Has the great Warren Buffett – chair and CEO of Berkshire Hathaway (NYSE:BRK.A)(NYSE: BRK.B) – lost his magic?

Known as the Oracle of Omaha, Buffett is generally regarded as one of the greatest investors of all time. His holding company, Berkshire Hathaway is one of the greatest American success stories of the 20th century. Since 1964, Berkshire shares have grown by an average of 20.9% per year. In other words, back in ’64, a share in Berkshire would have cost you approximately $12.37. Not bad considering one BRK.A share will cost you US$275,000 today.

But Berkshire’s performance over the last 10 years, and particularly during the 2020 market crash, has some investors wondering if Buffett has lost his mojo. According to reporting in the Australian Financial Review (AFR), Berkshire had it’s worst performance against the US S&P 500 benchmark in 2019, and 2020 is looking to be just as bad.

Has Buffett lost his magic touch?

Recent Buffett deals – specifically involving Kraft Heinz and Occidental Petroleum – have been hugely damaging for Berkshire’s balance sheet. And his now-infamous selloff of US airline shares in March looks to have been executed pretty close to the market bottom. To make matters worse, all 4 of the airlines Buffett unloaded at multi-billion dollar losses have rebounded strongly since March.

Berkshire was seemingly ready for the market wipeout in March with more than US$137 billion of cash ready for deployment. Stockpiling cash late in the market cycle has been Buffett’s modus operandi for decades now. Many of Berkshire’s biggest moneyspinners over the past decade stemming from the global financial crisis in 2008-09.

But Buffett didn’t end up putting even a dollar to work in the 2020 market crash, telling investors in May that, “we haven’t seen anything attractive”.

What’s going on at Berkshire?

The unfortunate reality is that Buffett is now close to 90 years old. He openly admits that the tech companies that now make up the lion’s share of US equity markets are mostly outside his circle of competence. Apart from a gargantuan stake in Apple (initiated in 2016), Berkshire has largely stayed away from tech shares. This appears to have cost the company dearly in recent years.

It has been a challenging few years for Berkshire Hathaway and Warren Buffett. But he has managed to come back from periods of underperformance before. If you look at the history of this iconic investor, you’ll see that it’s never been a great idea to bet against Berkshire Hathaway. So I’m not giving up on Buffett just yet.

More reading

• 3 Warren Buffett quotes to start your week off right
• How to be like Warren Buffett and not lose money investing in ASX 200 shares
• 3 top Warren Buffett quotes to start your week right
• Why Warren Buffett’s net worth has cratered in 2020
• Why didn’t Warren Buffett buy more shares in the recent bear market?

Sebastian Bowen owns shares of Kraft Heinz. 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: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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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I believe maintaining a diversified portfolio is one of the keys to success when investing.

While a diverse portfolio won’t necessarily protect you from market crashes like we experienced earlier this year, it will limit the damage of them.

This is because it means you won’t be over exposed to sectors that are hit harder than others. The travel sector is a great example of this in 2020.

In light of this, I have picked out three top shares in three different sectors which I think could be great additions to most portfolios. They are as follows:

Financial sector – Commonwealth Bank of Australia (ASX: CBA)

Investors that don’t already have exposure to the banks might want to consider Commonwealth Bank. I think the pullback its share price this year has left it trading at a very attractive level for a long term and patient investment. Especially if, like me, you’re optimistic the worst is now behind the banks and better days are ahead. Another reason to consider Commonwealth Bank is its dividend. I expect a final dividend cut in FY 2021 down to approximately $3.70 per share. This equates to a fully franked 5.3% dividend yield.

Healthcare sector – ResMed Inc. (ASX: RMD)

In the healthcare sector I think ResMed is worth considering. It is a medical device company which manufactures ventilators and sleep treatment products. It is the latter products that I believe will be the key drivers of growth during the 2020s. This is because of the proliferation of sleep apnoea globally, which is leading to increasing demand for solutions. I believe the quality of its CPAP portfolio and its growing software businesses have positioned it perfectly to capture a growing slice of this market and deliver further strong earnings growth for many years to come.

Tech sector – Appen Ltd (ASX: APX)

Finally, I think Appen is one of the best options in the tech sector right now. The language data company looks well-positioned to continue growing its earnings at a strong rate over the next decade thanks to the increasing importance of artificial intelligence (AI). Appen has exposure to the AI market through its million-plus team of crowd-sourced experts that prepare the data that goes into machine learning models. It has worked with the likes of Facebook, Microsoft, and Apple. I believe this is a testament to the quality of its services.

More reading

• How the ASX 200 can help first home buyers save for a deposit
• Millennials be warned! Signs of dangerous ASX share trading grow
• 2 ASX shares to buy for beginners
• Is the Macquarie share price a solid buy today?
• 3 high quality dividend shares to buy instead of the big four banks

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. 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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An online sales boom has been magnified as a result of the lockdown during the pandemic. It’s anticipated this boom will continue post the coronavirus.

ABC News reported that the virus has shifted consumer behaviour. Because consumer preferences have changed, this has forced retailers to re-think their offerings and move to, or compliment, their operations with an online presence.

For this reason, I believe an investment in either one of these 3 companies could reward the willing investor:

• Kogan.com Ltd (ASX: KGN)
• Goodman Group (ASX: GMG)
• NextDC Ltd (ASX: NXT)

Kogan.com

The Kogan.com share price has soared 185% in the past year.

Why?

As an online retailer selling a diversified mix of products and services and with a loyal customer base, sales have soared – especially since the lockdown. 

Is it too late to buy?

After completing a A$100 million capital raise this month, Kogan now has the flexibility to invest and grow the business.

In its investor presentation released this month, the group announced a significant increase in sales, earnings and customer numbers. 

In my view, Kogan has benefited enormously from online sales because of its diverse offering. Its increase in marketing spend is helping attract customers and boost sales. For this reason, I believe the share price will continue to rise.  

Goodman Group

While the share price has increased by 2% in the past year, I believe there are reasons to be optimistic. 

In its recent investor newsletter to security holders, the group advised it remains in a solid position and reaffirmed its FY20 earnings guidance of 57.3 cents per share, up 11% on FY19, and a full year distribution of 30 cents per share. 

Goodman supplies logistics and warehousing globally. This aids in the delivery of goods for the online sales boom. It’s seeing stronger demand for new space and the development book stands at $4.8 billion. 

In my view, Goodman is an attractive investment that I think will reward investors despite the small increase in share price in the past year.

NextDC

The NextDC share price has soared 38% in the past year on the back of the demand for its data centres. 

Last month, the group completed a $191 million share purchase plan for eligible shareholders. It’s expected that the funds raised will help the development of a new data centre to meet increased demand. 

CEO, Craig Scroggie, said 

“…well capitalised to continue growing our premium data centre services platform in support of our key customers who continue to drive the growth of the digital economy.”

As a result, NextDC Ltd could deliver significant capital gains for buy and hold investors. 

Foolish takeaway

The recent crisis promoted the benefit of e-commerce with some trying online shopping for the first time. The above-mentioned companies could reward investors who are looking to profit from the rise of online sales.

More reading

• I would buy and hold Kogan and these ASX shares until 2030
• Up 250% since March: is it too late to buy Kogan shares?
• 2 ASX shares to buy for beginners
• Will Xero shares and these 2 other ASX companies be portfolio staples by 2030?
• Why Zip Co and these All Ords shares have doubled in 12 months

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

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ASX dividend shares are a great place to find a good source of income in my opinion. 

Bank interest is now very low. People may want their money to work harder, particularly if income is the goal.

Growth shares can create solid returns with the compounding of earnings. However, growth shares can be risky because they may be overpriced and the growth may not go according to plan. 

Dividends from ASX shares can be an attractive way to be rewarded each year. Share prices are volatile, whereas dividends can be consistent. Dividends are decided by the boards of companies, so businesses have more control of the dividend income for shareholders.

I think that dividend payments are a good sign of business profitability. It also shows that the leadership are thinking about their shareholders. You don’t want a CEO with an empire-building mindset who may lose a lot of money with risky acquisitions.

What type of ASX shares are good for dividends?

Do you want a mix of growth and income? Are you looking for the highest income? Is dividend growth your main concern?

High yield

The yield from an ASX dividend share is a big consideration. There are both positives and negatives to consider when thinking about high yield dividend shares.

If a business is paying out most of its profit each year as a dividend then there is little left for re-investment. It’s the re-investing for growth that is one of the key factors for long-term growth of the business.

But maybe you don’t want a lot of capital growth from your ASX dividend share. Perhaps a high level of income is all you want. In that case then shares like WAM Research Limited (ASX: WAX), Challenger Ltd (ASX: CGF) and Medibank Private Limited (ASX: MPL) could be decent ideas with their current yields.

Franking credits can really add to the yield on offer with the boost to the after-tax returns.

A healthy mix of income and growth

Some ASX dividend shares may not have grossed-up yields that are around 8% or over. They may be closer to the 5% level.

I like these types of income ideas the most because they may offer a good mix of long-term growth, whilst also paying solid dividends in the short-term.

If a dividend isn’t growing then it’s more likely to face a potential cut in the future. If a business isn’t moving forward then its competition is probably catching up. It’s the businesses with strong economic moats that can keep growing and fend off competition. I don’t think stagnant businesses are worth investing in for the long-term. Shares like banks aren’t attractive dividend ideas to me. 

Some ASX dividend shares that offer solid yields now, with good growth potential, are: Brickworks Limited (ASX: BKW), Arena REIT No 1 (ASX: ARF), APA Group (ASX: APA), Amcor Plc (ASX: AMC), Invocare Limited (ASX: IVC), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) Service Stream Limited (ASX: SSM).

Fast-growth income shares

There’s also the option of going for shares that seem as though their dividend income will grow at a fast pace.

For example, a dividend yield starting at 3% doesn’t sound like much. But if the dividend payment grows by say 10% a year then it compounds into a much larger number over time. After several years the 3% yield could pay more in dollar terms than the high yield dividend share, plus it may come with pleasing capital growth.

In this area I’m thinking about shares like Magellan High Conviction Trust (ASX: MHH), Propel Funeral Partners Ltd (ASX: PFP) and TechnologyOne Ltd (ASX: TNE).

ASX dividend shares that I’m going for

There is a lot of uncertainty at the moment with COVID-19 and with the US, particularly as it’s an election year.

If I had to pick some of the ASX dividend shares that I’ve named in this article for my portfolio I’d go for Washington H. Soul Pattinson, Brickworks, Magellan High Conviction Trust and Propel. They all offer decent starting yields and I think they are all trading at good value with good future growth prospects.  

More reading

• Top brokers name 3 ASX 200 shares to sell today
• Fund managers have been buying these ASX shares
• Forget bank interest, try these ASX 200 dividend shares!
• Why G8 Education, InvoCare, Megaport, & Webjet shares are tumbling lower
• ASX 200 jumps almost 4%, Webjet share price soars

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Amcor Limited, Brickworks, Challenger Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group. The Motley Fool Australia has recommended InvoCare Limited, Propel Funeral Partners Ltd, and Service Stream 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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Investors looking for buy ideas that’s off the beaten path might be keen to put these ASX stocks on their watchlist.

These often overlooked stocks are the latest “buy” recommendations outside of the S&P/ASX 200 Index (Index:^AXJO) by leading brokers.

Little risk of dividend cut

The first is the APN Convenience Retail REIT (ASX: ARQ) share price, which jumped 4.5% to $3.50 on Thursday.

Morgans reiterated its “add” recommendation on the stock after the property trust completed its $50 million placement.

APN is looking to raise another $5 million to strengthen its balance sheet and fund the recently announced acquisition of Coles Express outlets.

Management is promising that its FY21 dividend will be no less than the current financial year. That will be music to investors’ ears given that the property sector is at risk of cutting dividends, as highlighted in my article yesterday.

Upcoming catalyst

“The main tenant remains Puma Energy Australia (c58% of income), however in December 2019 Chevron entered into a conditional agreement to acquire its Australian fuel business,” said Morgans.

“In our view, completion of this deal would be a near term positive catalyst as it would further strengthen the credit quality of a key tenant.”

The broker is forecasting a FY20 dividend of 21.8 cents a share, which increases slightly to 21.9 cents next year.

This puts the stock on a yield of 6.3% and Morgan’s price target on the stock is $3.75 a share.

Digging itself out of a hole

Another ASX small cap to put on your buy list is the Imdex Limited (ASX: IMD) share price, according to UBS.

The drilling services company is impacted by the COVID-19 shutdowns, particularly in South America. You only need to look at Brazil to see what I mean.

UBS estimates that Imdex’s June quarter revenue will crash by around 41% over the same period last year due to the lockdowns.

What’s more, the broker doesn’t see a V-shape recovery for Imdex with the way South America is going, but is convinced the stock looks cheap for those willing to look through the coronavirus crisis.

Looking cheap over medium-term

“While near-term earnings provide little support for IMD’s valuation, we view IMD’s FY22E EBIT multiple of 7.5x EV/EBIT as attractive and representative of more normalised EBIT,” said UBS.

“We see risks skewed to the upside from a faster recovery, underpinned by a favourable commodity price backdrop, and faster adoption of IMD’s new products.”

UBS reiterated its “buy” recommendation on Imdex with a price target of $1.30 a share.

More reading

• Can these 5 FY20 dogs of ASX 200 bounce back in the new financial year?
• How the ASX 200 can help first home buyers save for a deposit
• Millennials be warned! Signs of dangerous ASX share trading grow
• Top brokers name 3 ASX 200 shares to sell today
• Australian unemployment jumps to 7.1%

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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The Turners Automotive Group Ltd (ASX: TRA) share price was a standout performer on the ASX today. Turners shares finished 28.24% higher at $2.18 after the group released its full-year FY20 results for the year ending 31 March 2020.

Turners Automotive Group is an integrated financial services group that, as its name suggests, primarily operates in the automotive sector. The group has three main business segments: automotive retail, finance and insurance, and debt management systems. 

Alongside the cornerstone Turners business, the group has a number of brands under its banner, including Oxford Finance, Autosure, and EC Credit Control.

Headline results

Starting from the top line, FY20 group revenue declined by 1% to NZ$333 million. Turners noted that trading towards the back end of the financial year was impacted by the early effects of COVID-19.

Nonetheless, the group delivered an 11% increase in underlying net profit before tax (NPBT), which rose from NZ$26 million in FY19 to NZ$28.8 million in FY20.

The group attributed this growth to gains made in the insurance, finance and credit divisions, which were partially offset by a drop in auto retail due to COVID-19.

Reported NPBT came in at NZ$29.1 million, in line with the group’s guidance range of NZ$28 million to NZ$30 million and flat on FY19 NPBT of NZ$29 million.

Automotive retail

Turners observed a softening of the used car market throughout FY20 due to reduced consumer confidence. Unsurprisingly, this decline was exacerbated during late February and March in the wake of the coronavirus pandemic.

The group highlighted a cyclical reduction in consignment vehicles in FY20. However, this was partially offset by an increase in the sales of owned inventory, with average gross profits per unit up 12% to $529.

Overall, the group’s automotive retail segment delivered revenue of NZ$224.9 million and underlying profit of NZ$13.3 million.

Other segment performance

The group’s finance business, Oxford Finance, delivered marginal revenue growth of 4% to come in at NZ$45.7 million. Operating profit also jumped 10% to NZ$12.2 million. Turners attributed this improvement to writing higher quality new business and the resulting improved arrears performance.

Meanwhile, the group’s insurance arm, Autosure, recorded a 9% drop in revenue as a result of market conditions and focusing on lower risk portfolios and vehicles. Operating profit saw a steeper decline, falling 25% to NZ$6.2 million.

Finally, credit management business EC Credit Control booked in a 1% drop in revenue, while operating profit increased by 3%.

What next?

Looking forward, Turners noted its auto retail business is fully operational, with sales stronger than expected.

The finance segment is seeing arrears performing well, while new insurance policy claims are recovering, with claims tracking below expectations.

On the whole, the group stated that trading in April and May has been “significantly better than what we expected”. This comes as New Zealand moved through its COVID-19 alert levels and the benefits of cost reductions, rent reductions and wage subsidies materialised.

At the end of FY20, the group had net debt of NZ$317.6 million, comprising NZ$32.8 million cash and NZ$350.4 million debt. Turners has an additional NZ$78 million of undrawn funding.

After today’s strong gains, the Turners Automotive share price is down 3.11% year-to-date.

More reading

• I would buy and hold Kogan and these ASX shares until 2030
• Has Warren Buffett lost his magic?
• Diversify your portfolio with 3 top ASX 200 shares from 3 sectors
• 3 ASX shares I’d buy because of the online sales boom
• What are the best ASX shares for dividends?

Motley Fool contributor Cathryn Goh 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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According to the latest cash rate futures, the market is currently pricing in a 57% probability of a rate cut to zero next month.

While I’m not convinced that another rate cut is coming, I feel quite sure that rates will be staying at these ultra low levels for the foreseeable future.

This is good news for borrowers, but the very opposite for savers and income investors who will have to live with meagre interest rates for some time to come.

Fortunately, the Australian share market is home to a large number of dividend shares with generous yields. Two which I would buy today are listed below:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

If you don’t have exposure to the banking sector already, then I think ANZ would be worth considering. With its shares down by a third from their 52-week high, I estimate that they are changing hands for 13x estimated FY 2021 earnings and 0.9% FY 2021 book value. This is lower than average and a level that I think is attractive for patient investors.

Another positive is that although it is highly likely to cut its dividend materially next year, its share price decline means it should still offer an above-average yield. As things stand, I expect ANZ to pay a partially franked dividend of $1.05 per share next year. This equates to a 5.5% yield today.

BWP Trust (ASX: BWP)

Another dividend share to consider buying is BWP Trust. It is a real estate investment trust which owns 75 properties across Australia. The majority of its properties are warehouses that are leased to the Wesfarmers Ltd (ASX: WES) owned Bunnings business. At the last count the company’s occupancy rate stood at 97.5% and it was generating over $150 million in rent each year.

While having the majority of your properties leased to a single customer is usually a risk, I don’t believe it is anything to be too concerned about. This is because Wesfarmers is a major BWP shareholder with a stake of almost 24% and unlikely to do anything that would negative impact its investment. All in all, I’m confident BWP can continue growing its income and distribution at a modest rate for the foreseeable future. At present I estimate that its shares offer investors a forward 4.9% yield.

More reading

• Next phase of bull market could see ANZ Bank outperform Afterpay
• The next ASX sector at risk of cutting dividends
• ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher
• Is the ANZ share price a buy today?
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?

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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There can be no doubting that 2020 has been a tumultuous year for the ASX. At the height of the coronavirus panic-selling in March, millions were wiped off the market caps of many ASX growth companies.

Buy now, pay later fintech Afterpay Ltd (ASX: APT) saw its share price slump almost 80% to a multi-year low of $8.01. Cloud accounting software developer Xero Limited (ASX: XRO) and healthcare blue-chip Cochlear Limited (ASX: COH) also shed over 30% of their values.

While some companies have staged incredible recoveries – Afterpay shares are up 620% since 23 March – there is still plenty of value left in the market. But separating the diamonds from the rough can be difficult. Here are 3 companies I think may have been neglected in the recent market recovery and could still offer big potential.

Nearmap Ltd (ASX: NEA)

ASX aerial imaging company Nearmap is one of the most promising ASX growth companies on the market. Nearmap is a leader in a niche industry and has rapidly expanded its footprint across Australia and North America. Statutory revenue for H1 FY20 surged 31% over the prior comparative period to $46.3 million. And the company was positioning itself for even greater things during the second half.

But then coronavirus happened. Nearmap investors fled despite the assurance that Nearmap had seen no adverse financial impacts from COVID-19. Nearmap shares dropped over 50% in value to a 52-week low of just $0.83 by 25 March. The company has recovered much of its losses, currently sitting around $2. But it’s still well short of the 52-week high of $4.29 in June 2019.

Livetiles Ltd (ASX: LVT)

LiveTiles is a perennially undervalued ASX software company and should be surging higher in the current climate. Software developers like MNF Group Ltd (ASX: MNF) and Objective Corporate Limited (ASX: OCL) have found themselves the unlikely market darlings of this emerging economy. But despite a modest recovery, LiveTiles shares are languishing well below their pre-coronavirus highs. 

LiveTiles develops intranet portals and online working environments for corporate clients. Given many businesses are still working remotely, you would think the demand for software that enables online collaboration would be accelerating.

And according to LiveTiles, it is. Cash receipts for the Q3 FY20 quarter were up 109% over the prior comparative period to $10.9 million. Annualised recurring revenue also rose 5% for the quarter to $55.7 million. And yet, LiveTiles shares are still trading for just 25 cents, 60% short of the 52-week high of 60 cents they recorded last July.

Audinate Group Ltd (ASX: AD8)

Audinate shares took a real hammering during the coronavirus selloff. After opening the year trading at over $7, Audinate shares crashed to $2.51 by 23 March. Despite a strong rebound, they still haven’t recovered all those losses. Audinate is trading at just $6.03 at the time of writing. And to think, as recently as December they were valued at $9.30.

This stunning collapse is, in large part, pretty understandable. Audinate was a promising ASX growth company pre-coronavirus, but demand for its services has been severely dampened by lockdowns. Audinate specialises in the technology required for complex and large sound systems. Past projects have included a theatre in Buffalo, New York, a shopping mall in Mexico City, and even a zoo and aquarium in Ohio.

Audinate was forced to withdraw its FY20 guidance in April in response to the pandemic. It will be interesting to see how much financial damage the company will have sustained. However, as restrictions ease and event spaces re-open, the global leader in sound technology is well-positioned for a rebound.

More reading

• Is investing in super a smart move right now?
• Afterpay share price hits record high on Apple Pay partnership
• Start your investment journey with a $2,500 investment in these ASX shares
• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher
• Splitit share price rockets 33% on new Mastercard deal

Rhys Brock owns shares of AFTERPAY T FPO, AUDINATEGL FPO, Cochlear Ltd., LIVETILES FPO, and Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO, Cochlear Ltd., LIVETILES FPO, Nearmap Ltd., Objective Limited, and Xero. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended AUDINATEGL FPO, Cochlear Ltd., LIVETILES FPO, and Nearmap 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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I think the mid cap side of the market is a great place to look for long term investment options.

But which mid caps should you buy? Three which I think would be top options are listed below. Here’s why I like them:

Bravura Solutions Ltd (ASX: BVS)

The first mid cap ASX share to consider is Bravura Solutions. It provides software and services to the wealth management and funds administration industries. It has a number of quality products in its portfolio which are being used by some of biggest financial institutions in the world. This includes the Sonata wealth management platform, Rufus transfer agency solution, the Garradin back office solution, and the recently acquired Midwinter financial planning software.

Collins Foods Ltd (ASX: CKF)

A second ASX mid cap share to look at is Collins Foods. Not only is it one of the region’s largest KFC restaurant operators, it also has a growing presence in Europe. The good thing about the latter is that the KFC brand has a long runway for growth in the European market due to its under penetration. I believe this gives Collins Foods the opportunity to expand its international network materially over the next decade and drive solid earnings growth.

Pushpay Holdings Ltd (ASX: PPH)

A final mid cap share to consider buying with a long term view is Pushpay. It provides a donor management system, including donor tools, finance tools, and a custom community app, to the faith sector. The company has been growing at a very strong rate over the last few years and expects more of the same in FY 2021. In fact, today Pushpay upgraded its guidance just six weeks after first giving it. It expects EBITDA of US$50 million to US$54 million this year, up from its previous guidance of US$48 million to US$53 million. This will be more double FY 2020’s earnings.

More reading

• Pushpay share price jumps nearly 10% on updated guidance
• Start your investment journey with a $2,500 investment in these ASX shares
• 2 fast-growing ASX tech shares to buy right now
• Here are 2 top ASX tech shares for your portfolio
• UBS picks the best ASX retail stocks for the post COVID-19 world

James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Bravura Solutions Ltd and Collins Foods 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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This is the time when many will be mulling over the question of whether the dogs of FY20 on the S&P/ASX 200 Index (Index:^AXJO) will outperform in the new financial year.

This strategy is popularised by the “Dogs of Dow” theory, which states that last year’s underachievers on the Dow Jones Industrial Average will rebound the following year as businesses move in cycles.

The theory doesn’t quite translate into practice for ASX 200 as there are differences between the Dow and our top 200 benchmark. The most obvious one being the size of companies included in each of the indices.

Value back in vogue

But this doesn’t mean it’s unhelpful to look at FY20 underperformers this year. In fact, this year is probably the best time to be hunting for buys among the laggards compared to past years.

This is because value stocks may finally be pulling ahead of growth stocks for reasons highlighted in my previous article.

This financial year’s underperformers are firmly in the value camp as value stocks trade at a discount to the market and their historical measurements.

On the flipside, growth stocks are those that trade at a premium as investors are happy to bid up shares with better growth prospects in the post COVID-19 world.

Not easy finding the real ASX bargains

But blindly picking ASX stocks from the bargain bin is a recipe for disaster.  Some stragglers deserve to be cast aside as their recovery prospects in FY21 don’t look much better than FY20.

What might work as a better filter is to pick the worst performers that are currently rated a “buy” by most brokers covering the stock.

Using consensus data from Thomson Reuters, there are five ASX dogs that stand out.

Dirt cheap

The worst performer of the group is the South32 Ltd (ASX: S32) share price, which lost around 35% of its value of the past year.

But the majority of brokers think the stock is fundamentally cheap, as do I. I sold out of the base metal miner in August last year but bought back in April when the stock fell under $2 a share.

I think it will head back towards $3 in FY21 as the market thinks the prices for its key commodities are significantly lower than spot prices.

If prices hold around current levels, I suspect we will see a re-rating in the stock.

Zero to hero

Another dog that could find love in the new financial year is the Nine Entertainment Co Holdings Ltd (ASX: NEC) share price.

The media group has long been under pressure due to structural changes in the industry but the coronavirus disruption certainly didn’t help.

The stock slumped around 24% over the past 12 months, but the headwinds are starting to ease.

Outlook improving

The reopening of our economy is one obvious plus point, but that isn’t the only light at the end of its tunnel.

The government’s move to force tech giants like Alphabet Inc (aka Google) and Facebook, Inc. to pay local media outlets to reuse content could be a game changer.

Nine also stands to benefit from further easing on cross-media ownership laws and subscriptions for some of its mastheads, like the Australia Financial Review, are stabilising, if not growing.

The other three wooden spooners with a “buy” consensus rating are registry services company Link Administration Holdings Ltd (ASX: LNK), property group Centuria Office REIT (ASX: COF) and health insurer NIB Holdings Limited (ASX: NHF).

More reading

• How the ASX 200 can help first home buyers save for a deposit
• Millennials be warned! Signs of dangerous ASX share trading grow
• Top brokers name 3 ASX 200 shares to sell today
• Australian unemployment jumps to 7.1%
• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher

Suzanne Frey, an executive at Alphabet, 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.

Brendon Lau owns shares of South32 Ltd. Follow me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (C shares) and Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia has recommended Alphabet (C shares), Facebook, Link Administration Holdings Ltd, NIB Holdings Limited, and Nine Entertainment Co. Holdings 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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