Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in its portfolio.

WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).

There’s also one called WAM Leaders Ltd (ASX: WLE) which looks at the larger businesses on the ASX.

WAM says WAM Leaders actively invests in the highest quality Australian companies.

The WAM Leaders portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 12.8% per annum since inception in May 2016, which is superior to the S&P/ASX 200 Accumulation Index average return of 8.7%.

These are the two ASX shares that WAM outlined in its most recent monthly update, which were two of the largest contributors of performance for the month:

IGO Ltd (ASX: IGO)

WAM described IGO as a clean metals exploration and mining company producing nickel, copper and gold.

In December, the IGO share price rallied strongly after IGO’s entry into the lithium sector, through a non-controlling stake of a Western Australia lithium mine and lithium hydroxide plant.

The fund manager said that the transaction aligns with the ASX share’s long term strategic plan to support the structural shift into battery storage, with the company noting electric vehicle sales are expected to grow approximately 18% per annum through to 2030. If IGO announces the divestment of its Tropicana gold mind, the fundie expects this will be a further positive catalyst for the share price of IGO.

In FY20 the company generated record underlying free cash flow of $311 million for the year. It also generated record net profit after tax (NPAT) for the year of $155 million, an improvement of 104% over FY19.

The ASX share said in its quarterly report for the period ended 30 September 2020, the Nova operation production increased quarter on quarter for all metals. Cash costs were lower at $2.25 per payable pound of nickel. Tropicana gold production was up 5% on the prior quarter at 107,060 ounces. It also said that commercial production from the Boston Shaker underground mine was declared.

For that quarter, it generated revenue and other income of AU$227 million and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $121 million at a margin of 54%. It also generated cashflow from operations of $110 million and generated free cash flow of AU$84 million for the quarter.

BHP Group Ltd (ASX: BHP)

WAM said that not only is BHP the largest resources company on the ASX, but it’s one of the most diversified, producing iron ore, oil, gas, coal, copper, nickel and uranium.

The fundie said that while the December outperformance was primarily driven by higher by iron ore prices, WAM favours the ASX share for its exposure to oil, nickel and copper in particular.

Over the near term, WAM expects oil prices to be supported by a continued recovery in coronavirus-related demand, with travel and industrial production being two examples.

Over the longer-term, a catch up in capital expenditure should see a significant tightening in supply. The fund manager said it’s constructive on nickel and copper for the same electric vehicle reasons that were said about IGO.

More reading

• ASX 200 Weekly Wrap: ASX drops despite promises of more US stimulus
• ASX banks to steal the dividend crown from mining stocks by next year
• 4 ASX shares that helped this fund outperform in December
• Why Afterpay, BHP, Objective, & Pro Medicus shares are charging higher
• 3 blue chip ASX dividend shares with big yields

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Welcome back to the first Foolish Weekly Wrap of 2021! The S&P/ASX 200 Index (ASX: XJO) had a muted week last week, dropping 0.6% despite a raft of positive developments for ASX shares.

The leading story was the late-week announcement of another massive stimulus package over in the United States. President-elect Joe Biden made the announcement on Friday morning (our time) and told Americans that his plan ‘doesn’t come cheap’ but is necessary to help the US economy transition to a post-COVID, vaccinated future.

The US$1.9 trillion plan involves another round of US$1,400 stimulus cheques as well as funding injections for vaccine rollout efforts, among other provisions.

The markets reacted positively to the announcement on Friday, but tempered their enthusiasm somewhat soon after. That was sparked by doubts surfacing over the Democrats’ ability to shepherd the entire package through Congress with its razor-thin majorities in both Houses.

ASX miners and drillers pile on the gains

Even so, the stimulus announcement was catnip for ASX resources shares in particular. BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG) all spiked on Friday on the news, before drifting slightly lower throughout the day.

ASX energy shares also felt the love from the stimulus announcement. Like the miners above, Woodside Petroleum Limited (ASX: WPL), Oil Search Ltd (ASX: OSH) and the energy sector also saw a healthy spike in Friday’s early trade.

But perhaps the week’s biggest winner was Afterpay Ltd (ASX: APT), although for different reasons entirely. Afterpay spent the second trading week of 2021 once again reaching new record highs. The buy now, pay later (BNPL) pioneer hit a new high watermark on Friday of $135.54 a share after shooting more than 10% higher over the trading day. It’s only mid-January, yet Afterpay shares are already up 11.9% year to date!

The catalyst for this move appears to be another round of bullish broker upgrades, as well as the successful IPO of Affirm Holdings Inc (NASDAQ: AFRM). Affirm is a US-listed BNPL company, which rocketed from its IPO price of US$49 a share to US$117 by the end of the week. As my Fool colleague Lina Lim pointed out, Affirm is roughly valued at the same market capitalisation as Afterpay on this move. Investors are clearly interpreting this move as a bullish display of the investor capital available to BNPL companies in the States.

Back home, Afterpay is now valued higher than Telstra Corporation Ltd (ASX: TLS) on the ASX.

How did the markets end the week?

Since the ASX 200 Index started the week at 6,757.9 points and ended up at 6,715.4 points, the benchmark saw a 0.63% decline for the week. Monday kicked things off with a 0.8% decline, which was followed on Tuesday with another 0.1% lopped off. Wednesday saw this partially reversed with a 0.1% gain. Then Thursday turned things around with a 0.4% gain, which was backed up with a tiny 0.002% bump on Friday.

Meanwhile, the All Ordinaries Index (ASX: XAO) also had a week in the red, starting at 7,021.2 points and finishing up at 6,986.8 points in a 0.4% drop.

Which ASX 200 shares were the biggest winners and losers?

Everyone’s favourite page is back with our salacious look at the week’s winners and losers. So put the kettle on and fetch the biscuits while we, as always, start with the worst-performing ASX 200 shares of the week:

More reading

• These ASX dividend shares could solve your income needs
• 5 things to watch on the ASX 200 on Monday
• 2 ASX dividend shares with yields over 5% right now
• Buy these ASX dividend shares if the RBA cuts rates again
• 3 great ASX tech shares to buy

Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium and Pro Medicus Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and POLYNOVO FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It certainly is getting very hard to earn a passive income from traditional interest-bearing financial products like savings accounts and term deposits. 

Fortunately, the Australian share market still has plenty of dividend shares offering yields that could solve your income needs. Two to look closely at are listed below:

BWP Trust (ASX: BWP)

The first dividend share to look at is commercial property company BWP Trust. It is the largest owner of Bunnings Warehouse sites across Australia.

Given the quality of the Bunnings business and its strong performance during the pandemic, BWP has been a solid performer over the last 12 months. In fact, it even saw the value of its properties increase at the height of the crisis. This led to the company reporting an impressive 24.4% increase in full year profit to $210.6 million in FY 2020.

This strong form also allowed the BWP board to increase its distribution to 18.29 cents per unit. Based on the current BWP share price, this represents a trailing 4.3% yield for investors. Management advised that a similar dividend is expected in FY 2021.

Westpac Banking Corp (ASX: WBC)

The banking sector didn’t fare anywhere near as well as BWP in FY 2020. A spike in loan deferrals and billions of dollars worth of provisions weighed heavily on investor sentiment and sent bank shares down to multi-year lows. It also forced the banks to cut or suspend their dividends, much to the dismay of shareholders.

The good news is that the worst now appears to be over and the banks have come out of the crisis in a much better shape than expected. And while their shares have rallied hard because of this, it doesn’t appear to be too late to invest for income thanks to APRA’s decision to scrap its dividend restrictions.

Last week analysts at Morgan Stanley put an outperform rating and $22.50 price target on Westpac’s shares. The broker is also forecasting an 86 cents per share dividend in FY 2021 and then a $1.08 per share dividend in FY 2022. This represents 4% and 5% dividend yields, respectively, over the next two years. 

More reading

• ASX banks to steal the dividend crown from mining stocks by next year
• This broker calls ANZ (ASX:ANZ) shares as the preferred bank pick
• ASX 200 up 0.4%: Afterpay hits record high, bank shares rise, Resolute disappoints
• Westpac (ASX:WBC) share price climbs higher as investors eye dividends
• Here’s why ASX bank shares might juice up their dividends in 2021

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you have room in your portfolio for a growth share or two, then you might want to take a look at the ones listed below.

Both have been named as buys and tipped to deliver strong growth over the coming years. Here’s what you need to know:

Nanosonics Ltd (ASX: NAN)

With the COVID-19 crisis highlighting the importance of infection control, Nanosonics looks well-placed for the future. At present the company is a bit of a one-trick pony with its hugely popular and industry-leading trophon EPR disinfection system for ultrasound probes.

However, it is aiming to launch several new products in the near future which have similar addressable markets. Given the favourable tailwinds supporting infection prevention, these products could take its growth up a level if management finally releases them after several delays.

One broker that thinks investors should be patient with Nanosonics is UBS. The broker believes the company is a high-quality and structural growth story and expects it to benefit from post-COVID infection prevention tailwinds. UBS has a buy rating and $7.20 price target on the company’s shares.

Zip Co Ltd (ASX: Z1P)

Another growth share to look at is Zip. It is a leading buy now pay later provider with operations across several key markets such as Australia, the United Kingdom, and the United States.

Zip has been growing its transaction value and customer numbers at a very strong rate over the last few years. This has been driven by the growing popularity of the buy now pay later payment method with consumers and merchants, the decline in credit card usage, and its international expansion.

The company has also launched a few complementary products which have been tipped to support its growth in the future. These include Zip Business and its Tap & Zip product.

Analysts at Morgans are very positive on its outlook. Following its capital raising last month, the broker put an add rating and $8.89 price target on its shares. This compares to the current Zip share price of $5.61.

More reading

• What’s in store for the ASX tech sector in 2021?
• ASX 200 rises 0.4%
• Could this be why Afterpay (ASX:APT) and other BNPL shares are soaring today?
• Afterpay and Creso Pharma were among the most traded shares on the ASX last week
• 5 things to watch on the ASX 200 on Tuesday

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 Nanosonics Limited and ZIPCOLTD FPO. The Motley Fool Australia has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Friday the S&P/ASX 200 Index (ASX: XJO) finished a difficult week with the smallest of positive days. The benchmark index rose a fraction of a point to 6,715.4 points.

Will the market be able to build on this on Monday? Here are five things to watch:

ASX 200 expected to fall.

It looks set to be a disappointing start to the week for the Australian share market on Monday. According to the latest SPI futures, the ASX 200 is poised to open the week 16 points or 0.25% lower. This follows a poor end to the week on Wall Street, which saw the Dow Jones fall 0.6%, the S&P 500 drop 0.7%, and the Nasdaq tumble 0.9% lower.

Ramsay upgraded to conviction buy rating.

The Ramsay Health Care Limited (ASX: RHC) share price could push higher today after analysts at Goldman Sachs upgraded its shares to a conviction buy rating from neutral. The broker has also lifted its price target on the private hospital operator’s shares to $70.00. Goldman believes the improvement in near-term fundamentals is not yet reflected in consensus forecasts or current trading multiples.

Oil prices drop lower.

Energy producers including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could start the week in the red after oil prices dropped lower. According to Bloomberg, the WTI crude oil price fell 2.3% to US$52.36 a barrel and the Brent crude oil price dropped 2.3% to US$55.10 a barrel. Oil prices tumbled after demand fears hit sentiment.

Gold price sinks.

Gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could come under pressure today after the gold price sank lower on Friday. According to CNBC, the spot gold price dropped 1.2% to US$1,829.90 an ounce. Traders were selling the precious metal after the US dollar strengthened.

Dexus upgraded.

The DEXUS Property Group (ASX: DXS) share price will be on watch today after Goldman Sachs took its sell rating off the property company’s shares and upgraded them to a neutral rating. Goldman has a $9.65 price target on its shares and believes that the company is doing all the right things in a softening market. The broker estimates that its shares offer a 5.6% dividend yield at the current level.

More reading

• 2 ASX dividend shares with yields over 5% right now
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 ends flat on Friday
• Why the Northern Star and Saracen Mineral merger is getting closer

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At the small end of the market there are a good number of companies with the potential to grow strongly in the future.

Two that have been tipped as future stars are named below. Here’s what you need to know about them:

Damstra Holdings Ltd (ASX: DTC)

The first small cap to look at is this growing integrated workplace management solutions provider.

Damstra’s cloud-based workplace management platform is used by businesses to track, manage, and protect their workers and assets.

The company also offers solutions which are proving very popular during the pandemic. These include fever detection and mobility tracking.

Damstra recently strengthened its portfolio with the acquisition of Vault Intelligence. This adds solutions combining health, safety, compliance, and risk management.

The company has been a positive performer in FY 2021, reporting first quarter revenue of $5.2 million. This was up 34% on the prior corresponding period.

Analysts at Morgan Stanley are positive on its prospects. They have an overweight rating and $2.00 price target on its shares. This compares to the current Damstra share price of $1.49.

MyDeal.com.au Limited (ASX: MYD)

Another small cap to watch is MyDeal. As its name implies, MyDeal is an online retail marketplace provider. It has a focus on furniture, homewares, appliances, technology, baby products, and hardware.

Due to the accelerating shift to online shopping because of the pandemic, MyDeal has been a very strong performer recently.

For example, the online retailer reported a 317% increase in first quarter gross sales to $56.67 million. This was underpinned by a 268% increase in active customers to 669,897.

RBC Capital Markets is a fan of the company and sees more growth ahead for it. The broker has a buy rating and $1.60 price target on its shares. This compares to the latest MyDeal share price of $1.37.

More reading

• 2 rapidly growing ASX ecommerce shares to buy
• 2 exciting small cap ASX shares growing fast
• 2 ASX ecommerce shares to buy in January
• 2 exciting ASX mid cap tech shares to buy in 2021
• 2 growing small cap ASX shares to watch in 2021

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 and recommends Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some ASX dividend shares out there that have high dividend yields but have paid consistent or even growing dividends, including through COVID-19.

Some investors may be looking for higher yields with the Reserve Bank of Australia (RBA) interest rate being so low.

Here are some examples:

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is a large retailer of phones, computers, appliances and other devices and accessories.

The company played its part in helping people get ready to learn and work at home during the difficult COVID-19 lockdown periods. It may also have benefited from the government stimulus.

In FY20, JB Hi-Fi achieved 11.6% growth of sales, earnings before interest and tax (EBIT) went up 30.5% and net profit rose by 33.2%. It was this growth that funded the 33.1% growth of the dividend to $1.89 per share.

The ASX dividend share has a trailing grossed-up dividend yield of 5.3% at the current JB Hi-Fi share price.

JB Hi Fi’s growth has continued into the first quarter of FY21, with JB Hi-Fi Australia sales growth of 27.3%, JB Hi-Fi New Zealand sales declined by 2.5% and the The Good Guys sales growth was 30.9%.

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the largest retailers of furniture in Australia.

The company delivered flat profit growth in FY20 – whilst sales revenue fell 2.1% to $262.5 million, net profit after tax (NPAT) was $42.1 million, the same as the prior corresponding period. This was achieved by the EBIT margin increasing by 90 basis points to 23.2%.

Nick Scali increased its FY20 final dividend by 12.5% on the back of the strength of its sales orders for the first half of FY21. That brought the Nick Scali full year dividend to 47.5 cents per share.

The ASX dividend share has a trailing grossed-up dividend yield of 6.3%.

Nick Scali is expecting a lot more growth in the FY21 first half. It recently provided guidance that it’s expecting net profit after tax (NPAT) for the six months to 31 December 2020 to be $40.5 million, up approximately 100% on the underlying profit from the prior corresponding period. Total written sales orders grew by 45% in the first quarter and grew 58% in the second quarter.

The sales order book was at an all-time high at 31 December 2020 and this is expected to translate to material revenue and profit growth in the second half of FY21.

Nick Scali continues to add more stores to its network in Australia and New Zealand to increase its footprint and potential customer base.

Rural Funds Group (ASX: RFF)

Rural Funds is a farmland real estate investment trust (REIT) that owns farm types including cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

The agricultural landlord leases its farms to a variety of high-quality tenants that are among the biggest of their industry in Australia. Examples are: Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE), Olam, JBS and Australian Agricultural Company Ltd (ASX: AAC).

All of the contracts with these tenants are long-term and have rental growth built into them. That growth is either a fixed 2.5% annual increase, or it’s linked to CPI inflation, plus occasional market reviews.

The ASX dividend share also has a strategy of investing some of its rental profit each year into farm improvements to boost the value and rental potential of the properties. This has worked particularly well with cattle properties in recent years.

These two strategies are a large reason why Rural Funds has a goal of increase the distribution by 4% each year.

In FY21 Rural Funds plans to pay a higher distribution of 11.28 cents per unit, equating to a distribution yield of 4.5%.

More reading

• What’s in store for the ASX tech sector in 2021?
• What does 2021 hold for ASX retail shares?
• The Accent Group (ASX:AX1) share price just got hit by a broker downgrade
• Retail sales rose 7% in November to boost ASX retail shares
• Capital returns galore from cashed-up ASX retail stocks

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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An ASX dividend share is worth more today than perhaps any time in living memory. With interest rates at record lows (near zero in fact), sources of yield outside the share market have more or less dried up.

Unlike in years gone by, investors who are nervous of the inherent volatility of the share market cannot turn to government bonds or term deposits to find a ‘safe’, inflation-beating yield.

Although the S&P/ASX 200 Index (ASX: XJO) and ASX shares are almost at their most expensive point today than at any time after the coronavirus-induced market crash of March 2020, there are still plenty of shares that offer decent, inflation-beating yields, some even exceeding 5%.

ASX dividend shares, of course, are not safe investments. A company has absolutely no obligation to maintain a dividend payout. And the market can dent your principle capital on any trading day, sometimes permanently. But if you want a 5% yield today, there are few alternatives.

So, here are 2 ASX dividend shares that offer a 5% yield or greater on current pricing.

2 ASX dividend shares offering a 5% yield today

Telstra Corporation Ltd (ASX: TLS)

Telstra is our first ASX dividend share offering a yield of more than 5% today.

In 2020, Telstra paid out 2 dividends, each consisting of an 8 cents per share payout, complete with full franking credits. That gives Telstra shares a trailing dividend yield of 5.13%. That grosses-up to 7.33% with franking.

The Telstra share price has come under fire in recent months due to the company’s struggles with the ongoing NBN rollout, together with its thin margins. Even so, its annual general meeting last year, Telstra’s management all-but-committed to maintaining a 16 cents per share annual payout in 2021. If that indeed proves to be the case, Telstra is once again set to offer a grossed-up 7.33% yield in 2021 on recent pricing.

Rio Tinto Limited (ASX: RIO)

Our second ASX dividend share with a 5% or greater yield today is this mining giant. Rio shares have been on a tear in recent months, buoyed by a rocketing iron ore price. In fact, Rio is up more than 30% since just the start of November.

The Rio share price also recently just hit a new record all-time high of $127 a share. Deposit these gains, Rio shares are still offering a hefty trailing dividend yield of 4.7% on current prices, which grosses-up to 6.71% with full franking credits. Rio’s dividend is arguably less safe than Telstra’s given how volatile commodity prices (especially iron ore) tend to be.

Even so, as long as the iron ore price stays at, or even near, its current level, investors can likely expect the dividends to keep flowing from their Rio shares.

More reading

• ASX banks to steal the dividend crown from mining stocks by next year
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 ends flat on Friday
• Brokers name 3 ASX shares to buy right now

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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According to the latest cash rate futures, the market has priced in a 75% probability of the Reserve Bank of Australia cutting the cash rate down to zero next month.

Whether this happens or not, time will tell. But one thing that appears more certain is that the days of generous interest rates are some time away.

In light of this, the share market looks set to be the best place to earn a passive income for a while yet.

But which ASX dividend shares should you buy? Here are two to consider next week:

Bravura Solutions Ltd (ASX: BVS)

Bravura is a wealth management and transfer agency software solution provider with a number of popular solutions that are being used by large financial institutions.  These include its key Sonata wealth management platform, the Rufus transfer agency solution, the Garradin back office solution, and the Midwinter financial planning solution.

Unfortunately, the company has been facing significant headwinds over the last 12 months due to Brexit and COVID-19. However, management appears confident these are short term headwinds and that its growth will resume once the situation eases.

Goldman Sachs agrees with this view and believes the weakness in the Bravura share price is a buying opportunity. It has a buy rating and $4.50 price target on its shares and is forecasting a 10.6 cents per share dividend in FY 2021. Based on the latest Bravura share price, this represents a 3.6% dividend yield.

Wesfarmers Ltd (ASX: WES)

Another option to consider is Wesfarmers. In contrast to Bravura, this conglomerate has been a very positive performer over the last 12 months. This is thanks largely to its key Bunnings business which has been experiencing strong sales growth during the pandemic as consumers redirect their spending from holidays to home improvements.

Pleasingly, Bunnings has been tipped to continue its positive form over the coming years, especially given tax cuts and government stimulus. This should be supported by growth in other businesses such as Kmart, Target, and Catch.

Credit Suisse is positive on the company and has an outperform rating and $55.83 price target on its shares. The broker is also expecting a $1.90 per share fully franked dividend this year. Based on the latest Wesfarmers share price, this will mean a 3.8% dividend yield.

More reading

• Fund managers are buying Domino’s (ASX:DMP) and this ASX share
• With retail sales numbers rising, how are these 3 ASX shares performing?
• Retail sales rose 7% in November to boost ASX retail shares
• 2 star ASX shares to buy for a retirement portfolio
• Capital returns galore from cashed-up ASX retail stocks

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Warren Buffett and Charlie Munger are two of the most successful investors of all time. Together, they have turned Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) into one of the most valuable companies in the world.

Interestingly, they have achieved this goal through a relatively simple investment strategy that can be replicated by almost any investor.

In fact, through focusing on value opportunities and investing for the long term, it is possible to build a surprisingly large retirement portfolio – even from having no savings at age 40.

Warren Buffett and Charlie Munger’s value investing approach

Warren Buffett and Charlie Munger seek to buy high-quality companies when they trade at fair prices. As such, they do not necessarily purchase the cheapest shares that are available at any point in time. Nor are they willing to pay a high price for even the most attractive businesses. Rather, they aim to identify companies that have a competitive advantage versus sector peers and purchase them when their share price trades at a discount to intrinsic value.

Clearly, determining a company’s intrinsic value, or real worth, is very subjective. So, too, is deciding whether a company is high quality or not. However, through assessing a specific sector and building up knowledge about the companies that operate within it, it is possible to identify the most attractive stocks. Waiting for buying opportunities can be tough, but profitable, in the long run as they deliver capital growth from a low share price.

In today’s market, a number of strong businesses appear to trade at attractive prices after the 2020 stock market crash. As such, there may be opportunities for investors to follow Warren Buffett and Charlie Munger’s strategy to generate high returns in the long run.

A long-term approach to investing

Of course, Warren Buffett and Charlie Munger have built Berkshire Hathaway to its current size over many decades. They have relied on compounding to turn attractive returns into a vast portfolio. They have also been able to overcome various market declines simply by adopting a buy-and-hold strategy.

An investor aged 40 is likely to have sufficient time to do likewise. Certainly, they may not end up with a portfolio valued in the billions. However, even obtaining a similar return to that of indices such as the S&P 500 Index (SP: .INX) or FTSE 100 Index (FTSE: UKX) can turn a modest investment into a large sum. For example, assuming an 8% annual return over a 25-year time period would mean a total return of around 600%.

Therefore, investing today using a similar approach to that followed by Warren Buffett and Charlie Munger could be a sound move. It may enable an investor to turn a modest initial investment into a surprisingly large portfolio so that they can enjoy greater financial freedom in older age.

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Motley Fool contributor Peter Stephens 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: short January 2021 $200 puts on Berkshire Hathaway (B shares) and long January 2021 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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