Author: therawinformant

It was rocketing ASX tech stocks that generated big returns for fund managers, but these professionals are switching horses.

The latest fund manager survey by JPMorgan found that this group of investors are increasingly banking on the “reopening trade”.

This trade refers to buying the COVID-19 casualties – stocks that took the brunt of the sell-off from the pandemic.

Ugly ducklings to swans?

Some examples include the Qantas Airways Limited (ASX: QAN) share price and Webjet Limited (ASX: WEB).

“This month saw the first signs of a positioning tilt towards the ‘reopening trade’,” said the broker.

“The largest move during August was in Industrials, where the average OW [overweight] increased by 39bp [basis point] and 72% of managers increased holdings.

“Other cyclical sectors also saw inflows, with Discretionary and REITS enjoying up-weights of over 10bp.”

Hot property

What’s also notable is that the concentration of real estate investment trusts (REITs) in top stocks holdings is the highest its every been at 5%, added JPMorgan.

Property stocks have also been hammered by COVID. The accelerated shift towards online shopping forced mall owners like Vicinity Centres (ASX: VCX) and Scentre Group (ASX: SCG) to write down the value of their assets.

Social restrictions and border closures have also negatively impact on office and residential stocks.

Best reporting season on record

Another interesting finding in JPMorgan’s Fund Manager Radar survey was that fund managers enjoyed their best reporting season month ever in August.

“Average relative outperformance of the funds that we track was an outstanding 80bp, a stark contrast to the 30bp underperformance in the previous season,” said JPMorgan.

“August was also the second-best month of performance on our records.”

Turning of the tide

Most of the outperformance can be attributed to rocketing ASX tech stocks like the Afterpay Ltd (ASX: APT) share price and Appen Ltd (ASX: APX) share price.

One has to wonder if the next phase of the S&P/ASX 200 Index (Index:^AXJO) will be led by the COVID-19 underperformers.

As for specific stocks that fund managers are snapping up, two stand out from the crowd. JPMorgan noted that supermarket chain Coles Group Ltd (ASX: COL) and investment bank Macquarie Group Ltd (ASX: MQG) moved from “neutral” to “well held”.

More reading

• Are Resolute Mining (ASX: RSG) shares as good as gold?
• 3 profitable October ASX 200 trends
• Is the Mesoblast (ASX: MSB) share price still good value?
• Are ASX travel shares like Webjet (ASX:WEB) set to soar?
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited and Webjet Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and COLESGROUP DEF SET. 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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Between now and Friday 9 October, there are a range of opportunities to capture high yield ASX dividends. Some of these companies are small caps, albeit with solid performance, while others are ASX 200 giants. For investors interested in building an income-generating portfolio, these companies may represent some solid additions.

A quick guide to ASX dividends

When building a sustainable portfolio of ASX dividend shares, investors need to focus on three things. First, there is no need to look only at the top 20 or 50 companies. A company has to have a proven, cash-generating business model. Second, you must be able to invest in ASX dividend shares without sacrificing your capital. Third, a company should be able to pay the dividends from direct earnings. 

So let’s take a look at my pick of 4 high yield ASX dividend shares to buy right now.

Southern Cross Electrical Engineer Ltd (ASX: SXE)

Southern Cross is an electrical contracting company. I worked on several construction projects for the company more than 20 years ago. This share goes ex-dividend on 7 October, 2020. At today’s closing price, the payment will be a yield of 6.12%. In addition, this ASX dividend share has paid a consistent dividend in 8 of the past 10 years. In the past 3 years, the Southern Cross share price has fallen after payment, but has regained ground again. The company already has $330 million of secured project work in FY21, which accounts for 80% of the revenue target.

XRF Scientific Limited (ASX: XRF)

XRF is a small cap company that manufactures equipment and chemicals used in the preparation of samples for analysis. To illustrate the value of this company, in FY20 it increased its net profit after tax (NPAT) by 46%. This ASX dividend share goes ex-dividend on 1 October with a payment that will yield 4.59% based on today’s closing price. Based in Perth, the company is keyed into the mining industry and has a diverse range of mining clients. 

GR Engineering Services Ltd (ASX: GNG)

GR Engineering provides engineering design, procurement and construction services to the mining and mineral processing industry and the provision of operations, maintenance, projects and advisory services to the oil and gas sector. It forecasts revenue for FY21 to be in the range of $280 million to $300 million, with improvement in margins.

This ASX dividend share goes ex-dividend on 8 October with a payment that will yield 3.96% based on today’s closing price.

Harvey Norman Holdings Limited (ASX: HVN) 

Harvey Norman has had a great year during the pandemic. In fact, NPAT rose by 19.4% compared to FY19 due to the work from home phenomenon, and an increase in online sales. The Harvey Norman ASX dividend payment will yield 3.93% at today’s closing price. The ex-dividend date is 9 October.

More reading

• Can the Harvey Norman (ASX:HVN) share price maintain its momentum?
• ASX 200 down 0.5%: Harvey Norman (ASX:HVN) update, Magellan (ASX:MFG) makes Barrenjoey investment
• Why Dicker Data, Harvey Norman, Rhipe, & Senex shares are pushing higher
• Harvey Norman (ASX:HVN) share price surges higher on strong sales and profit growth
• 3 ASX shares with high-flying dividend yields

Motley Fool contributor Daryl Mather 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 MoneyMe Ltd (ASX: MME) share price is jumping higher on Tuesday after the release of an announcement.

In morning trade the digital consumer credit company’s shares are up 10% to $1.65.

What did MoneyMe announce?

This morning MoneyMe announced that it has established a new warehouse funding facility led by Westpac Banking Corp (ASX: WBC) that reduces its funding costs by more than half.

The new warehouse facility has been set-up to scale from an initial $167 million loan receivable funding capacity. It has a two-year term, with a rate below 3.95% per annum (+BBSW) on a fully drawn basis. This takes its combined warehouse loan asset funding costs to below 5% per annum (+BBSW).

As a comparison, MoneyMe was operating with funding costs of 11.4% per annum in FY 2020.

In addition to this, the company advised that it expects to realise a substantially lower cost of funds following a refinancing from the existing Velocity warehouse on the October or November payment date.

What now?

MoneyMe will now introduce more competitive pricing across its risk based priced Personal Loan and Freestyle products. This is to leverage the reduction in loan funding costs achieved with the establishment of the Westpac facility.

Management believes that these pricing changes will allow the company to further improve its offering of higher loan amounts to lower credit risk consumers. It also expects the changes to power the launch of new products.

Speaking of which, MoneyMe has just launched its PayAnyone product for users of its Freestyle virtual credit accounts.

This new functionality allows MoneyMe customers to pay any bank account in Australia directly using their Freestyle virtual credit account.

“A significant milestone.”

MoneyMe’s Managing Director and Chief Executive Officer, Clayton Howes, commented: “This major Australian bank partnership is transformative for MoneyMe, paving the way for substantial scale into the future.”

“This is a significant milestone that provides a step change in our funding costs, increases origination capacity and allows us to better compete on price. It is an achievement made despite the Covid-19 operating environment and is testament to the business model, the economics and quality of the loan assets and the growth opportunity,” he added.

More reading

• 3 profitable October ASX 200 trends
• 3 dirt cheap ASX shares for easier credit
• ASX 200 shares to buy for housing boom
• Westpac (ASX:WBC) and 2 more ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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 surge in the US dollar has seen gold prices sink to a two-month low of US$1,850 recently. Could the pullback of ASX gold mining shares be an opportunity to diversify your portfolio and hedge potential economic and geopolitical risks amid COVID-19? 

Gold prices firm for ASX shares 

A stronger Australian dollar means less profit for ASX gold mining shares. Gold is typically sold in US dollars and converted to Aussie. The initial COVID-19 sell off in March saw the AUD/USD freefall to just 58 cents before a V-shaped recovery to 73 cents. This recovery meant that ASX gold mining shares did not enjoy the merits of a surging gold price to its entirety. 

However, in light of gold’s recent sell off from US$1,950 to US$1,850, the gold spot price has stayed firm thanks to the AUD/USD falling from 73 cents to 70 cents. 

Are ASX gold mining shares a buy? 

The gold spot price is central to whether or not ASX gold mining shares are a buy. The recent slump in gold prices was largely driven by the strength in the US dollar. It is difficult to gauge where gold will go from here despite rising fears about the pandemic, a weak global economy and uncertainty about the US elections. The yellow metal may need additional monetary stimulus measures to prop up its price. 

With that said, many ASX gold mining shares are highly growth-orientated and focused on strategic acquisitions, expanding production and lowering all-in sustaining costs (AISC). 

Evolution Mining Ltd (ASX: EVN) is one of the lowest cost gold miners on the ASX. In its record FY20 financial result, the company delivered a soaring 86% increase in underlying net profit after tax (NPAT) to $405.4 million and produced 746,463 ounces of gold. Looking ahead, the group provided the following outlook for the next three years: 

• FY21: 670,000–730,000 ounces at an AISC of A$1,240–A$1,300 per ounce
• FY22: 700,000–770,000 ounces at an AISC of A$1,220–A$1,280 per ounce
• FY23: 790,000–850,000 ounces at an AISC of A$1,125–A$1,185 per ounce

Even if gold prices weaken, the company itself is expanding production and lowering costs by a modest amount in the next three years. 

Alternatively, Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) are more growth-orientated with a joint acquisition/ownership of the KCGM mine in Western Australia. In FY20, Northern Star delivered a significant 69% increase in underlying profit after tax. It expects KCGM’s cash flow to increase with full 12-month contribution in FY21.

Saracen on the other hand delivered a 93% increase in revenue and 105% increase in NPAT. This was driven by a 47% increase in gold production to 520.4 koz at an AISC of A$1,104/oz. Its FY21 guidance points to 600–640 koz at an AISC of $1,300-1,400/oz.

Foolish Takeaway

ASX gold mining shares have shown strong growth across the board in FY20. However the gold price might need more time to find a bottom and recover. I believe investors should watch closely for gold prices to improve and use ASX gold mining shares as both a defensive and growth investment.

More reading

• Are Resolute Mining (ASX: RSG) shares as good as gold?
• 5 things to watch on the ASX 200 on Tuesday
• Leading brokers name 3 ASX shares to buy today
• 5 things to watch on the ASX 200 on Monday
• Why Adbri, Brickworks, Northern Star, & Westpac shares are surging higher today

Motley Fool contributor Lina Lim 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 Bank of Queensland Limited (ASX: BOQ) share price will be on watch this morning following the release of an update.

What did Bank of Queensland announce?

This morning the regional bank announced that it has completed its FY 2020 collective provision modelling.

According to the release, Bank of Queensland now expects its FY 2020 loan impairment expense to be $175 million (pre‐tax). This equates to approximately 37 basis points of gross loans.

Management advised that this includes a COVID‐19 related collective provision expense of $133 million (pre‐tax), up from $71 million previously. This is based on updated RBA economic data, analysis of customers on the banking relief package and their likelihood of recovery, and a significant exposure review.

Bank of Queensland’s CEO, George Frazis, commented: ‘The revised provision reflects the anticipated lifetime losses on the current portfolio relating to the impacts of COVID‐19 in line with AASB 9 Financial Instruments.”

“As we all know, this has been an unprecedented year and BOQ is committed to supporting our customers throughout this period. We are very pleased to see many of our customers returning to work and re‐opening their businesses and will continue to work closely with those that require further assistance,” Mr Frazis said.

As at 31 August 2020, the bank had 12% of housing customers on the banking relief package and 16% of SME customers. Of those customers, 25% are continuing to make full or partial repayments.

Employee underpayment.

In addition to this, the company revealed a further $11 million (pre‐tax) expense. This follows a pro‐active review of historical employee pay and entitlements that was undertaken after the company witnessed remuneration and superannuation issues elsewhere.

Commenting on the review, the company advised: “That initial internal review identified some irregularities in superannuation payments and then subsequently identified potential issues relating to people employed under an Enterprise Agreement (EA) and specific requirements under the 2010, 2014 and 2018 EAs.”

The bank intends to ensure that those impacted are remediated fully as a matter of priority. It will also undertake a broader external wage analysis and review for EA employees.

Mr Frazis commented: “We will get this right and we will make sure our people, past and present receive every cent they are owed. This is an absolute priority.”

More reading

• These are the 10 most shorted ASX shares
• ASX 200 finishes the week with a bang
• These are the 10 most shorted ASX shares
• Borrowers on loan holidays are ignoring ASX bank communications
• Here are the 10 most shorted ASX shares

Motley Fool contributor James Mickleboro 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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Coca-Cola Amatil Ltd (ASX: CCL) has long guarded the secret location for the source of its Mt Franklin bottled water.

But now it has been forced to reveal where “Mt Franklin” is in real life.

The beverage maker has complained to the NSW Department of Planning about potential pollution of its water source from a future nearby sand mine.

The company’s group property development manager Brad McAndrew said its bores in the Southern Highlands, south of Sydney, could experience “contamination of the regional aquifer” if the project went ahead.

“The availability, consistency, reliability and quality of the water extracted from below the land is integral to our business and our customers.”

McAndrew’s submission showed Coca-Cola’s spring water bores are located about 20km south-west of Bowral, on a property on Hanging Rock Road in Sutton Forest. 

The boundary of the future quarry is about 2km away. 

The Motley Fool has contacted Coca-Cola Amatil for comment.

The concern is that millions of cubic metres of fill would need to be trucked in from all over NSW to fill the empty hole left in the quarry.

And that would produce a risk of contaminated soil delivered from elsewhere affecting the water quality.

Coca-Cola stated that its Sutton Forest bores had been used for 10 years and it was planning to operate them “over the long-term”.

Wingecarribee Shire Council stated the aquifer was “highly productive” and used “extensively”.

“43 registered bores were identified in a 2.4 km radius of the project, including 11 Industrial/irrigator users with entitlements of 457 megalitres a year.”

Coca-Cola Amatil shares were down 0.73% on Monday, to close at $9.56.

More reading

• Are ASX gold mining shares a buy after the recent selloff? 
• Bank of Queensland (ASX:BOQ) share price on watch after COVID and employee underpayment update
• Which shares to buy now with $10,000
• Are these high yield ASX dividend shares worth buying?
• 3 Warren Buffett quotes you need to read this week

Motley Fool contributor Tony Yoo 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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October is going to be an interesting month on the ASX. Anyone wondering which shares to buy now will need to consider a few things.

First, the Government is starting to wind back wage subsidies, insolvency laws, and tenancy protections. Second, laws are changing in relation to helping companies trade out of bankruptcy, and reducing responsible lending constraints. Third, Victoria is starting to emerge from lockdown and state borders are slowly reopening. 

Personally, I think the best shares to buy now is a mix of under priced value shares, as well as a number of high opportunity growth shares. 

Values shares to buy now

My preference in volatile markets is to try to find good companies, selling at a bargain price, and then hold them as the price increases. This reduces the risk of losing money. I would spend $7,500 in equal parts on the three ASX shares below. 

Stockland Corporation Ltd (ASX: SGP) has been oversold during the year due to impacts from the coronavirus lockdown. I think it is cheap right now and also has a trailing 12-month (TTM) dividend yield of 6.24%. Stockland has a development pipeline of 76,000 lots of residential real estate. It estimates this has an end market value of $21.4 billion.

Resimac Group Ltd (ASX: RMC) is a small cap non-bank lender worth around $600 million. While this lender definitely has medium term growth potential, I think it will be consistent and conservative. The company saw its share price rise by an average of 10.3% per year from 2010 to 2020. At this rate you will double your original investment within 7 years.  Resimac will be a beneficiary of any loosening of lending criteria.

Boral Limited (ASX: BLD) saw its share price leap up by 5.83% on Monday. The company has been performing very badly over the past several years. However, under new management there are strong signs of a turnaround, making this a great share to buy now. Boral is selling at a high price to earnings (P/E) ratio due entirely to impacts from the pandemic lockdown. 

The company has a new CEO and is working through a review of all elements of the business. It also counts Kerry Stokes’ company, Seven Group Holdings Ltd (ASX: SVW) as a substantial shareholder, recently taking two board seats at Boral.

Growth shares

There is an art to selecting which growth shares to buy now. First, they need to be solid companies with a proven business model. Second, there needs to be a large and growing addressable market. Third, and most importantly, the company needs to have solid barriers to entry, or a moat as Warren Buffet calls it. My preferred moat is intellectual property.

A company that meets all of these criteria, in my view, is DroneShield Ltd (ASX: DRO). The company manufactures non-ballistic weapons for detecting and disabling drones. It has clients in the defence forces and airports globally. Major customers include the Australian Defence Forces and the US Department of Defence. In addition, the company has announced a string of new contracts. Most of which will lead to additional work. 

The DroneShield share price has risen by 50% in the past month. I think this is a good share to buy now before it gets much more expensive. I would invest $2,500 directly into shares of this growth company.

More reading

• 3 profitable October ASX 200 trends
• ASX 200 shares to buy for housing boom
• 2 ASX shares to buy today for house price rise
• Macquarie says ASX value shares will outperform growth stocks from here
• Forget Afterpay (ASX:APT) shares, buy these 3 growth shares

Motley Fool contributor Daryl Mather owns shares of DroneShield Ltd. 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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High yield ASX dividend shares may be quite attractive to investors at the moment.

Interest rates are now incredibly low and that makes the dividends offered by ASX shares seem very appealing.

But just because something pays a dividend, even with a high yield, doesn’t mean that it’s a good pick automatically.

Below are three high yield ASX dividend shares, are they worth buying?

Telstra Corporation Ltd (ASX: TLS)

Telstra has been a popular high yield ASX dividend share for many years. However, today the Telstra share price is almost as low as it has ever been. It has fallen over the past year, five years and it’s down from when it listed. 

A share price will generally reflect the earnings trajectory. Telstra’s earnings have been dropping for the past few years because of the shift to the NBN. In FY20 Telstra’s total income fell 5.9% to $26.2 billion and net profit after tax (NPAT) dropped 14.4% to $1.8 billion.

The falling profit is the main reason why the Telstra dividend has almost halved since 2017. The dividend could actually be cut again if profit doesn’t stabilise. So far, 5G doesn’t seem like the profit saver it’s expected to be for Telstra.

The high yield ASX dividend share offers a grossed-up dividend yield of 8%. I’m not a buyer today because there’s a fair chance the earnings and dividend could decline more.

WAM Research Limited (ASX: WAX)

WAM Research is listed investment company (LIC) which is run by the high-performing team at Wilson Asset Management.

During the 2010s, WAM Research was one of the best-performing LICs. That strong performance allows it to keep increasing the dividend each year. The high yield ASX dividend share has increased its income payment every year since the GFC.

The fact that it’s a LIC also means that it offers diversification because it has dozens of holdings. Some names that it holds (or held recently) include: Adairs Ltd (ASX: ADH), Bapcor Ltd (ASX: BAP), Brickworks Limited (ASX: BKW) and BWX Ltd (ASX: BWX).

At the current WAM Research share price, it is still a high yield ASX dividend share after strong growth, it offers a grossed-up yield of 9.2%.

However, even after a strong portfolio performance in August, the WAM Research share price is trading at a 39.4% premium to the August 2020 pre-tax net tangible assets (NTA). Unless the LIC has had an incredible September, this premium seems very expensive and the dividend yield may prove to be unsustainably high over the long-term (when compared to the NTA). If WAM Research was trading near its NTA I’d be much more interested.

Whilst they have lower yields, I’d prefer other WAM LICs like WAM Leaders Ltd (ASX: WLE) or WAM Microcap Limited (ASX: WMI) which look better value to me.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue is one of the most impressive miners on the ASX. It has done very well, growing to become one of the latest businesses in Australia.

However, whilst Fortescue has done very well, some of this heightened economic strength may not be around forever consistently. Commodities like iron ore usually move in cycles.

The high yield ASX dividend share has benefited from the strong demand from China as well as the production disruption in Brazil due to COVID-19 impacts.

I believe it’s better to buy commodity businesses near the bottom of the cycle, rather than the top. Who knows when that will happen? I’m just not sure buying now is wise, even if the dividend looks very tempting. At some point production in Brazil will return to normal. 

At the current Fortescue Metals Group share price it offers a trailing grossed-up dividend yield of 15.8%. If the future grossed-up dividends can remain above 10% over the long-term then it could still be worth holding purely for income investors.

More reading

• Is the run over for ASX lithium shares after Tesla’s battery day? 
• 3 ASX shares with dividend yields above 10%
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• Are these blue chip ASX 200 shares worth buying?
• 2 high yield ASX blue chip dividend shares to buy next week

Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended Bapcor, Brickworks, BWX Limited, and Telstra 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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Warren Buffett – chair and CEO of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) – is regarded as one of the best investors of all time and someone most of us could learn a thing or two from in my view. Not only does Buffett have an incredible track record of investing over multiple decades, but he is also a highly effective teacher and quote artist. Our Fool colleagues over in the US have put together a comprehensive list of Buffett’s best quotes, but here are 3 I think every investor should keep in mind this week…

3 top Buffett-isms for this week

“Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market”

This is a great one to start off with. Too often, we investors get bogged down with the simplicity of trading shares. It’s easy to forget that those ticker symbols on your screen represent shares of real ownership of real businesses, not trinkets to trade and get lucky on. If all investors picked shares with the same care and dedication as their family home, I’m sure there would be a lot many more happy investors out there. So have a think about whether you’d be happy with your current portfolio of businesses if the ASX closed tomorrow for 5 years.

“Do not take yearly results too seriously. Instead, focus on four or five-year averages“

I think this quote is especially pertinent in this year of the coronavirus pandemic. Many ASX shares have been sold off throughout the year because of the effects from the pandemic and associated lockdowns . And yet for many of these businesses, there’s a decent chance of a full recovery in the years ahead that might make a decent value play today (I discussed one such example yesterday). I believe one of the factors that makes Buffett such a good investor is how he always focuses on the long-term. And putting the pandemic aside, you can almost always get a better gage of a business by looking at its numbers over multiple years anyway.

“Predicting rain doesn’t count, building the ark does”

A Biblical quote to end on, I especially like the simplicity and durability of this Buffett quote. The investing media landscape is perpetually filled with ‘experts’ predicting the next share market crash for a variety of reasons. Yes, one of them will eventually be right. But that doesn’t mean we should always listen. Share market crashes are scary, but they are also inevitable, so one of the best things to do (in my view) is accept this fact. I try and build my own ASX portfolio assuming a crash is just around the corner. That way I’m always holding ASX shares which I think will be just fine in a crash, as well as some extra cash for the opportunities a crash can bring. So don’t be worried about when the next crash will be, just make sure your portoflio can float!

More reading

• Should ASX investors follow Buffett and bet on oil shares?
• Understand this quote, and you’ll understand the ASX share market
• Warren Buffett’s 3 best-performing stocks so far this year: Are they buys now?
• Aussies trading this US share 5700% more than Uber
• The Snowflake (NYSE:SNOW) share price is up 90% in two days

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares) and short January 2021 $200 puts on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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 you have $1,000 sitting in a savings account and no near-term plans for it, I would recommend you consider investing it into the share market.

This is because the potential returns on offer from the share market are vastly superior to the interest rates you’ll receive from the big four banks.

But where should you invest these funds? Two top ASX shares that I think could generate very strong returns for investors over the next decade are listed below. Here’s why I would invest $1,000 into them:

a2 Milk Company Ltd (ASX: A2M)

Given the sharp pullback in the a2 Milk share price this week, I think now could be an opportune time to invest with a long term view. Just as I warned could be the case here recently, a2 Milk has been struggling during the early stages of FY 2021 due to a combination of factors. In light of this, it expects its first half sales to be lower year on year.

While this is disappointing, management appears confident that it is a temporary headwind caused by the pandemic. In light of this, I think investors should be looking beyond this short term weakness and focus instead on its very positive long term outlook. This is thanks to its relatively small market share in China, differentiated brand, and opportunities to accelerate its growth through acquisitions.

IDP Education Ltd (ASX: IEL)

Another option to consider investing $1,000 into is IDP Education. It is a leading provider of international student placement services and English language testing services. As you might have expected, IDP Education has been impacted by the pandemic. But perhaps not as much as you might expect.

It was still able to deliver strong profit growth in FY 2020 despite the crisis. And while trading conditions will be tough in FY 2021 and are likely to remain subdued until the crisis passes, I think it is worth looking to the future. Thanks to its robust balance sheet and strengthening market position, I expect IDP Education to come out the pandemic a stronger business. This could make it a great buy and hold option for investors.

More reading

• Should you buy the dip in the a2 Milk (ASX:A2M) share price?
• ASX 200 finishes flat, A2 Milk shares drop 10%
• I think it’s time to jump on the A2 Milk (ASX:A2M) share price
• 2 ASX shares I think are cheap today
• ASX 200 up 0.1%: a2 Milk crashes lower, Flight Centre and Webjet surge higher

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd. The Motley Fool Australia owns shares of A2 Milk. 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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