:

Share 1: APA Group (ASX: APA)

APA Group is one of the biggest infrastructure businesses on the ASX.

It owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation’s natural gas usage.

APA delivers an essential service for Australia. The nation needs its natural gas.

I think APA is a defensive ASX share because the demand for gas remains robust. The energy infrastructure giant recently said that there hasn’t been a material change because of COVID-19. It also has $1.2 billion of available liquidity to get through this period if needed.

The business has grown its distribution every year for a decade and a half. It offers a FY20 distribution yield of 4.4%. The distribution can keep growing because APA funds it from its annual cashflow. That cashflow is growing because APA continues to complete new energy projects.

Share 2: Rural Funds Group (ASX: RFF)

I think Rural Funds is another great defensive ASX share. It’s a farmland real estate investment trust (REIT).

COVID-19 caused many other REITs to be sold off. Shopping centres like Scentre Group (ASX: SCG) were hurt as shoppers stayed away and shops were shut. Office property REITs like DEXUS Property Group (ASX: DXS) were sold down as workers stayed home.

But Rural Funds hasn’t faced the same problems. Its agricultural tenants continue to grow produce at the farms. Some of its tenants include Olam, Select Harvests Limited (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE).

I think Rural Funds is a really good defensive ASX share for several reasons. It has high-quality tenants like the ones I just mentioned. Rural Funds’ farms are diversified geographically and by farm type – it owns cattle, cotton, vineyard, almond and macadamia properties.

One of the best reasons to like Rural Funds is that it has a weighted average lease expiry (WALE) of more than 10 years. That means the rental income is locked in for more than a decade.

That rental income is rising as each rental contract has built-in rental indexation. The rental indexation is either a fixed 2.5% increase or linked to CPI inflation, with market reviews. This helps the management of the defensive ASX share forecast that the distribution can grow by 4% per annum. I think that’s a good growth rate, it’s comfortably higher than inflation.

Another factor helping distribution growth is productivity investing. Rural Funds retains around 20% of its annual cash rental profit. The official term its cash rental profit is ‘adjusted funds from operations’ (AFFO). Rural Funds re-invests 20% of AFFO into productivity improvements at its farms for its tenants benefit. This increases the value of the farms and grows rental income.

Occasionally the defensive ASX share will acquire a new farm that will add to earnings. It has been focusing on buying cattle properties in the last couple of years.

It currently offers a FY21 distribution yield of 5.7%.

Foolish takeaway

I think both businesses are defensive ASX shares. At the current prices I’m more drawn to Rural Funds because of its consistent growth and higher distribution yield. However, I’d be happy to have both businesses in my portfolio for reliable income.

More reading

• The pros and cons of investing in high yield dividend shares
• 12 top ASX dividend shares to buy in June 2020
• 3 high yield ASX dividend shares for income
• Not keen on Westpac? Then buy these top ASX dividend shares instead
• 2 strong ASX dividend shares to bolster your income

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Treasury Wine Estates Limited. The Motley Fool Australia owns shares of APA Group. The Motley Fool Australia has recommended Scentre Group. 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 2 defensive ASX shares to protect your portfolio appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/37oYqjy

I believe there are a few ASX dividend kings that can fit nicely into almost any share portfolio. Especially in the current market, dividend shares can be like gold in providing a steady income stream.

Here are a few of my favourite dividend picks that are worth holding for the long term.

3 ASX dividend kings to buy and hold forever

It’s hard to look past Harvey Norman Holdings Limited (ASX: HVN). The Harvey Norman share price has fallen 13% lower in 2020 but that’s not what caught my eye.

The Aussie retailer recently announced a special dividend for shareholders. The 6 cents per share distribution comes following strong sales during the coronavirus pandemic. The retailer had previously scrapped its planned 12 cents per share distribution in April.

Harvey Norman isn’t the only ASX dividend king on my watchlist. I also like the look of Commonwealth Bank of Australia (ASX: CBA) right now.

CommBank announced an interim dividend of $2.00 per share in February in the pre-COVID-19 market. The largest of the Aussie banks reports its earnings before the other majors and paid investors prior to APRA calling on banks to defer or reduce dividends in April.

However, I think CommBank will bounce back strongly. The ASX bank share is down 15.7% in 2020 but has some strong momentum behind it. If you’re willing to buy and hold forever, I think Commonwealth Bank remains a strong ASX dividend share.

I also like some of the ASX real estate investment trusts (REITs) for the long term. In terms of ASX dividend kings, it’s hard to look past Scentre Group (ASX: SCG) right now.

Scentre shares are currently yielding 8.39% but I don’t know if this will remain the case in the short term. Aussie retail is doing it tough even with considerable government stimulus measures in place.

However, if you’re buying and holding forever, what happens today or tomorrow isn’t too important.

With a strong balance sheet and significant real estate holdings, I think Scentre can remain a strong ASX dividend share for decades to come.

Foolish takeaway

These are just a few ASX dividend kings that I like the look of right now but there are plenty of good options on the market.

More reading

• How I would build a balanced portfolio worth $100,000 with 10 ASX shares
• 12 top ASX dividend shares to buy in June 2020
• Why the Lovisa share price is at risk of falling further over the coming weeks
• ASX 200 falls 1.9%, big 4 ASX banks retreat
• The latest ASX shares to be hit by broker downgrades to “sell” today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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 3 ASX dividend kings to buy and hold forever appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3e0Z1dC