Author: therawinformant

The resurgence of coronavirus in Victoria has investors once again taking stock of potential economic impacts of the pandemic. When it comes to investing, and the outlook is particularly uncertain, it can often pay to consider life’s necessities. These are the products and services we will always need. Basic human needs for food, shelter, and internet access must continue to be met regardless of the economic climate. 

Defensive, blue chip ASX shares often cater to these needs. This makes them resistant to economic downturns. Companies in the consumer staples, healthcare, utilities, and telecoms sectors are somewhat insulated from economic fluctuations. Consumers may switch to cheaper options, but they can’t go without them altogether. On that note, let’s take a look at 3 dependable, blue chip shares to consider adding to your portfolio for these uncertain times. 

3 blue chip shares to buy during uncertain times

Coles Group Ltd (ASX: COL)

The Coles share price proved resilient during the February/March market crash. This was perhaps not surprising given shelves were stripped bare at the time due to consumers stockpiling. The rush on groceries prompted by lockdowns pushed Coles’ group sales up 12.9% in the third quarter giving total revenue of $9.2 billion.  

Coles operates 2,500 retail outlets nationally, including 800 supermarkets, 900 liquor stores, and more than 700 fuel and convenience retailers (Coles Express). Supermarket sales increased by 13.1% in the March quarter, giving the division its 50th consecutive quarter of comparable sales growth. Liquor sales were up by 7.2% and Express sales up 4.3%. 

Wesfarmers Ltd (ASX: WES)

The Wesfarmers share price has recovered strongly from the market downturn. Wesfarmers is the company behind Bunnings, Kmart, Target, Officeworks and the online superstore Catch. It’s also the former parent company of Coles but after a series of selloffs, now only retains 4.9% of the supermarket chain. Both Bunnings and Officeworks recorded significant sales growth in the second half to early June. Bunnings sales were up 19.2% and Officeworks sales were up 27.8%. 

Lockdown restrictions have resulted in vast numbers of Australians spending increased time living and working at home. Consequently, many have sought to improve their surrounds. This has led to a surge in DIY projects and home office upgrades. Whilst Kmart and Target have struggled during the pandemic, recent easing of restrictions have resulted in improving sales momentum from around early June as customer footfall in shopping centres increased. 

Woolworths Group Ltd (ASX: WOW)

Woolworths is the larger of the two major supermarket chains, operating 995 supermarkets across Australia. Including its liquor and Big W brands, Woolworths is behind some 3,000 stores across the country. The Woolworths share price has also proven fairly resilient, but has not recovered as strongly as the Coles share price since the March bear market. 

Woolworths reported a 10.7% increase in total, third quarter sales. The Australian food business saw growth of 11.3%, Big W increased sales by 9.5%, and liquor sales rose 9.5%. The hotels business saw a 12.9% drop in sales due to the closure of venues. Sales growth continued in April although moderated from rates seen in March. 

Foolish takeaway

Whilst these ASX blue chip shares might not deliver the heady, short-term returns offered by the likes of Afterpay Ltd (ASX: APT), given we are facing such an uncertain economic outlook, I feel they represent solid, defensive additions to a diversified portfolio. 

More reading

• 2 ASX shares that could flourish in an Australian recession
• Why Afterpay, Evolution, Netwealth, & Praemium shares are racing higher
• Leading broker says Afterpay share price can hit $101
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• ASX 200 drops 1.5% today, Afterpay falls 3%

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Wesfarmers Limited, 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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The NextDC Ltd (ASX: NXT) share price rocketed up to to all-time highs in June, pushing through the $10 barrier before falling slightly at month’s end. During June, the Australian data centre operator’s market cap exploded through the $5 billion mark, pushing it into the ASX 100 for the first time ever. The share price in June finished at $9.88, up above 70% since its lows in March.

Since the end of June, the NextDC share price has gone from strength to strength, reaching its highest ever price at $11.44. This represents a 73% increase for the year.

What does NextDC do?

NextDC is an Australian data centre operator that provides data centre outsourcing solutions, connectivity services and infrastructure management software to global cloud-computing businesses, enterprise and government clients.

The company has a strong focus on energy efficiency and sustainability through renewable energy sources and is aiming for its operations to be 100% driven by renewable energy. As such, NextDC’s corporate operations have been certified carbon neutral under the Australian Government’s Carbon Neutral Initiative.

Yet more contract wins

As recently as 1 July, NextDC announced another material customer contract win in NSW. The company advised that the contracted commitments at its NSW data centre facilities have now increased by approximately 4MW, to more than 36MW-with options to increase to 60MW.

This follows on from contract wins in May and March for Victoria. The company also completed a $672 million equity raise in April.

Commenting on the recent contract wins, CEO and managing director Craig Scroggie stated: “This reflects the nature of NEXTDC’s digital infrastructure business model, which continues to build long term value through contracted capacity and tangible asset backing.”

The pandemic and resulting rise in remote work arrangements has caused increased demand for NextDC’s services, which could help explain the stock’s meteoric rise. Brokers are evidently still keen on NextDC shares, with Goldman’s analysts retaining their buy rating in early July.

At the time of writing, the NextDC share price is continuing to break barriers as it surges upwards towards the $11.50 mark.

More reading

• 3 high quality ASX 100 shares to buy right now
• Where to invest $1,000 in ASX tech shares today
• Why NEXTDC and these high flying ASX shares just hit record highs
• 3 ASX tech shares to buy and hold
• These were the 5 best performing ASX shares last week

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.

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The Praemium Ltd (ASX: PPS) share price is rocketing higher on Thursday after announcing an agreement to acquire smaller rival Powerwrap Ltd (ASX: PWL).

At the time of writing the Praemium share price is up 13.5% to 42 cents and the Powerwrap share price is up over 51% to 26.5 cents.

What did Praemium announce?

Praemium and Powerwrap have entered into a bid implementation agreement under which the former will make an off-market conditional takeover bid for all of the Powerwrap shares it does not presently hold.

According to the release, Praemium has offered 7.5 cents per Powerwrap share in cash and 1 Praemium share for every 2 Powerwrap shares held.

Combined, this values Powerwrap at an indicative price of 26.44 cents per share or $55.6 million. This represents a 51.1% premium to the last closing price of Powerwrap shares.

What now?

The Powerwrap board of directors unanimously recommend that its shareholders accept the offer. They have indicated that they will be doing so with the shares they own, in the absence of a superior proposal.

The board notes that shareholders will have the opportunity to participate in the benefits of a merged group, which will be one of Australia’s largest independent specialist platform providers with combined funds under administration (FUA) of over $27 billion.

In addition to this, it feels Powerwrap shareholders will be able to participate in the expected upside from the realisation of potentially significant synergies. It expects full year EBITDA operating cost synergies on a preliminary basis to total $6 million by FY 2022.

Furthermore, it believes the likelihood of a competing proposal emerging is low given Praemium’s existing 15.1% interest in Powerwrap.

An “exciting opportunity”.

Praemium’s Chair, Barry Lewin, sees a lot of positives from the combination of the two investment platform businesses.

He said: “The merger is an exciting opportunity for Powerwrap and Praemium shareholders alike. For many years, Praemium has been on a growth trajectory with a recent history of generating steadily growing profitability. This merger adds increased scale and significant synergies. Powerwrap shareholders can now gain exposure to Praemium’s strong financial position and advanced technology, to realise compelling benefits via the creation of one of Australia’s leading independent specialist platform providers on a combined FUA basis.”

This view was echoed by Powerwrap’s Chair, Anthony Wamsteker.

He said: “The board of Powerwrap believes the Offer presents an excellent opportunity for Powerwrap shareholders to participate in the upside of a merged group that stands to benefit from significant potential synergies. With Powerwrap’s strong customer base and Praemium’s track record of profitability and cutting-edge technology, the benefits to Powerwrap shareholders are clear to the board and we encourage Powerwrap shareholders to take the next step in the company’s journey.”

More reading

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• PointsBet share price jumps 10% on BetMakers US deal
• Gold jumps to 9-year high with record highs in sight
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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 Praemium Limited. The Motley Fool Australia has recommended Praemium 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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On Wednesday, the S2 Resources Ltd (ASX: S2R) share price rose by 23.81% to $0.13 after the company announced that it had commenced drilling at its Finland site. 

What was in the announcement?

The company announced that initial diamond drilling had commenced at its 100% owned Aarnivalkea East gold target on the large Paana tenement in Finland. The mine is located 20km northwest of a 9 million ounce gold mine that is owned by another company.

The first drill test had revealed gold grades of up to 10.7 grams per tonne, accompanied by arsenic and bimuth, which can help in identifying a path to gold.

Drilling had been scheduled to start in March but had been delayed due to the effects of the coronavirus pandemic. The drilling is being undertaken by the company’s European-based workers, with virtual oversight by its Australian personnel until they are able to resume international travel.

The initial drilling program will consist of approximately ten diamond core holes, these are to be drilled on 3–4 traverses across the previously identified trend. The initial drilling will take about 3–4 weeks to be completed. According to the announcement, the site can be accessed year round for follow up drilling. 

About the S2 Resources share price 

S2 resources is a greenfields gold and base metals explorer. The company has exploration activities in Australia and Finland. According to the company, its exploration is based in mine-friendly areas. The S2 team primarily consists of former directors from Sirius Resources, which had success in nickel exploration.

The company recently discovered two gold prospects in Finland, one of which is being drilled currently.

At the end of the March quarter, S2 resources had $7.3 million cash plus 31% ownership of Todd River Resources Ltd (ASX: TRT). The company continued drilling for gold in Finland while drilling for nickel at two sites in Western Australia.

The S2 Resources share price is up 97% from its 52 week low of $0.066, and while it is flat on the start of 2020 it is up 18% since this time last year.

More reading

• Todd River Resources share price up 50% in 2 days after acquisition news

Motley Fool contributor Chris Chitty 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 you’re planning to invest your money into the Australian share market, then one of the shares listed below could be worth considering whether you’re looking for growth, income, or value.

Here’s why I think these shares are in the buy zone:

Lendlease Group (ASX: LLC)

I think this international property and infrastructure company could be a top option for income investors. Although it has just released its unaudited results for FY 2020 and revealed a sharp decline in profit, I’m confident that the worst is now behind the company. In light of this, I think investors should focus on its long term outlook, which looks very positive thanks to its burgeoning global development pipeline. One broker that is positive on the company is Goldman Sachs. It recently declared its shares as a buy and forecast a 57 cents per share dividend next year. Based on the current Lendlease share price, this equates to a 4.8% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

This telco giant could be a good option for value investors. At approximately 20x estimated full year earnings, I think Telstra’s shares are trading at an attractive level. Especially given its improving outlook and generous dividend yield. In respect to its outlook, I believe a return to growth could be on the cards in the near future thanks to its T22 strategy and the easing NBN headwind. In the meantime, I’m confident its 16 cents per share fully franked dividend is sustainable for the foreseeable future. Based on the latest Telstra share price, this works out to be a generous 4.7% dividend yield.

Xero Limited (ASX: XRO)

Finally, if you’re a growth investor, you might want to consider buying this cloud-based business and accounting software provider. I believe Xero is one of the best growth shares on the ASX and capable of generating very strong returns for investors over the 2020s. This is thanks to its high quality and sticky platform, high retention ratio, and massive global market opportunity. Combined, I expect them to result in strong earnings growth in the coming years.

More reading

• Why NAB and Telstra shares could be top options for income investors
• How to beat the market with 2 kids and no time
• Why brokers have just downgraded BHP and these ASX stocks today
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• Where to invest $1,000 in ASX tech shares today

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 Xero. The Motley Fool Australia owns shares of and has recommended 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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