If you’re young and are just starting out with investing, you might focus on growth shares like Zip Co Ltd (ASX: Z1P) that offer potentially strong returns.

This is because, with time on your side, you can afford to invest in higher risk shares as you have the opportunity to recover your losses further down the line if things don’t go to plan.

But when you are approaching retirement, I feel your focus should shift to lower risk options that offer income and capital preservation.

With that in mind, I have picked out two ASX shares which I think would be great options for a retirement portfolio:

Coles Group Ltd (ASX: COL)

I believe this supermarket giant would be a fantastic option for a retirement portfolio. This is due largely to its solid long term outlook and defensive qualities. The latter has been on display for all to see this year during the pandemic. Coles looks set to deliver a very strong profit result later this month, which should put it in a position to increase its dividend nicely. I expect more of the same in FY 2021, especially given recent lockdowns, and for its growth to continue over the next decade and beyond. Another positive is its favourable dividend policy which sees it pay out between 80% and 90% of its earnings to shareholders. Based on the current Coles share price, I estimate that this will mean a 3.4% fully franked dividend yield in FY 2021.

Rural Funds Group (ASX: RFF)

Another top option for a retirement portfolio could be this agriculture-focused property group. This is because of the quality of its assets and its positive long-term distribution outlook. Thanks to its long-term tenancy agreements and periodic rent increases, I believe Rural Funds will be able to grow its distribution at a consistently solid rate long into the future. An added bonus is that it pays its distribution in quarterly instalments, providing investors with a regular source of income. In FY 2021 Rural Funds intends to pay an 11.28 cents per share distribution. Based on the latest Rural Funds share price, this equates to a 5.4% yield.

More reading

• 3 property shares I’d rather buy over an investment property
• Earnings preview: What to expect from the Coles FY 2020 result
• 4 coronavirus-resistant blue chip ASX shares
• Coronavirus: What does lockdown mean for ASX retail shares like JB Hi-Fi?
• 3 ASX shares with generous dividend yields to buy 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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of 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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There are some ASX shares that look absurdly cheap right now in my opinion.

I’d like to snap up some of them for my portfolio. There are plenty of businesses that seem troubled due to COVID-19 impacts – I wouldn’t want to buy those. It could be like trying to catch a falling knife.

There are other shares that have good growth potential, but their share prices are too eye-watering for me at the moment. I’m thinking about shares like Kogan.com Ltd (ASX: KGN) and Afterpay Ltd (ASX: APT).

But I think these ASX shares could be very cheap buys right now:

Share 1: Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is a real estate investment trust which owns some of the largest aggregations of berry and citrus farms in Australia. Those farms are leased to leading horticultural business Costa Group Holdings Ltd (ASX: CGC).

From those existing farms it receives a solid fixed rental return as well as variable rent in the form of 25% of the profit generated by those farms. The last 18 months has been quite difficult for Costa (and Vitalharvest’s) earnings, but I think we have passed the worst point.

I think increased earnings and distributions from improved variable rent could be a boost for shareholders and the Vitalharvest share price.

Another boost could come from the new manager Primewest Group Ltd (ASX: PWG). Primewest plans to look for new acquisition opportunities for the ASX share in both Australia and New Zealand.

It’s going to look for farms, processing and manufacturing facilities for food, food and beverage packaging facilities and storage facilities relating to food. I think this wider investment scope, and a regular acquisition plan, will make more investors take notice of Vitalharvest.

It had a net asset value (NAV) of $0.95 per unit at 31 December 2019. At the current Vitalharvest share price that’s a 19% discount, assuming the NAV hasn’t changed. There’s a chance the NAV has grown since then. Of course, it could also have fallen.

Using the last 12 months of distributions, it offers a current distribution yield of 6.2%.

Share 2: NAOS Small Cap Opportunities Company Ltd (ASX: NSC)

This is a listed investment company (LIC). The job of a LIC is to invest in other shares on behalf of shareholders.

Some of its current investments include retirement living business Eureka Group Holdings Ltd (ASX: EGH), IT and telecommunications provider Over The Wire Holdings Ltd (ASX: OTW) and IP voice network business MNF Group Ltd (ASX: MNF). These businesses are proving defensive during COVID-19. For example, one of MNF’s customers is Zoom, the video conferencing business, which has seen a large amount of growth.

This LIC looks for ASX shares with market caps between $100 million and $1 billion. It has a high-conviction portfolio of around ten businesses, meaning it has a large position in each share with an aim of holding for them for the long-term.

I think this LIC is really cheap because of the discount to its net tangible assets (NTA). At 30 June 2020 it had pre-tax NTA per share of $0.68. At the current NAOS Small Cap Opportunities Company share price it’s trading at a 23.5% discount to the June NTA.

The LIC has had a tough couple of years, but I think performance will return to a more normal level as the economy recovers from COVID-19. FY20 was a solid year for the Naos LIC, its 2.6% portfolio return (after expenses, before fees) was 8.26% better than the return of the S&P/ASX Small Ordinaries Accumulation Index.

The ASX share seems to have a floor of a quarterly 1 cent per share dividend, equating to an annual 4 cents per share. This is a grossed-up dividend yield of 11%.

I think the NTA discount is so large that you can’t go too wrong with this pick, unless there’s another crash later this year due to COVID-19 or the US election.

Foolish takeaway

I think both these ASX shares look very cheap and there’s a good chance the discount to their underlying values will close up over time. Even if they don’t rise, shareholders will be rewarded with seemingly large income payments over the next 12 months. At the current prices I’d probably go for Vitalharvest, but I’d be happy to buy both.

More reading

• 3 ASX LICs offering big dividend yields over 7%
• 3 top ASX dividend shares for income investors in August
• 3 ASX dividend shares with yields over 5%
• Where I’d invest $9,000 in ASX shares
• 4 ASX shares I’d buy with $4,000

Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Over The Wire Holdings Ltd. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and MNF Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd and Over The Wire Holdings 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 S&P/ASX 200 Index (ASX: XJO) fell by 0.6% today to 6,001 points.

COVID-19 restrictions continue to get stronger across the country. People travelling from NSW to Victoria will now have to quarantine in a hotel for 14 days. Meanwhile, Queensland has shut the border to NSW and ACT.

Telstra Corporation Ltd (ASX: TLS) asset sale

Australia’s biggest ASX 200 telco announced today that it has entered into an agreement to sell its data centre complex in Clayton, Victoria, to Centuria Industrial REIT (ASX: CIP) for $416.7 million.

The sale includes a triple-net lease-back arrangement which means Telstra will keep ownership of all the IT and telco equipment. Telstra will be responsible for the operations, upgrades, repairs, future capex spending and the security.

The lease is for an initial period of 30 years with two 10-year options for Telstra to extend the lease. Centuria said that the data centre complex had an initial yield of 4.2% and it had a gross lettable area of 26,139 square metres.

The 3.2 hectare complex is 25km from the Melbourne CBD and includes 10 buildings. It has Telstra’s newest 6.1MW data centre, its adjacent 6.6MW data centre and the associated energy centre.

Telstra CEO Andy Penn said: “As part of T22, we have an ambition to monetise up to $2 billion worth of assets to strengthen our balance sheet. This deal means we have no reached over $1.5 billion. Data centres are an incredibly important part of the digital ecosystem and we continue to own and operate world-leading facilities in Australia and overseas.”

The Telstra share price fell 2.3% today.

Centuria Industrial REIT FY20 result and capital raising

Centuria announced its FY20 result and a capital raising along with the Telstra data centre acquisition.

The ASX 200 share’s net rental profit, called the funds from operations (FFO), was $63.5 million for the year. This translated to FFO per unit of 18.9 cents, down from 19.3 cents.

The industrial real estate investment trust (REIT) announced a full year distribution of 18.7 cents per unit, up from 18.4 cents last year.

Its gearing reduced from 37.4% last year to 27.2% at 30 June 2020. The net tangible assets (NTA) per unit increased from $2.73 to $2.82 at the end of FY20.

In FY21 the REIT is guiding that FFO per unit will be 17.4 cents and the FY21 distribution will be 17 cents.

Not only did the ASX 200 share announce the acquisition, but it’s also buying a $16.4 million industrial facility in Smeaton Grange, NSW and a $14 million facility in Tullamarine, Victoria.

To fund all of these new properties it’s doing a fully underwritten entitlement offer of $340.8 million at an issue price of $3.15 per unit. That’s a 4.8% discount to the last closing share price yesterday.

Centuria Office REIT (ASX: COF) FY20 result

Another Centuria property fund also announced its result today.

Management said that the REIT performed well despite the difficult operating conditions because of COVID-19 impacts. Around 25% of its income is derived from Australian state and federal government tenants.

Its funds from operations rose by $24.2 million to $85.4 million. However, in per-unit terms FFO actually declined slightly to 18.6 cents. The distribution increased slightly to 17.8 cents, up from 17.6 cents. Distribution guidance for FY21 is 16.5 cents per unit.

The REIT’s NTA didn’t change, it was still $2.49 at the end of FY20. Gearing increased slightly to 34.5%.

Centuria Office Fund manager Grant Nichols said: “We believe COF provides quality, highly connected and affordable office space at a time when tenants are focused on their operating costs. Due to its high occupancy, strong underlying tenant covenants and an average building age of 15.9 years, COF remains well pleased to continue delivering attractive income returns to unitholders, with FY21 distribution guidance equating to a current distribution yield of around 9%.”

The forward distribution yield guidance may have been 9% when Mr Nichols delivered that statement, but the Centuria Office REIT share price rose 6.6% today, reducing the prospective yield for future buyers.

More reading

• Top broker warns Afterpay and these ASX stocks could disappoint on profit results
• Why the Netwealth Group share price leapt 33% in July
• 3 property shares I’d rather buy over an investment property
• The latest ASX stocks to be hit by broker downgrades today
• Top brokers name 3 ASX 200 shares to buy today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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If you’re looking to make some long term investments in the share market, then I think the three ASX shares listed below would be top options.

Here’s why I think they would be great shares to buy and hold:

a2 Milk Company Ltd (ASX: A2M)

I think this fresh milk and infant formula company’s shares could generate strong returns for investors over the next decade. This is thanks to the strong demand for its products in China and its relatively modest market share in the lucrative market. In addition to this, its strong pricing power, expansion opportunities for its fresh milk segment, and potential acquisitions should be supportive of its growth in the future. Overall, I think this makes it a great buy and hold option.

Cochlear Limited (ASX: COH)

Another top share to consider buying and holding is Cochlear. I think the leading provider of cochlear implantable devices for the hearing impaired has very strong long-term growth potential. This is due largely to its leading position in a market with high barriers to entry and positive tailwinds. In respect to the latter, I believe Cochlear will benefit greatly from ageing populations across the globe. After all, with hearing tending to fade as you age, a growing number of over 65s globally can only be a good thing for the company.

Kogan.com Ltd (ASX: KGN)

Kogan is a rapidly growing ecommerce company and Australia’s answer to Amazon. It has been a big winner from the shift to online shopping during the pandemic. And while this has resulted in its share price zooming materially higher, I would still be a buyer with a long term view. I expect more and more shopping to be made online over the next decade, which bodes well for Kogan given the increasing popularity of its website. Combined with potential value accretive acquisitions following its equity raising, I believe the future is very bright for this one.

More reading

• Here’s where Australians are spending – despite the recession
• Why Cochlear, NAB, Tabcorp, & Telstra shares are tumbling lower
• 2 of the best online shopping ASX shares to buy in August
• 3 ASX shares I’d buy if the ASX crashes again
• Top fund manager says A2 Milk could double or triple its market share

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 Cochlear Ltd. and Kogan.com ltd. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Cochlear Ltd. and 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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Some of the shine may come off the record breaking Afterpay Ltd (ASX: APT) share price this profit reporting season.

The BNPL champ has been winning the hearts of ASX retail investors with some of the best returns on the S&P/ASX 200 Index (Index:^AXJO), but this goodwill will be put to the test this month.

Goldman Sachs warns that Afterpay is one of the six ASX stocks that are likely to unveil negative surprises when they hand in their earnings report card.

Risk of higher than expected costs

While attention will likely be on top-line measurements (such as customer growth, new merchant sign-ups, active users, etc), the risks comes from capex.

“There is still a risk we are under-estimating the cost investment that may be required to drive what we otherwise expect to be strong top line growth,” said the broker.

Having said that, the growth in the business is unlikely to disappoint given the strong momentum Afterpay is achieving.

On the other hand, let’s not also forget there’s a lot of good news priced into the Afterpay share price, which makes it vulnerable to any negative surprises.

Goldman rates Afterpay as “neutral” with a 12-month price target of $70.15 a share.

Turbulence ahead

Afterpay isn’t the only one carrying downside risk. The Qantas Airways Limited (ASX: QAN) share price is another that could make shareholder nervous.

The airline is guiding for a pre-tax profit of between breakeven and a small positive number excluding $2.8 billion in one-off charges.

But with the new stage four Victorian lockdowns and increasing cross border restrictions, it’s hard to imagine its outlook commentary being anything but sombre.

However, Qantas is still better placed than the Air New Zealand Limited (ASX: AIZ) share price.

“Recovery of domestic activity has been taken positively by the market,” said the broker.

“However, without international activity (incl Trans-Tasman) we believe the carrier will struggle to return to cashflow breakeven given structurally high operating cost base.”

Goldman’s recommendation on Qantas is “neutral” and Air New Zealand is “sell”. The broker’s price target on the flying kangaroo is $3.82, while the latter is NZ$0.90 (its dual listed).

Other potential profit season disappointers

Other stocks on the August reporting season “sin list” include the Boral Limited (ASX: BLD) share price, the Charter Hall Group (ASX: CHC) share price and Transurban Group (ASX: TCL) share price.

Building materials supplier Boral could be a capital raising candidate as the new CEO looks to restructure the troubled group.

Meanwhile, the market may be underestimating the risk of write-downs from property group Charter Hall due to the COVID-19 fallout.

Finally, the hard lockdown in Melbourne is bound to have a material impact on toll road operator Transurban.

More reading

• ASX 200 drops 0.6%, Telstra sells data centre for $416.7 million
• Why the Netwealth Group share price leapt 33% in July
• The latest ASX stocks to be hit by broker downgrades today
• Top brokers name 3 ASX 200 shares to buy today
• Why the Treasury Wine share price is sinking today

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Transurban Group. 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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