Looking for 2 ASX shares to provide you with above average shareholder returns over the long term?

There are never any guarantees with share investing. However, here’s why I believe why the following two ASX shares have a better chance than most of achieving this goal.

TPG Telecom Ltd (ASX: TPG)

TPG now has a significantly stronger market position in the Australian telecommunications landscape since its merger with mobile operator, Vodafone.

TPG has been previously financially challenged over the past few years as a fixed broadband operator. This was mainly due to the lower retail margins it received from wholesaling broadband services on the National Broadband Network. However, following the merger with the local subsidiary of global mobile operator Vodafone, this now places TPG in a much stronger competitive position.

The TPG share price has lost a bit of ground since it was re-listed post the merger at the beginning of July. However, I think it is way too early to read anything into this trend just yet. I believe that TPG is well-placed for above-average shareholder returns over the next five years. Growth is likely to be driven from a combination of a competitive fixed broadband and 5G offering.

REA Group Limited (ASX: REA)

The REA Group share price fell heavily during the early phase of the coronavirus pandemic up to late March. However, the company’s share price has rebounded strongly since then, recovering nearly all of those losses. It has risen from a low of $65.02 on 23 March to now be trading at $110.47.

Although the Australian housing market has been impacted by the pandemic, national house price falls have only been moderate since early this year.

Further house price falls as well as further restrictions on sales activities, such as property open for inspections, may occur in the months ahead.

However, I believe that REA Group is well-placed for strong, long-term growth. In my opinion, REA Group has a much stronger market position than its main rival Domain Holdings Australia Ltd (ASX: DHG). REA Group is well-placed to tap into a rising demand for online property services over the next decade as our national housing market continues to grow.

Foolish Takeaway

TPG and REA Group are 2 ASX shares that I am confident are well-positioned for strong, long-term growth over the next five years. This is likely to lead to above average shareholder returns.

More reading

• Where to invest $20,000 into ASX shares right now
• 5 things to watch on the ASX 200 next week
• Is the REA Group share price a buy?
• I would buy ResMed and these ASX blue chip shares in August
• A dirt-cheap ASX dividend share to add to your portfolio today

Motley Fool contributor Phil Harpur owns shares of REA Group Limited. The Motley Fool Australia has recommended REA Group 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 Splitit Ltd (ASX: SPT) share price has returned from its trading halt and zoomed higher this morning.

In early trade the buy now pay later provider’s shares were up as much as 20% to $1.64.

Why was the Splitit share price in a trading halt?

The Afterpay Ltd (ASX: APT) rival requested a trading halt on Monday while it launched an equity raising.

This morning Splitit announced that it has received firm commitments to raise $90 million (before costs) in new equity. These funds will be raised via a fully committed two-tranche share placement to institutional, sophisticated, and professional investors.

This will be through the issue of approximately 69.2 million new shares at a price of $1.30 per share. This represents a discount of 4.8% to Splitit’s last close price.

Management advised that the placement was well supported by existing shareholders and will see a number of new, high quality institutions join the company’s register.

This includes cornerstone investor, Woodson Capital Management, as a substantial shareholder. Woodson Capital manages a global consumer and technology investment fund headquartered in New York and launched in 2010 with seed backing from Tiger Management.

What about retail shareholders?

The company also intends to launch a non-underwritten share purchase plan following the issue of the first tranche of the placement shares.

This is expected to raise approximately $10 million, which brings the total of the equity raising to $100 million.

What will the funds be used for?

Management advised that the proceeds from the equity raising will be used to accelerate Splitit’s high-growth strategy. This will be through funding additional sales and marketing, and further investing in product and technology development.

Its strengthened balance sheet is also expected to further support growth across the business, including growth of its funded merchant model.

Splitit CEO and Managing Director, Brad Paterson, commented: “We are excited to welcome North American and Global institutional investors to our register. With the business foundations in place and our strategy working well, this equity raising allows us to take things to the next level.”

“We are the only BNPL provider servicing the huge and growing credit card industry and our investors recognise the enormous opportunity to accelerate merchant and customer adoption across our key markets. Our business outlook remains extremely positive, with a healthy pipeline of new merchants and as we work towards activating our strategic partnerships with Visa and Mastercard. We are just getting started and I look forward to building on this positive momentum,” he concluded.

More reading

• ASX 200 jumps 2% higher, Afterpay soars
• Afterpay and Qantas were among the most traded shares on the ASX last week
• Zip Co share price surges 8.5% higher: Is it too late to buy shares?
• 3 quality ASX tech shares to buy in August
• ASX 200 jumps 2%: Big four banks rebound, Wesfarmers update, Afterpay rockets

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Zoom Video Communications Inc (NASDAQ: ZM) was one of the hottest growth stocks of the year, rallying over 270% as the COVID-19 crisis brought millions of new users to its video collaboration platform. That growth attracted the attention of larger tech companies like Microsoft Corporation (NASDAQ: MSFT), which aggressively promoted Teams as an alternative to Zoom.

Zoom easily outpaced Microsoft’s 30% gain this year, and it likely remains a more appealing stock for growth-oriented investors. But is Zoom actually a better long-term investment than Microsoft?

David vs. Goliath

Zoom has a market cap of more than $70 billion, but it’s dwarfed by Microsoft’s valuation of over $1.5 trillion. Microsoft also generated 230 times as much revenue and over 2,000 times as much generally accepted accounting principles (GAAP) profit as Zoom last year.

Zoom is also trading at much higher valuations than Microsoft. Zoom trades at 200 times forward earnings, while Microsoft has a more grounded forward price-to-earnings (P/E) ratio of 31. Zoom trades at 40 times this year’s sales, compared to Microsoft’s cooler forward price-to-sales (P/S) ratio of 10.

The bears will argue that Zoom is overvalued, while the bulls will claim its valuations are justified by its growth rates.

How fast is Zoom growing?

Zoom’s revenue surged 88% to $622.7 million in fiscal 2020, which ended this January, as its adjusted net income surged 514% to $101.3 million.

In the first quarter, which bore the full impact of the COVID-19 shutdowns, Zoom’s revenue rose 169% annually to $328.2 million, and its adjusted net income soared 555% to $58.3 million. Its number of customers contributing over $100,000 in revenues over the past 12 months also grew 90% annually.

For the full year, Zoom expects its revenue to rise 185% to 189%, and for its adjusted earnings-per-share (EPS) to grow 246% to 269%. But after that growth spurt, analysts expect Zoom’s revenue and earnings to rise 25% and 19%, respectively, in fiscal 2022.

Investors should take those forecasts with a grain of salt, but they suggest Zoom’s COVID-19 boost could fade as it faces stiff competition from rivals like Cisco‘s Webex, Facebook‘s Messenger Rooms, Alphabet‘s Google Meet, and Microsoft Teams.

Zoom surpassed 300 million daily active-meeting participants in April but admitted that was a “peak” during last quarter’s conference call. Microsoft claimed Teams hit 75 million daily active users in April but hasn’t updated that figure since.

How fast is Microsoft growing?

Microsoft’s revenue rose 13% to $143 billion in fiscal 2020, which ended in June, as its adjusted EPS grew 14%. The COVID-19 crisis mainly curbed the growth of Microsoft’s Productivity and Business Processes unit, which sells productivity software like Office and Dynamics to enterprise customers.

However, Microsoft’s Intelligent Cloud unit, which houses its cloud platform Azure and server products, benefited from the higher usage of cloud services throughout the crisis. Its More Personal Computing unit — which sells its Windows licenses, Xbox games and hardware, and Surface devices — also benefited from stay-at-home measures.

In short, Microsoft’s strengths offset its weaknesses, and maintaining that balancing act allowed it to expand its ecosystem with loss-leading strategies — like bundling Teams as a free service for Office 365 users.

Microsoft estimated its revenue would rise 8% to 9% annually in the first quarter of 2021 but didn’t offer clear guidance for the rest of the year. Analysts expect its revenue and earnings to rise 10% and 12%, respectively, as the growth of its cloud services and the upcoming launch of the Xbox Series X offset the softness of its macro-sensitive businesses.

The long-term winner: Microsoft

Zoom’s stock still has a lot of momentum, but its valuations are too high, and the competitive threats are too great to ignore. It might be a good short-term play, but its long-term growth is too difficult to predict.

Microsoft is a more balanced investment. The “mobile first, cloud first” strategies, which CEO Satya Nadella spearheaded six years ago, are still generating strong returns; it’s well diversified across multiple markets; and it rewards patient investors with a 1% yield and consistent buybacks.

For now, Microsoft is the better overall investment for long-term investors. I admire Zoom’s robust growth, but I’m not convinced it can maintain its momentum and meaningfully widen its moat against its larger rivals.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

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• ASX investors have been buying these 5 international shares

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Cisco Systems and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Microsoft, and Zoom Video Communications and recommends the following options: short August 2020 $130 calls on Zoom Video Communications, long January 2021 $85 calls on Microsoft, and short January 2021 $115 calls on Microsoft. 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 Qantas Airways Limited (ASX: QAN) share price is dropping lower today after an update from its rival Virgin Australia.

At the time of writing the airline operator’s shares are down 1% to $3.23.

What did Virgin Australia announce?

This morning Virgin Australia announced its plan for a stronger, more profitable, and competitive business. This plan aims to secure approximately 6,000 jobs as it prepares to exit voluntary administration under the ownership of Bain Capital.

Virgin Australia revealed that its plan is anchored around six key points. They are as follows:

Overhaul the cost base and simplify everything, starting with the fleet.

The company believes that to build a successful airline, it will need to align costs with a depressed and uncertain revenue outlook. This includes simplifying its fleet to realise cost efficiencies and remove operational complexity. This will see the airline transition to a single Boeing 737 fleet for domestic and short-haul flying and discontinue the Tigerair brand.

Focus on customer value.

Virgin Australia wants to be the best value carrier in the market and not a low-cost carrier. It intends to offer exceptional experiences at great value, regardless of purpose of travel. It will also continue to focus on delivering the best on-time performance and maintain an exceptional safety record and safety culture.

Harness culture.

Management believes the company’s culture is unique and the heart and soul of both the airline and Velocity Frequent Flyer. As such, it will continue to “reinvigorate the Virgin Australia brand and its passion for customer service, while embracing the diversity, talent and strength of its people.”

Investment in world class digital and data technologies.

Virgin Australia plans to invest significantly in the comprehensive digital re-platforming of both the airline and Velocity Frequent Flyer program. It expects this to accelerate its vision for the future. Which will not only improve its commercial capability and guest experience, but significantly enhance the employee experience and increase the pace of profitable revenue growth.

Strong balance sheet and investment capital for both transformation and growth.

Management expects the company to emerge from its voluntary administration with a strong balance sheet that is worthy of an investment grade rating. This is expected to provide resilience and future growth potential.

Jobs and future growth.

As a result of the changes announced today, Virgin Australia expects 3,000 jobs to be impacted. This will be primarily across the operations functions and corporate roles which directly support the operation. Management commented: “While devastating for our people, making these changes now will secure approximately 6,000 jobs once market demand recovers, with potential to increase to 8,000 jobs in the future.”

“Continued uncertainty.”

Virgin Australia Group CEO and Managing Director, Paul Scurrah, commented: “Our aviation and tourism sectors face continued uncertainty in the face of COVID-19 with many Australian airports recording passenger numbers less than three per cent of last year and ongoing changes to government travel restrictions.”

“Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-COVID-19 levels, with the real chance it could be longer, which means as a business we must make changes to ensure the Virgin Australia Group is successful in this new world,” he added.

Mr Scurrah concluded: “Virgin Australia has been a challenger in the Australian market for 20 years, and as a result of this plan and the investment of Bain Capital we are going to be in a much stronger position to continue that legacy.”

More reading

• Earnings season: What to expect from the CSL FY 2020 result
• Afterpay and Qantas were among the most traded shares on the ASX last week
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• Why the Qantas share price is experiencing severe turbulence
• Why IOOF, IGO, Janus Henderson, & Qantas shares are dropping lower

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX property stocks have been on the nose with asset write downs and dividend cuts forced on the sector from the COVID-19 meltdown.

But there’s one that’s promising a 9% yield for the current financial year. This is the Centuria Office REIT (ASX: COF) share price.

The office trust reported its FY20 full year results this morning and went to great pains to point out its relatively more defensive properties compared to its peers.

Big jump in earnings and revenue

Centuria reported a 38% surge in total revenue to $149.3 million as funds from operations (FFO) jumped $85.4 million in the latest financial year compared to FY19.

The trust even recorded an upward revision in the value of its office properties, although I think some of this could be unwound this year.

Work-from-home restrictions during the coronavirus pandemic is expected to lead to a drop in demand for office space even after the crisis passes.

Risk of write-downs

We have already seen a number of listed property stocks cut the value of their portfolios. This includes Mirvac Group (ASX: MGR) and GPT Group (ASX: GPT), although it relates mainly to their retail properties. I suspect their office portfolios will be next.

However, Centuria’s office properties may not be as badly impacted as these are outside of CBD areas.

It’s high-end central offices charging premium rents that are facing the most pressure. Centuria’s offices are instead in Fortitude Valley in Queensland and Chatswood in New South Wales.

Centuria rents are typically 47% to 77% below what equivalent offices in Sydney CBD charge. Government agencies make up around a quarter of its tenant base.

But Centuria isn’t immune. In fact, it took a $3.2 million hit before June 30 this year from credit losses and rent waivers.

WALE splash or crash?

The trust reported a weighted-average lease expiry (WALE) of 4.7 years and occupancy stands at around 98%.

However, I would take these numbers with a slight pinch of salt in this volatile environment. There are reports that some tenants still in contract are aggressively pushing to cut their rents or renegotiate terms.

Further, 15.2% of rents (based on WALE) expires in 2021 and another 6.8% matures in 2022. These are reasonably small numbers but if most of these tenants do not renew, it can have a big impact on Centuria’s FFO.

Should you be tempted by yield?

However, management will be hoping investors will be tempted by its forecast dividend yield. While the trust is guiding for a lower distribution in FY21 at 16.5 cents a unit (a 7.3% cut from FY20), this still works out to a 9% yield based on yesterday’s close of $1.83.

But in a sign that things remain in a state of flux, management isn’t providing guidance on its FY21 FFO at this point. This makes me wonder how much confidence we can have in the 16.5 cents forecast distribution.

More reading

• 7 ASX shares to watch this reporting season
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• Value stocks to rise on strong A$ and broker picks the cheapest ASX stocks to buy today

Motley Fool contributor Brendon Lau 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 are looking for two quality S&P/ASX 200 Index (ASX: XJO) shares to buy this month, my pick would be ResMed Inc (ASX: RMD) and  Transurban Group (ASX: TCL).

Here’s why both of these shares are in my buy zone right now:

Global leaders

ASX 200 share ResMed may not be as well-known as other leading Australian healthcare shares such as CSL Limited (ASX: CSL).

However, ResMed has evolved over the past 30 years to be a global leader in its healthcare niche and is now one of the world’s top sleep treatment companies.

The company manufactures devices and cloud-based software solutions for the treatment of sleep apnoea and other chronic respiratory illnesses.

ResMed’s strong revenue growth story continues. ResMed achieved an impressive 47% increase in net income during the third quarter of FY 2020. This strong revenue growth is reflected in ResMed’s recent share price growth. Despite the challenges of the coronavirus pandemic, the ResMed share price has risen from $21.90 at the beginning of this year, to now be trading at $28.79. That’s more than a 30% increase.

I believe that ResMed is well-positioned to grow over the next decade, as it further expands its global reach. The international market for sleep apnea remains largely untapped.

Strong futures

Transurban is the largest toll road operator in Australia, and has an expanding overseas presence. This ASX 200 share now has a market capitalisation of $38 billion. In Australia, Transurban has a virtual monopoly on the toll road systems in both Sydney and Melbourne.

The Transurban share price took a hit during the early phase of the coronavirus pandemic from late February to mid-March. Since then its share price has made only a partial recovery.

The Transurban share price is currently  trading at $14.01, compared to $16.34 in late February. I believe this offers astute investors with a long investment horizon a good buying opportunity. Revenues are no doubt likely to be further impacted in the short-term, especially in Melbourne, where stage 4 restrictions have just been introduced. However, traffic levels will eventually return to normal as the crisis eventually eases.

I believe that Transurban is well-placed to tap into growing revenues from growing populations in both its local and overseas operation over the next decade.

Foolish Takeaway

ResMed and Transurban are both high quality ASX 200 shares that I believe could make good additions to your ASX share portfolio this month. Both have strong market positions and an expanding overseas presence.

More reading

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Motley Fool contributor Phil Harpur owns shares of ResMed Inc. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended ResMed Inc. 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 Telstra Corporation Ltd (ASX: TLS) share price will be one to watch on Wednesday after the release of an announcement.

What did Telstra announce?

This morning Telstra announced that it has entered into an agreement to sell its data centre complex in Clayton, Victoria, to Centuria Industrial REIT (ASX: CIP) for a total of $416.7 million.

The 3.2 hectare complex is 25km from the Melbourne CBD and incorporates 10 buildings. This includes the telco giant’s newest 6.1MW data centre and its adjacent 6.6MW data centre and associated energy centre.

According to the release, the sale includes a triple-net lease-back arrangement. This means Telstra will retain ownership of all IT and telecommunications equipment, as well as ongoing operations and responsibility for building upgrades and repairs, future capex requirements, and security.

The lease is for an initial period of 30 years, with two 10-year options for Telstra to extend the lease. Importantly, the sale has no impact for Telstra customers.

T22 strategy progressing well.

Telstra’s CEO, Andrew Penn, notes that the sale is part of the company’s T22 strategy which is cutting costs and simplifying its business.

He commented: “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 now 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 company advised that transaction is expected to be completed by the end of August and will generate $416.7 million in proceeds.

However, due to the long tenure of the lease-back, the transaction will not be treated as a sale under accounting standards. As a result, no accounting gain will arise from the transaction.

The acquirer, Centuria Industrial REIT, has placed its shares in a trading halt this morning while it raises funds to complete the transaction.

More reading

• 3 high quality blue chip ASX 200 shares to buy
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Motley Fool contributor James Mickleboro 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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Coronavirus restrictions are tightening and, as a result, I’m watching ASX retail shares.

I think non-discretionary retailers like Coles Group Ltd (ASX: COL) could benefit from tightening restrictions across the company.

However, there are some question marks around those with discretionary products.

Here’s what I think might lay ahead for ASX retail shares in the coming months.

Which ASX retail shares to watch this month

Clearly, the August earnings season will be a big factor for ASX retail share prices.

It’s been a strong year so far for the likes of JB Hi-Fi Limited (ASX: JBH). The JB Hi-Fi share price is up 15.5% in 2020 while the S&P/ASX 200 Index (ASX: XJO) has fallen 9.8% lower.

Given its heavy reliance on electronics, I think JB Hi-Fi is one of those non-discretionary shares to watch.

The retailer is set to release its FY20 results on 17 August. I think the numbers will be strong, but investors may be worried about the impact of restrictions weighing down sales.

I can see a couple of headwinds for the ASX retail share in 2020. One is that government stimulus money is starting to slow which could impact discretionary spending.

The other is that many Aussies already loaded up on their electronics in March. That means recurring customer revenue may be lower in the year ahead.

It’s not just JB Hi-Fi I’m watching this month. An article in Monday’s Australian Financial Review (AFR) also got me thinking about other ASX retail shares.

Many stores owned by JB Hi-Fi, Super Retail Group Ltd (ASX: SUL) and Wesfarmers Ltd (ASX: WES) all stayed open during the first lockdown in March.

However, that’s set to change which could mean a different impact this time around. A strong online presence may help some stores weather the impact but nothing is certain.

If Aussies are willing to bunker down, some of these top ASX retail shares could see an earnings slump. That won’t, however, be reflected in their FY20 results, which means we will have to wait for more trading updates.

Foolish takeaway

There’s no doubt that the coming weeks will be challenging for Victorian and Australian businesses.

I think the safe play here is to stick to non-discretionary ASX retail shares. Supermarket sales should be more resilient than most in the coming months.

That means a supermarket retailer like Coles or Metcash Limited (ASX: MTS) may be worth a look.

More reading

• Leading fundie says the ASX gold share boom is just beginning
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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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