ASX 200 retail shares have had a pretty tough start to the year. Even before the coronavirus pandemic, things were looking pretty bleak.

We’ve seen a continuing trend of insolvency action, with brands like Jeanswest and Kikki.K falling into voluntary administration.

Then the pandemic hit and the situation deteriorated further. ASX 200 retail share prices were hammered as lockdown restrictions were introduced. This crushed bricks and mortar sales as businesses were forced to temporarily close.

But now restrictions are continuing to ease and the economy is emerging from hibernation. Could this mean Aussie retail shares are set to outperform in 2020?

Will ASX 200 retail shares outperform in 2020?

I think the JB Hi-Fi Limited (ASX: JBH) share price could outperform this year. The Aussie electronics retailer has already seen some strong sales as workers moved to a ‘work from home’ model and rushed to stock up on computers, monitors and accessories. This was good news for the ASX 200 retail share but there could be more on the way.

If businesses continue to operate at a reduced capacity, I think this could result in more sales for JB Hi-Fi. Aussie workers may move from temporary work-at-home setups to more permanent home offices. This could mean more spending on equipment and be very good news for retailers like JB.

I also think Harvey Norman Holdings Limited (ASX: HVN) is worth a look. Harvey Norman is a more diversified retailer which means there are more potential earnings streams.

The real question here is whether or not Aussies continue to spend. While many are keen to get back to shopping as soon as possible, the tough economic conditions could definitely impact discretionary spending.

However, if supply chains are maintained and we see government stimulus measures continue, I think the Aussie retail share could outperform this year.

Foolish takeaway

The S&P/ASX 200 Index (ASX: XJO) is down 12.70% this year. Meanwhile JB Hi-Fi shares are up 3% while Harvey Norman shares have fallen 15.72%.

If the economy continues to pick up then I think both of these ASX 200 retail shares could outperform by the end of the year.

More reading

• 1 ASX 200 tech share to buy and hold for a decade
• JobMaker is coming. These 3 ASX 200 shares could benefit
• Why the Vocus share price can race ahead later this month
• Is the BHP share price cheap right now?
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Ken Hall 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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If I were starting my investment journey again with my first $500 to invest into ASX shares, I’d pick Future Generation Investment Company Ltd (ASX: FGX).

The problem with investing just $500 is that brokerage can take up a material amount of your starting money. So I’d want to go for an ASX share that I could stay invested in for the long-term.

If you were to begin with a single ASX share like Commonwealth Bank of Australia (ASX: CBA) then your entire investment portfolio would be allocated to just one business. That’s not very good diversification. I’d also want to pick something that can do well if there’s another coronavirus market sell off. 

What if you could pick an investment that could give you good diversification right from the start? I think Future Generation is a good answer.

Why is Future Generation a good ASX share?

It’s a special listed investment company (LIC). The job of a LIC is to invest in other shares on your behalf. Most LICs will charge a management fee (and perhaps a performance fee).

But Future Generation doesn’t charge a management fee. It donates 1% of its net assets each year to youth charities.

What does Future Generation actually invest in? Well, it doesn’t invest in normal ASX shares. It invests in the funds of around 20 fund managers who also work for free. They don’t charge management fees or performance fees.

Each fund is a separate portfolio. So Future Generation’s underlying diversification is very strong. The investments that Future Generation’s managers usually go for are those smaller growth shares, so in normal times it may be able to offer better growth than the ASX index.

One of the fun things with LICs is that sometimes you can buy them for cheaper than their asset value. You can buy the ASX share’s $1 of assets for less than $1. That seems like good value to me. Future Generation has been trading at an attractive discount to its net tangible assets (NTA) in recent times. 

As a bonus, Future Generation currently has a grossed-up dividend yield of 7.3%. I think Future Generation is a good ASX share to start with $500.

More reading

• Got $50,000 to invest for income? Pick these 5 ASX dividend shares
• How to make $1,000 a month in dividends
• How to build good wealth with small investments
• Why high yield dividend shares can be detrimental to your wealth
• 2 ASX shares to build a diversified dividend portfolio

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. 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 NextDC Ltd (ASX: NXT) share price has soared nearly 39% higher during 2020. This far exceeds the performance of the S&P/ASX 200 Index (ASX: XJO) which has fallen by 12% year to date.

Is this ASX 200 tech share overvalued right now? Or, is it a good long-term buy?

Fast growing cloud ecosystem

NextDC is Australia’s largest, locally-based data centre provider by quite a margin.

The ASX 200 company’s portfolio of data centres is home to one of Australia’s largest cloud centre partner ecosystems. This is highly advantageous because, in the data centre service market, ‘scale’ really matters. NextDC’s cloud centre community comprises more than 590 carriers, cloud providers and IT service providers.

Furthermore, the company is continuing to rapidly expand its portfolio of data centres, with a number currently under construction. NextDC recently completed a $672 million equity raising which will further assist with its expansion strategy.

The company is also looking at further data centre site acquisitions to expand its nationwide presence.

Continued strong growth during the pandemic

NextDC has benefitted from increased demand for cloud services during the coronavirus pandemic.

Under the government enforced lockdown measures, vast numbers of businesses have switched to a working-from-home model for their employees. Because of this, many consumers have increased their usage of bandwidth-hungry applications such as streaming video. This has been good news for the ASX 200 tech share.

Well positioned for long-term growth

NextDC has continued to grow strongly with the ongoing rise of cloud computing.  Over the last 4 years, the company’s customer base has grown at a compound annual growth rate (CAGR) of 21%.

This is very strong result for a data centre provider which typically grows at much slower rates than other IT companies such as Software-as-a-Service (SaaS) providers.

Interconnections have grown even more quickly for NextDC with a CAGR of 31% over the same period.

Customers are continuing to expand their ecosystems which is driving higher use of cloud services and connectivity with other data centres.

NextDC is also continuing to build newer and more energy-efficient Tier IV data centres. This is driving higher margins and higher recurring revenues for the business.

Is NextDC a solid, ASX 200 long-term buy?

The data centre game is highly capital intensive. There are high upfront costs to build new data centres. However, once in place, operators are well positioned to reap the benefits further down the track.

I believe that NextDC is well placed for strong revenue and profitability growth over the next 5 to 10 years. This will be driven by increased economies of scale and the rollout of more efficient tier IV data centres.

Despite the company’s recent share price rise, in my view, this still makes it a tech share worth buying and holding for the long term.

More reading

• Can ASX 200 retail shares outperform this year?
• JobMaker is coming. These 3 ASX 200 shares could benefit
• Why the Vocus share price can race ahead later this month
• Is the BHP share price cheap right now?
• Afterpay and these top ASX tech shares are on fire in 2020

Motley Fool contributor Phil Harpur owns shares of NEXTDC Limited. 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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