Author: therawinformant

Investing in ASX 200 shares as a beginner is exciting. There are endless companies to research and a lot of media content to read.

The S&P/ASX 200 Index (ASX: XJO) has rebounded strongly since March and many investors want in on the action.

However, amidst all the market noise, it can be hard to know the dos and don’ts with ASX 200 shares.

Here are a few top tips I wish I had known before I began my investing journey.

1. Diversify across ASX 200 shares

It’s easy to see a hot stock like Afterpay Ltd (ASX: APT) and be tempted to go all-in. However, this is not a wise, long-term strategy.

There are always hot ASX 200 shares but this growth will come and go. It’s best to spread your risk across a number of shares rather than putting all your eggs in one company’s basket.

This can be done in a number of ways. For instance, you could buy a handful of top shares that you like in different industries or sectors.

Another approach is to gain instant diversification by using exchange-traded funds (ETFs).

ETFs invest in a portfolio of shares, and you can buy units in that diversified fund on the ASX.

A couple of examples are Vanguard Australian Shares Index ETF (ASX: VAS) or ETFS FANG+ ETF (ASX: FANG). These funds seek to track the S&P/ASX 300 Index (ASX: XKO) and the NYSE FANG+ Index, respectively.

2. Invest, don’t gamble

According to ASIC, many first-time investors were buying and selling ASX 200 shares in the March bear market.

On the one hand, that’s fantastic news. That means more Aussies are investing their money and building their future wealth. However, that also means many are likely making short-term trades.

To be clear, good investors like Warren Buffett buy and hold companies for the long term. Short-term investors are essentially gambling on each day’s ASX 200 share price moves.

Be more like Buffett and less like the gambler.

3. Trust your strategy

Once you’ve decided on your strategy, try not to worry too much. It’s easy to stress about the daily moves in your portfolio as a beginner.

However, you have to remember that you’re investing in your long-term future. That means you can ignore the day-to-day noise and focus on buying high-quality ASX 200 shares that can perform for the decades ahead.

Don’t waste money trying to time the market, or buying and selling out of your positions. That will cost you a lot of time, effort, taxes and transaction costs.

Instead, just sit back, relax and enjoy the ride.

More reading

• What you need to know about Downer’s share price, $400m cap raise and acquisition
• Where to invest $10,000 into quality ASX 200 shares
• This is how the Hungarian Grand Prix affects you as an ASX investor
• Is the Super Retail share price cheap today?
• Down 5% in 1 day: Are Bendigo and Adelaide Bank shares a buy?

Motley Fool contributor Ken Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 tips for investing in ASX 200 shares for beginners appeared first on Motley Fool Australia.

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If you are fortunate enough to have $10,000 sitting in your savings account and have no immediate use for it, I would suggest you consider putting it to work in the share market.

This is because the potential returns on offer are vastly superior to the interest rates of 0.05% per annum that most bank accounts offer right now.

But where should you invest these funds? I would be buying one of these high quality ASX 200 shares:

a2 Milk Company Ltd (ASX: A2M)

The first place to consider investing $10,000 into is a2 Milk Company. It is one of the leading infant formula and fresh milk companies in the ANZ region and has been growing very strongly in recent years. The good news is that I believe it has the ability to continue its strong growth for a long time to come thanks to increasing demand for its infant formula products in China and the expansion of its fresh milk footprint in North America.

In addition to this, I like the company due to its extremely strong balance sheet, high levels of return on equity, and strong brand power in China. The latter should help the company when competition in the a2-only market increases. Whereas its strong balance sheet gives a2 Milk Company the firepower to make earnings accretive acquisitions to boost its future growth.

Appen Ltd (ASX: APX)

Another quality option for that $10,000 could be Appen. It is the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence (AI). The company has a crowd-sourced team of over 1 million skilled contractors powering the industry’s most advanced AI-assisted data annotation platform.

I believe a testament to the quality of this platform is its customer base. It has helped the likes of Facebook, Microsoft, and Apple with their AI models. The latter includes work on the tech giant’s smart assistant, Siri. Pleasingly, spending on machine learning and AI is expected to continue growing significantly over the next decade. Given its leadership position, I feel this bodes very well for its future growth.

More reading

• What you need to know about Downer’s share price, $400m cap raise and acquisition
• 3 tips for investing in ASX 200 shares for beginners
• This is how the Hungarian Grand Prix affects you as an ASX investor
• Is the Super Retail share price cheap today?
• Down 5% in 1 day: Are Bendigo and Adelaide Bank shares a buy?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Appen Ltd. 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 Where to invest $10,000 into quality ASX 200 shares appeared first on Motley Fool Australia.

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ASX 200 consumer discretionary shares are known to be cyclical. That is, they are companies selling non-essential products and services – things we like to have but can survive without. This sector often suffers in economic downturns. But the COVID-19 downturn appears to be different. 

Lockdown restrictions mean people are spending more leisure time at home, and frequently working from home too. This has increased demand for some typically discretionary items. Here we take a look at three consumer discretionary ASX 200 shares that are outperforming despite the downturn. 

Breville Group Ltd (ASX: BRG)

The Breville Group share price has increased more than 130% since its March low of $10.80 and is currently trading at $24.97. Breville manufactures and sells home appliances such as blenders, toasters, microwaves, and kettles. This ASX 200 share saw revenue grow strongly in March and April – climbing 14% and 18% respectively in the company’s Global segment. The Distribution segment saw revenue growth of 25% in March and 15% in April. 

Strong Australian sales 

Australia and the United Kingdom recorded strong sales in April and May. The United States and Europe lagged other regions due to store closures and the temporary shut down of Amazon Prime. A strong shift to online channels was observed, both via third party sellers and from Breville direct to consumers. Despite its strong growth, Breville moved swiftly to implement measures to reduce cash expenses with the onset of the pandemic. 

Expenses down 

Employee expenses were reduced via salary cost reductions and marketing expenses temporarily reduced by 45%. Discretionary spending has been reduced or deferred and a freeze on non-essential capex implemented. R&D investment has, however, been maintained to protect the product development pipeline. 

Earnings growth and expansion 

Breville has delivered growth in earnings before interest and tax (EBIT) since FY16, with EBIT increasing 15.6% in 1H FY20. Since FY16, Breville has been steadily expanding into new international markets. It entered Eastern Europe in FY16-17 and Germany and Austria in April 2018. In early 2019 Breville entered Belgium, the Netherlands, Luxembourg, and Switzerland, followed by Spain and Turkey later in the year. The company expanded to France and the Middle East this year and is in advanced planning for entry into further markets in FY21. 

Wesfarmers Ltd (ASX: WES)

The Wesfarmers share price has climbed steadily since its March low. It is now up 50% from a low of $31.02 and trading at $46.48. Wesfarmers is the company behind Bunnings, Officeworks, Kmart, and Target. Bunnings and Officeworks saw a serious acceleration in sales during the first lockdown as consumers set up home offices and tucked into DIY projects. 

Strong sales growth 

Bunnings saw sales growth of 19.2% in 2H FY20 to May, while Officeworks’ sales grew 27.8%. This growth was attributable to people spending more time at home as lockdowns took effect. Given the change in customer shopping patterns, it is uncertain whether this growth will continue. 

Sales momentum at Kmart and Target improved in May with a general increase in customer footfall in shopping centres. A recovery in demand for apparel, particularly winter clothing, was noted. Nonetheless, weekly sales performance remains highly variable. For Kmart, significant growth in demand for home and living ranges resulted in some availability issues which are expected to impact June sales. 

Online sales surge

Over the calendar year to early June, the ASX 200 share saw total online sales growth of 89%, reflecting the COVID-19 shift to digital. Wesfarmers has invested significantly in its eCommerce capabilities in recent years, an investment that paid off. Over the financial year to early June, total online sales across Wesfarmers’ business increased 60% to $1.4 billion, or $1.9 billion including Catch. Online bargain site Catch reported sales growth of 68.7% in the second half, and 43.7% over FY20 to early June. 

Costs also up 

Increased sales came at a cost, with Bunnings investing approximately $20 million in additional cleaning, security, and protective equipment to respond to COVID-19. Bunnings will also incur costs of approximately $70 million associated with trading restrictions in New Zealand, the accelerated roll-out of the online offering, and the closure of seven small format stores in the second half. Additional costs associated with COVID-19 and the temporary closure of New Zealand stores will also impact Kmart’s earnings in the FY20 financial year. 

Domino’s Pizza Enterprises Ltd (ASX: DMP)  

The Domino’s share price has recovered strongly from the March downturn and surpassed previous highs. Now trading at $74.05, Domino’s share price is up 37% over 2020 and 65% from its March low. Domino’s is behind the ubiquitous pizza franchise, which has seen a material shift to food delivery in its markets as customers follow stay at home orders. 

Domino’s reports takeaway orders are being replaced by orders for zero contact delivery. CEO Don Meij said, “Many have told us they are doing the right thing by staying home… Their Domino’s delivery is helping them to stay home as well as providing a welcome moment of normalcy in challenging times.” 

Store sales performance  

Same store sales remained consistent in Australia post COVID at a national level. There were, however, significant changes in individual store performances reflecting local trading conditions. This means sales growth has been distributed unevenly across the business. In New Zealand and France, stores have reopened with 1,000 additional delivery drivers sought in New Zealand in anticipation of customers opting for delivery rather than takeaway. 

Japanese and German stores have maintained their strong sales performance. Sales performance in Germany continues to lead the region, while demand has significantly increased in Japan. Japanese management is focused on ensuring operations can meet increased demand from both delivery and takeaway customers. 

Medium-term outlook 

Domino’s does not provide short-term guidance but has advised its balance sheet remains strong, with significant headroom in committed debt facilities and covenants. Over the medium term, Domino’s intention is to continue to open new stores (+7 to 9% per year), and grow same store sales (+3% to 6% per year). COVID-19 has caused some uncertainty which delayed the opening of some stores planned for FY20. Store openings in FY21 will depend on local market conditions relating to COVID-19. 

Foolish takeaway

The COVID-19 downturn is different to previous downturns because it’s accompanied by lockdowns and social distancing restrictions. These have impacted on consumer spending patterns, increasing demand for some discretionary items. These ASX 200 consumer discretionary shares are seeing the results in their sales figures. 

More reading

• You probably shop at these 7 ASX retailers. Should you buy shares in them too?
• Top fund manager names favourite ASX growth shares
• ASX 200 Weekly Wrap: Blue chip shares pull ASX 200 back over 6,000 points
• Cash rate on hold until 2022? Buy these ASX dividend shares
• 3 five-star ASX shares to buy

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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 These ASX 200 consumer discretionary shares are bucking the economic cycle appeared first on Motley Fool Australia.

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With earnings season just around the corner, I thought now would be a good time to look at what the market is expecting from Commonwealth Bank of Australia (ASX: CBA) next month.

Australia’s largest bank is scheduled to release its full year results on 12 August 2020. Here’s what to look for:

Cash earnings.

According to a note out of Goldman Sachs, it is expecting Commonwealth Bank’s FY 2020 cash earnings from continued operations (pre-one-offs) to come in at $7,815 million. This will be an 8% decline on the prior corresponding period.

As a comparison, the consensus analyst estimate is for cash earnings of $7,620 million in FY 2020.

Net interest margin.

Goldman is expecting the bank to report a net interest margin of 2.1%.

Its analysts commented: “While CBA’s 3Q20 NIM was lower than its 1H20 average, we think the operating environment on the margin front will have been supportive for CBA and the sector more broadly in 4Q20.”

It notes favourable deposit pricing trends, supportive funding spreads, and the introduction of the Term Funding Facility by the RBA.

Final dividend.

One of the hottest topics in investment communities right now is what (if any) dividend Commonwealth Bank will pay for the second half.

Goldman Sachs is forecasting a 100 cents per share fully franked final dividend. This will be a 56.7% reduction on last year’s final dividend. The consensus analyst estimate is for a slightly higher dividend of 119 cents per share.

Commenting on the final dividend, Goldman Sachs said: “We think CBA remains well-placed to pay a final ordinary DPS of A100¢, implying a c. 50% 2H20 payout, with a 1.5% discounted 2H20E DRP.”

This is thanks to its superior capital position, strong levels of provisioning, and its healthy level of pre-provision profitability.

However, the broker warned: “We expect the market to focus heavily on CBA’s dividend and any capital management commentary at the upcoming result and concede there is a wide range of potential outcomes with respect to both the size of the dividend and level of the DRP.”

Looking ahead, the broker is forecasting a dividend of 303 cents per share in FY 2021. This represents a fully franked forward 4.2% dividend yield.

Should you invest?

While Goldman Sachs has retained its sell rating and $65.00 price target on Commonwealth Bank’s shares, I still see value in them and would be a buyer at the current level.

Its shares may not be as cheap as Australia and New Zealand Banking GrpLtd (ASX: ANZ) and the rest of the big four, but I think it deserves to trade at a premium due to the quality of its business.

More reading

• Down 5% in 1 day: Are Bendigo and Adelaide Bank shares a buy?
• 5 things to watch on the ASX 200 on Tuesday
• ASX investors were buying these 5 international shares last week
• Why CBA and Macquarie shares could be in the buy zone
• ASX 200 Weekly Wrap: Blue chip shares pull ASX 200 back over 6,000 points

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.

The post What to expect from the Commonwealth Bank FY 2020 result appeared first on Motley Fool Australia.

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The Clean TeQ Holdings Limited (ASX: CLQ) share price has been on a rollercoaster ride over the past few days of trading.

Yesterday, Clean TeQ shares rose 19% despite no news coming out of the company on Monday. However, last Friday the company announced its activities and cash flow report for the quarter ending June 2020, which saw its share price jump 13% that day.

Today, however, the Clean TeQ share price opened early trade down 6.25% to 15 cents per share, before pushing up slightly to be trading flat at the time of writing.

What does Clean TeQ do?

Clean TeQ is involved in metals recovery and industrial water treatment through its ‘Clean-iX’ continuous ion exchange technology. The company aims to help reduce the world’s environmental burden and become a leading supplier of clean energy solutions.

Project updates

On Friday, the company released an update regarding its current projects, which drove the Clean TeQ share price higher on Friday and across yesterday’s trade.

Clean TeQ reported it has made strong progress towards the formal completion of the Fosterville Gold Mine water treatment plant, which is located in Victoria. Since the end of June, the operation of the plant has been handed over to the customer and is running on waste water continuously.

Clean TeQ confirmed it also continued to advance the development of the Sunrise Battery Materials Complex in New South Wales. The Sunrise Project is one of the world’s largest and most cobalt-rich laterite deposits and is tipped to be a significant producer of nickel sulphate and cobalt sulphate – key materials for the electric vehicle battery market.

The company has been progressing the project in conjunction with the Fluor global engineering group, which is headquartered in Texas. While the project was originally slated to be completed in the second quarter of FY20, it has been announced that the project’s completion date has been pushed later to Q3 FY20. The company cited Covid-19 as the reason for the delay.

What now for Clean TeQ

As at the end of June, Clean TeQ’s cash balance was $40.1 million. The company announced that it had received a cash rebate of approximately $4.4 million after being eligible for the government’s research and development tax incentive for FY19. Clean TeQ was also granted a large new exploration licence for base and precious metals near Dubbo and Narromine.

The Clean TeQ share price is down 26%, year to date, and 60% since this time last year. Despite its recent rally, the current Clean TeQ share price represents a sharp drop on its highs of $1.65 in late 2017. 

More reading

• Why AGL Energy, Alumina, BlueScope, & BWX shares are dropping lower
• Immuron share price shoots 90% higher on potential COVID-19 treatment news
• 2 cheap value shares to buy this week
• What you need to know about Downer’s share price, $400m cap raise and acquisition
• 3 tips for investing in ASX 200 shares for beginners

Motley Fool contributor Daniel Ewing 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 The Clean TeQ share price is on a rollercoaster ride right now appeared first on Motley Fool Australia.

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The Kogan.com Ltd (ASX: KGN) share price is rocketing higher following an update on its fourth quarter performance.

In morning trade the ecommerce company’s shares are up 7.5% to a new record high of $18.65.

How did Kogan perform in the fourth quarter?

For the three months ending 30 June 2020, Kogan delivered further strong sales and profit growth compared to the prior corresponding period.

According to the release, gross sales grew by more than 95% and gross profit increased by over 115%.

Things were even better for its adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA). Kogan’s adjusted EBITDA increased by more than 149% during the fourth quarter. This took its adjusted EBITDA growth to over 57% for the full year.

Pleasingly, although retail stores are now open largely as normal, this hasn’t slowed Kogan’s growth.

In the final month of the fourth quarter, Kogan reported gross sales of more than $94 million, gross profit of more than $17 million, and adjusted EBITDA of more than $7.9 million.

As a comparison, during the first two months of the fourth quarter, Kogan’s average run-rate of adjusted EBITDA was $7 million per month.

At the end of the financial year Kogan’s cash balance stood at $147 million. This includes the $100 million raised from its institutional placement, but not the $20 million from its share purchase plan.

Total inventories were $113.1 million at the end of the period, with $80.6 million in its warehouse and $32.5 million in transit.

What were the drivers of this growth?

The shift to online shopping and another solid increase in customer numbers helped drive this strong quarterly result.

Kogan’s active customers grew to 2,183,000 at the end of June, with net 109,000 active customers added during the month.

Founder and CEO of Kogan, Ruslan Kogan, commented: “In early July we celebrated four years since listing the Company on the ASX, and we are now proud to have delivered four consecutive years of significant growth in sales and earnings. Our business is booming as more customers than ever choose Kogan.com.”

More reading

• You probably shop at these 7 ASX retailers. Should you buy shares in them too?
• One thing you should be doing ahead of the ASX reporting season
• Why these 9 ASX shares have doubled in value in the past year
• Kogan share price falls 7% on Federal Court Ruling
• Invest like Warren Buffett and buy and hold these excellent ASX shares

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 Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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 Saracen Mineral Holdings Limited (ASX: SAR) share price is on watch this morning after the miner announced gold production above guidance. Saracen released its June quarterly activities report which revealed FY20 production of 520,414 ounces of gold, ahead of FY20 guidance of +500,000 ounces. 

What does Saracen Mineral Holdings do? 

Saracen is an Australian gold miner with 3 mines on the doorstep of Kalgoorlie. The company mines from the Carosue Dam and Thunderbox operations, and has a half share in the Super Pit, the biggest open pit gold mine in Australia.

The Saracen share price is up 41% over the past year and 102% from its March low. The rise in the share price has been assisted by the rising price of gold, which has increased from around $2,200 an ounce at the start of 2020 to closer to $2,600 an ounce currently. 

What did Saracen Mineral Holdings announce? 

Saracen released its June quarterly activities report, which showed quarterly production of 145,830 ounces of gold at an all-in sustaining cost of $1,152 an ounce. Over the full year, Saracen produced 520,414 ounces of gold at an all-in sustaining cost of $1,101 an ounce. This was ahead of FY20 guidance of +500,000 ounces. 

Saracen sold 148,011 ounces of gold during the June quarter at an average price of $2,280 an ounce, generating sales receipts of $338 million. The company had cash and bullion of $369 million at 30 June, up from $339 million at 31 March. Debt was $321 million at the end of the June quarter, giving net cash of $48 million up from net debt of $21 million at 31 March 2020. 

What is the outlook for Saracen Mineral Holdings? 

Saracen has announced unaudited FY20 sales revenue of $1,072 million, with unaudited statutory net profit after tax of $190 million to $200 million. In FY21, Saracen has forecast production of +600,000 ounces of gold. The company has large ore stockpiles of 1.7 million ounces, which will help insulate the business should mining be restricted due to COVID-19 or other impacts. 

More reading

• ASX 200 Weekly Wrap: Blue chip shares pull ASX 200 back over 6,000 points
• 3 ASX gold shares to hedge against uncertainty
• Up 31% in 1 month: is the Saracen share price a buy?
• Is the gold price too high for investing in ASX gold shares?
• Bellevue share price on watch due to project acceleration

Motley Fool contributor Kate O’Brien 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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ASX shares are a great option for both growth and dividend income.

Businesses have the ability to make good profit and pay out some of it in the form a dividend whilst keeping the rest of the profit to re-invest for more growth in the future. 

It’s hard to find businesses with the right mix of income and growth. There are some businesses like Telstra Corporation Ltd (ASX: TLS) that pay out a large proportion of their earnings, but the earnings and share price aren’t growing.

Others have great growth potential but don’t pay a dividend like A2 Milk Company Ltd (ASX: A2M) and Pushpay Holdings Ltd (ASX: PPH).

But there are some businesses that offer a good mix of both growth and dividend income:

Share 1: WCM Global Growth Ltd (ASX: WQG)

This is a listed investment company (LIC) which invests in global shares, not ASX shares. The name ‘WCM’ refers to WCM Asset Management, a manager based in California which was founded in 1976.

WCM looks for two key attributes for companies to make it into its global growth portfolio. The first is an improving competitive advantage, or in other words an expanding ‘economic moat’. The second attribute is a corporate culture that supports the expansion of this moat. WCM believes that the direction of a company’s economic moat is of more importance than its absolute width or size.

The fund manager looks for companies with a rising return on invested capital (ROIC), rather than businesses with a large but static or declining moat. The corporate culture is a key factor for a business’ ability to achieve a constantly growing moat.

So what are some shares that make it into WCM’s portfolio? The ASX share has positions in: Shopify, West Parmaceuticals, MercadoLibre, Visa, Stryker, Tencent, Lululemon Athletica, Taiwan Semiconductor, Crown Castle International and Ecolab.

As you may have noticed, there’s a focus on technology and healthcare businesses. These two sectors offer investors growth and (usually) fairly defensive earnings.

The investment returns have been strong to June 2020. The ASX share said that its portfolio has returned 20.15% per annum after management fees over the past three years – don’t forget this includes the COVID-19 market selloff a few months ago.

The dividend income part comes in with the biannual dividend that the LIC pays to shareholders. At the moment it’s committed to paying a 2 cents per share dividend as its final FY20 dividend, partially franked to 50%. That means the grossed-up dividend yield is currently 3.8%. At the current WCM Global Growth share price, the ASX share is trading at a 14% discount to its pre-tax net tangible assets (NTA) at 17 July 2020.

I believe it looks like a compelling buy today.

Share 2: Brickworks Limited (ASX: BKW)

I think Brickworks is one of the most promising non-technology ASX shares for growth.

There are three sections to Brickworks, each of them look like they have good growth prospects.

One section is its industrial property trust which it owns half of along with Goodman Group (ASX: GMG). The trust has built industrial properties on excess land that Brickworks used to own. Just like other quality real estate investment trusts (REITs), this property trust is generating reliable rental profit each year. Over the next few years the trust will see two large distribution warehouses completed and leased to Amazon and Coles Group Limited (ASX: COL). The completion of these assets should see a pleasing uptick in rental income and valuation uplift for the property trust.

Another section is Brickworks’ large shareholding of investment conglomerate ASX share Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). The investment house has been a strong dividend share for a long time and it’s steadily building its asset base with diversified businesses like TPG Telecom Ltd (ASX: TPG), Clover Corporation Limited (ASX: CLV) and Palla Pharma Ltd (ASX: PAL). Soul Patts has been delivering solid total shareholder returns for decades, so Brickworks should be able to keep benefiting here.

The last section may be the most important one. Brickworks owns building product businesses in both Australia and the US. COVID-19 has made it harder for construction businesses in the short-term, but Brickworks has set the foundations for good growth in the future when construction rebounds in both countries. I really like the company’s long-term growth plan in the US to make the operations there more efficient and profitable. I think the best time to buy a somewhat cyclical business is during the downturn. 

At the current Brickworks share price it has a grossed-up dividend yield of 5%. It hasn’t cut its dividend for over four decades.

Foolish takeaway

I think both of these ASX shares are trading at good value, have good growth potential and have decent starting dividend yields. I’d be happy to buy both of them for my portfolio at the current share prices.

More reading

• 4 ASX shares I’d buy with $4,000
• How to create a yearly income of $65,000 in dividends
• Top ASX dividend shares to buy in July 2020
• 2 ASX shares for investors aged 50+
• 3 ASX shares I won’t hesitate to buy in the next market crash

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited and WCM Global Growth Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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