ASX small cap stocks are taking more of a beating today than their larger counterparts, but don’t be fooled into thinking there aren’t any compelling buys at the small end of town.

The S&P/ASX SMALL ORDINARIES (Index: ^AXSO) tumbled 1.4% while the S&P/ASX 200 Index (Index:^AXJO) shed 0.7% in late afternoon trade.

But the underperformance of the market minnows needs to be taken into context. They have outperformed the large caps in recent months, so the pullback isn’t alarming.

If anything, it could prove to be a buying opportunity, particularly for three emerging stocks that leading brokers have just slapped a “buy” on.

Conviction buy

The Charter Hall Social Infrastructure REIT (ASX: CQE) share price is one to watch after Goldman Sachs reaffirmed its conviction “buy” recommendation on the stock.  

The childcare property trust is substantially under priced despite the government withdrawing free childcare support and the second COVID-19 lockdown in key parts of Victoria.

“On GS estimates, the market expects 19% devaluation of CQE’s portfolio or an implied cap rate of 7.6% (vs. 6.1% book), which we see as overly bearish given continued government funding, exposure to high-quality operators with limited exposure to Victoria,” said the broker.

Add in a strong balance sheet and the improving outlook for the sector, and you can see why Goldman is so bullish on the Charter Hall Social share price.

The broker’s 12-month price target on CQE is $3.16 a share, which implies a circa 40% upside for the stock.

Gaining traction

Meanwhile, JP Morgan reiterated its “overweight” recommendation on the Tyro Payments Ltd (ASX: TYR) share price.

The bullish call comes on the back of a positive trading update from the fintech for the week ended July 10. Transaction value jumped 14% over the same period last year on a same day basis.

“Although this represents only a week of data into FY21, we like the positive trend in TYR’s comps,” said JP Morgan.

“However, near-term we expect the comps may be weighed down by the lockdown in Melbourne and the real risk of a second wave of COVID-19 cases.”

The broker’s 12-month price target on Tyro is $4.15 a share.

Good premium

Another small cap to watch is the Steadfast Group Ltd (ASX: SDF) share price. Macquarie Group Ltd (ASX: MQG) reiterated its “outperform” call on the insurance broker as insurance premiums continue to grow despite cycling three-years of positive comparables.

“Premium rate increases in 4Q20 have not moderated, with Property class increases offsetting more modest Motor class rate increases,” explained Macquarie.

“Policy cancellations, refunds and premium deferral, as policyholders and underwriters respond to COVID-19 economic impacts, do not appear to have been material and have not impacted the data series in the June qtr.”

The broker’s 12-month price target on Steadfast is $3.70 a share.

More reading

• ASX 200 drops 0.6% today, Afterpay share price down 7%
• Is the Coles share price still attractive after it surged to a record high today?
• Investor in your 30s? Buy these cheap ASX shares
• Macquarie picks ASX stocks that can deliver positive earnings surprises next month
• Leading brokers name 3 ASX 200 shares to sell today

Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Steadfast Group 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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Melbourne is now in the midst of its second coronavirus lockdown, this one expected to last six weeks. The first set of restrictions had mixed impacts on ASX shares with some seeing a rush of buyers and others being sold off. Whether the second lockdown results in similar impacts remains to be seen. 

Initial lockdown impacts 

During the first round of COVID-19 lockdowns, ASX shares such as Coles Group Ltd (ASX:COL) and Woolworths Group Ltd (ASX: WOW) reported elevated sales as customers stockpiled goods. Third quarter FY20 supermarket sales were up 13.8% for Coles and 11.3% for Woolworths. Customers moving to work-from-home models also caused a surge in demand for office technology such as keyboards and monitors. As such, JB Hi Fi Limited (ASX: JBH) saw sales grow 20% in 2HFY20, up from 5.1% in 1H FY20. Wesfarmers Ltd (ASX: WES) also reported its Officeworks division grew sales by 27.8% in the half year to the start of June. 

With many physical stores closing, demand for online shopping increased. Some retailers saw accelerated demand through their digital channels, with Accent Group Group Ltd (ASX: AX1) seeing online sales quadruple during store closures. The elevated demand for digital commerce resulting from COVID-19 is expected to endure and grow beyond the pandemic. 

As people began spending more time at home, demand for products to enhance the home setting also began to increase. Homewares retailer Adairs Ltd (ASX: ADH) saw online sales increase 92.6% in 2HFY20, while sales of online furniture subsidiary, Mocka, were up 52.1%. Online furniture and homewares retailer Temple & Webster Group Ltd (ASX: TPW) reported strong gross sales to 28 June, up 130% compared to the prior corresponding period. People also took advantage of lockdown to complete DIY projects with Bunnings seeing sales growth of 19.2% in 2H FY20.

Which ASX shares will benefit from the second lockdown? 

The second lockdown may not prompt the same surge in sales of certain products that the first one did. After all, how many computer monitors and throw rugs does anyone need? On the other hand, those who chose not to set up a home office the first time may relent this time around.  But there are fears that businesses already fragile from the first round of lockdowns may fail to recover from a second. 

According to the Australian Financial Review, there has been a firm rotation into ASX shares most likely to outperform in the event of a second lockdown. Investors remain wary of travel shares but are favouring technology and defensive shares. Consumer staples shares such as Coles and Woolworths have been popular as have healthcare shares such as Resmed Inc (ASX: RMD), CSL Limited (ASX: CSL), and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH). 

It is likely technology companies that facilitate remote working solutions such as Whispir Ltd (ASX: WSP) will continue to see elevated demand. Buy now, pay later (BNPL) providers are also seeing strong user growth in the current economic environment. Afterpay Ltd (ASX: APT) now has nearly 10 million customers globally and other BNPL providers such as Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT) and Zip Co Ltd (ASX: Z1P) have also been reporting strong growth. 

Foolish takeaway

COVID-19 is fundamentally shifting how we live, work and play and the effects are likely to be lasting. I believe ASX shares leveraged to take advantage of these shifting trends will survive and continue to thrive throughout subsequent lockdowns. 

More reading

• ASX 200 drops 0.6% today, Afterpay share price down 7%
• Is the Coles share price still attractive after it surged to a record high today?
• 2 quality ASX healthcare shares to snap up at more attractive prices
• Afterpay share price sinks 7.5%: Is this a buying opportunity?
• 3 blue chip ASX 200 dividend shares to buy in the next market correction

Kate O’Brien owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., Temple & Webster Group Ltd, Whispir Ltd, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Accent Group, ResMed Inc., Sezzle Inc, Temple & Webster Group Ltd, and Whispir 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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On Tuesday, the Pointerra Ltd (ASX: 3DP) share price came out of a trading halt and shot up 77.78% to 9.6 cents per share at the time of writing. This follows the announcement of a $2.5 million placement to a strategic investor.

What was in the announcement?

According to the announcement, Australian technology entrepreneur Bevan Slattery has invested in Pointerra via a placement. The placement will consist of 50 million shares at 5 cents per share, to raise a total of $2.5 million. The investment will secure Mr Slattery’s corporate and commercial involvement in Pointerra.

The announcement stated: “The Board and management team at Pointerra is delighted to have secured Mr Slattery’s commitment to and involvement in the company via the strategic placement and looks forward to working with Bevan in coming months.”

According to the announcement, the proceeds will be used to accelerate the company’s cloud platform development and sales resources in Australian and US marketplaces. It will also be used to fund the company’s working capital.

Commenting on the deal, Mr Slattery stated:

When you understand the exponential growth in geospatial data that is being captured by third party systems that in turn create these massive data lakes worldwide, combined with the enormous growth of cloud computing and machine learning, you realise that the geospatial analytics platforms that have been built from the ground up in the “new world” will quickly surpass traditional methods of 3D geospatial analysis.

After speaking with the management team and understanding our aligned vision, I am excited that Pointerra has the potential to be a world leader in this field and ultimately to help feed the geospatial systems behind industries including telecommunications, renewable energy and autonomous vehicles. I am tremendously excited that an Australian team is building this global capability.

Bevan Slattery has over 20 years’ experience in founding and investing in early stage technology companies and is the co-founder of PIPE Networks Limited. He is also the founder of NextDC Ltd (ASX: NXT), Superloop Ltd (ASX: SLC), Megaport Ltd (ASX:MP1) and NextDC spin-out, Asia Pacific Data Centre Trust. Mr Slattery is currently a non-executive chairman of Megaport and Superloop. 

About the Pointerra share price

Pointerra provide cloud computing solutions for 3D geospatial data technology. The company processes 3D data and allows storage on the cloud, allowing for very large 3D datasets to be used without the need for high power computing. The company’s platform can be accessed anywhere from any device.

On 30 April, Pointerra announced that its annual contract value had grown by 17% during the previous 3 months to $3.32 million. 

In the quarter to March 2020, the company had cash receipts of $530,000 compared to $180,000 in the second quarter of the 2020 financial year. It announced that it was moving closer to a cashflow positive position. The company had a cash balance of $2.2 million at the end of the March quarter, down from a balance of $2.5 million at the beginning of the March quarter.

The Pointerra share price is up 540% from its 52-week low of 1.5 cents. It has returned 60% since the beginning of the year. The Pointerra share price is up 104% since this time last year.

More reading

• 3 exciting ASX tech shares to buy and hold for a decade
• Is the NextDC share price in the buy zone right now?
• Why this small cap ASX tech share could be the next big thing
• ASX 200 Weekly Wrap: Rocketing BNPL shares fail to stop ASX 200 slide
• How ASX investors can profit from the cloud computing boom

Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO and SUPERLOOP FPO. The Motley Fool Australia has recommended MEGAPORT 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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If you’re looking for growth shares to buy then I think the healthcare sector is a great place to start.

This is because thanks to new technologies and favourable tailwinds, demand for healthcare services looks set to grow strongly over the next decade.

Two ASX growth shares in the healthcare sector that I would buy are listed below. Here’s why I like them:

Nanosonics Ltd (ASX: NAN)

The first ASX healthcare share to consider buying is this infection prevention company. I think Nanosonics has a very bright future ahead of it thanks to its industry-leading trophon EPR disinfection system for ultrasound probes. This system reduces the risk of ultrasound-related cross-infection and is clinically proven to kill the infectious high-risk cancer-causing human papillomavirus. 

And while I think this product alone could drive strong earnings growth over the next decade thanks to its sizeable market opportunity and growing recurring revenues, it will be joined by new products in the near future. Nanosonics is aiming to release a number of new products targeting other unmet needs. I believe these could give its earnings growth a major lift and drive the Nanosonics share price notably higher over the 2020s.

PolyNovo Ltd (ASX: PNV)

I think this exciting medical device company is another ASX healthcare share to buy. It is the company behind the increasingly popular NovoSorb technology. NovoSorb is a biodegradable material that was developed and CSIRO and can aid the repair of bone fractures and damaged cartilage, and in skin grafts.

I believe the NovoSorb Biodegradable Temporising Matrix (BTM) product in particular has enormous potential. It is a wound dressing intended to treat full-thickness wounds and burns and has a sizeable $1.5 billion market opportunity. As with Nanosonics, management isn’t resting on its laurels and is aiming to expand into other markets. It has its eyes on the hernia and breast treatment markets, which would add an additional $6 billion to its addressable market.

More reading

• Nanosonics and 1 more ASX healthcare share to buy and hold beyond 2025
• Why I think the Polynovo share price is a buy right now
• 3 exciting ASX growth shares to buy and hold until 2030
• ASX 200 drops 0.6%, Afterpay hits a new record
• PolyNovo share price higher on strong sales update

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 POLYNOVO FPO. The Motley Fool Australia has recommended Nanosonics 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 Afterpay Ltd (ASX: APT) share price is having a rare off day and is sinking notably lower on Tuesday.

The payments company’s shares are the worst performers on the S&P/ASX 200 Index (ASX: XJO) this afternoon with a 7.5% decline to $66.30.

Why is the Afterpay share price sinking lower?

Today’s decline appears to be due to profit taking in the technology sector following a similar move overnight on Wall Street’s technology-focused Nasdaq index.

The likes of Appen Ltd (ASX: APX), Xero Limited (ASX: XRO), and Zip Co Ltd (ASX: Z1P) are all falling heavily as well.

Overnight the Nasdaq index was up as much as 1.9% before ending the day 2.1% lower. Investors appear to have decided to take profit off the table shortly after the index broke through the 11,000 points mark for the first time.

And given the meteoric rise in the Afterpay share price over the last few months, I can’t say it is a surprise to see it fall more than most.

Even after today’s sizeable decline, the Afterpay share price is up a whopping 720% from its March low of $8.01.

Is it time to buy Afterpay shares?

Two brokers that are likely to see this share price weakness as a buying opportunity are Ord Minnett and Morgan Stanley.

Last week Ord Minnett placed a buy rating and $76.70 price target on the buy now pay later provider’s shares. This price target implies potential upside of 15.5% for its shares over the next 12 months.

Morgan Stanley is even more bullish and upgraded Afterpay’s shares to an overweight rating with a massive $101.00 price target.

If the company’s shares were to reach that lofty price target, it would mean a gain of just over 52%.

I would agree with these brokers and believe the weakness in the Afterpay share price could be an opportunity to invest. This is because I feel the company is well on its way to becoming a real force in the payments industry and capable of growing materially over the next decade.

Though, given the premium that its shares trade at, it might be best to restrict an investment to just a small part of your portfolio.

More reading

• New investors could invest $1,000 into these top ASX shares
• Why Afterpay, Altium, Northern Star, & Pushpay shares are sinking lower
• ASX 200 down 0.5%: Altium sales update, Afterpay tumbles, Breville shoots higher
• 2 high growth ASX 200 shares to buy with $10,000 amid the coronavirus pandemic
• Are these small cap ASX shares future tech stars?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen 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) and All Ordinaries (ASX: XAO) remain in a vulnerable (and volatile) state and may present more buying opportunities in the future.

For investors seeking high quality ASX 200 dividend shares with consistent cash flows amid the COVID-19 crisis, here are 3 blue-chip shares to add to your watchlist. 

BHP Group Ltd (ASX: BHP) 

The iron ore spot price has soared to an 11-month high following strong Chinese steel demand and optimism over Chinese economic growth recovery. This spells good news for iron ore miners BHP, Rio Tinto Limited (ASX: RIO) and Fortescue Mining Limited (ASX: FMG), all of which are among the best ASX 200 dividend shares, in my view.

I would prefer BHP as the dividend play, given its diversified minerals portfolio compared to a pure iron ore play such as Fortescue. At the time of writing, BHP pays a fully franked dividend yield of 5.76%. The current elevated iron ore prices should see iron ore miners continue to be leading ASX 200 dividend shares for yield-hungry investors. 

WAM Capital Limited (ASX: WAM) 

On 8 July, WAM Capital announced a fully franked final dividend of 7.75 cents per share, bringing its FY20 fully franked full year dividend to 15.5 cents per share. This would equate to a dividend yield of approximately 8.1% at today’s share price.

Its market leading dividend payout follows its investment portfolio outperforming the ASX 200 by 4.4% during the 12-month period to 30 June 2020. WAM Capital’s top holdings as at 30 June 2020 include retailers such as Adairs Ltd (ASX: ADH), Bapcor Ltd (ASX: BAP) and BWX Ltd (ASX: BWX) and a mix of others in agriculture, healthcare and information technology.

WAM hasn’t cut its dividend for more than a decade and remains one of the most consistent and reliable ASX 200 dividend shares. 

JB Hi-Fi Limited (ASX: JBH) 

Retailers are emerging as strong ASX 200 dividend shares, given an increase in retail spending and time spent at home. As a result, JB Hi-Fi reported strong sales growth in the second half of FY20 in JB Hi-Fi Australia and The Good Guys with comparable sales increasing by 20% and 23.5%, respectively, on the prior corresponding period (pcp).

At this point in time, the group expects total net profit after tax to be in the range of $300 million to $305 million, an increase of 20% to 22% on the pcp. It currently pays a dividend yield of approximately 3.80%. Other retailers such as Adairs and Shaver Shop Group Ltd (ASX: SSG) may pay higher dividends, but I prefer JB Hi-Fi for its position as a market leader in the electronics space, and its consistent earnings. 

More reading

• Macquarie picks ASX stocks that can deliver positive earnings surprises next month
• Is the gold price too high for investing in ASX gold shares?
• 2 ASX shares I would buy for growth and income
• The difficulty of investing in shares right now
• Why the Fortescue share price rallied over 40% to a record high in 2020

Motley Fool contributor Lina Lim 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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Dividend shares on the ASX could be the best way to invest for the next period of the COVID-19 pandemic.

I think it’s quite interesting that large shareholders of both Afterpay Ltd (ASX: APT) and Pushpay Holdings Ltd (ASX: PPH) have recently decided to take some profit off the table. Those shareholders still own a majority of their shareholding, but the share prices of those growth businesses have run up very strongly over the last few months.

Dividend shares have not risen up as much. I think they’re worth looking at. Dividends are paid out of profit that the company has generated. Making profit is obviously better than losses. So I see profit as a sign of a business that has (hopefully) reached sustainability. 

This is what I’m looking for in dividend shares during COVID-19:

Dividend guidance

A business that has guided that it’s going to pay a dividend during this COVID-19 period is obviously attractive as a dividend share. For me, a high yield isn’t worth it if the dividend is just going to get cut when times get tough – that’s exactly when you may be relying on a dividend payment. I don’t think shares like Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) should be relied on as dividend shares.

I particularly like dividend shares that have guided that they will increase their dividend in the next result despite all of the economic impacts.

Some shares that have guided dividend increases for the upcoming reporting season are: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Duxton Water Ltd (ASX: D2O) and Rural Funds Group (ASX: RFF).

Defensive earnings

Profit is not a guaranteed thing, that’s why shares are riskier than cash in the bank. Profits are going to be volatile. Just look at how the statutory profit of BHP Group Ltd (ASX: BHP) or Commonwealth Bank of Australia (ASX: CBA) can change year to year.

I like to go for dividend shares that should be robust in difficult times like a recession. Or even a global pandemic.

Rural Funds is a good example because it receives regular rental income from its tenants. We still need to keep eating food, even during a pandemic.

A business like APA Group (ASX: APA), which supplies half of the country’s natural gas, can generate reliable cashflow and therefore fund a consistent distribution.

In the current world a business like Amcor Plc (ASX: AMC), which supplies flexible and rigid packaging, continues to see good demand and is expecting higher revenue, which should mean a solid dividend.

Dividend history

Dividend shares that have already built a solid history of dividend payments to shareholders will not want to disappoint shareholders.

It can be unhealthy for a business to unsustainably chase the image of ‘reliable’ dividends – just look at Telstra Corporation Ltd (ASX: TLS), it was paying all (or more) of its profit out each year as a dividend. Dividend cuts were inevitable because profits weren’t rising. So you need to find businesses which have sustainable dividends.

Some of the ASX dividend shares I’ve already mentioned have long dividend track records. APA Group has increased its distribution every year for a decade and a half. Soul Patts has increased its dividend every year since 2000.

Yield

Obviously a dividend share has to start with a decent dividend yield. I’m not exactly sure what counts as good yield these days. The official RBA interest rate is now just 0.25%.

At the current Soul Patts share price, it offers a grossed-up dividend yield of 4.25%.

Rural Funds’ share price translates into a FY21 distribution yield of 5.6%.

With the FY20 distribution yield, at the current share price APA offers a distribution yield of 4.6%.

Foolish takeaway

Dividend shares may be able to provide stability for your portfolio with all of the volatility. I’d be happy to buy Soul Patts shares and a few other dividend shares for my portfolio right now. But patience could also pay off. It may be best to wait for the next dip to buy some shares, particularly if you’re looking at growth shares. 

More reading

• 3 safe and strong ASX dividend shares to buy during the pandemic
• 3 top ASX 200 blue chip shares to buy
• The difficulty of investing in shares right now
• 3 ASX dividend shares raising their dividend like clockwork
• Why I would put excess funds into ASX dividend shares instead of a savings account

Tristan Harrison owns shares of DUXTON FPO, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Amcor Limited, RURALFUNDS STAPLED, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and APA Group. The Motley Fool Australia has recommended DUXTON FPO and PUSHPAY FPO NZX. 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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Earnings season starts in August when most ASX shares will be delivering financial and annual reports. These will disclose not only how each company has made it through the pandemic so far, but also what they are planning to do in FY21. I am pretty sure that this is going to be the strangest earnings season in my investing career.

ASX shares expecting good earnings

August is likely to bring positive results from consumer staples like Coles Group Ltd (ASX: COL) and Inghams Group Ltd (ASX: ING). Both of these companies are trading at price multiples of around 20, so the market clearly expects good things from them. If results are not strong, then their shares could be sold off. 

Investors are also likely to expect strong results from eCommerce companies such as Kogan.com Ltd (ASX: KGN), which posted a 100% increase in sales during the lockdown months. Kogan’s profit for the same period also grew by 130%. Other companies with strong eCommerce channels include Temple & Webster Group Ltd (ASX: TPW) and City Chic Collective Ltd (ASX: CCX).

Possible earnings surprises

The ASX shares likely to get solid share price rises this earnings season are going to be those that have done very well in spite of the year we have all had.

Harvey Norman Holdings Limited (ASX: HVN)

Harvey Norman has already given us a bit of a view into its financials. On 23 June, the company announced unaudited results of a 20% increase in profit before taxes for FY20. It is one of the many ASX shares to report an increase in electronics sales, in particular, due to the work from home phenomenon. In a trading update earlier in June, it reported increases in Australia and Ireland through 2H FY20. International sales also benefited from an Australian dollar at lower than historical averages.

Harvey Norman is currently trading at a price-to-earnings ratio (P/E) of 10.83 and a trailing 12 month dividend yield of 5.96%. I think it will surprise investors during earnings season.

DEXUS Property Group (ASX: DXS)

Like many real estate ASX shares or real estate investment trusts (REITs), Dexus is trading at a historically low P/E ratio. In fact, lower than it has been for the past 7 years. 

Dexus is a multi-sector property company. In the company’s 1H FY20 results, it disclosed that it manages $38 billion in real estate and owns $16.8 billion in office and industrial properties. The company’s properties have a weighted average lease expiry (WALE) of 4.4 years. This is basically an average duration of each lease. Dexus also has 97.2% occupancy for its office properties and 96% for its industrial properties. 

Dexus has a current market valuation of $10.13 billion, which is 40% lower than its property portfolio value. It is presently selling at a P/E of 6.55 and is paying a trailing 12 month dividend of 5.41%. I think this ASX share will also surprise investors at earnings season, and it looks to me to be a good investment, in any case.

Credit Corp Group Limited (ASX: CCP)

Credit Corp is a little different to the other two ASX shares discussed. Credit Corp buys purchased debt ledgers (PDLs) comprised of distressed consumer debt from Australian and New Zealand banks, finance companies, and telecommunication companies. It then proceeds to collect on these debts at a lower repayment rate. It also provides predominantly ‘payday’ loans.

This is not a company you want a call from! 

On 13 July, Credit Corp announced that it flagged an impairment of approximately $65 million, leaving it with a net profit after taxes (NPAT) of ~$10-$15 million. The company is actively negotiating debt repayments, and has halved the approval rate of its own loan products. 

I think there are two ways this can go. Firstly, the company could report slightly higher than expected NPAT, in which case the share price may see a rise. Secondly, the government could announce an extension to the current financial supports, thus allowing repayment plans to proceed. This would also lead to a potential rise in the Credit Corp share price. Either way, I think Credit Corp is in a better position than it appears, heading into earnings season.  

More reading

• 3 safe and strong ASX dividend shares to buy during the pandemic
• Why Breville, Credit Corp, Pendal, & Whitehaven shares are charging higher
• Breville share price surges as top broker reckons it’s worth $62 a share
• The difficulty of investing in shares right now
• These 2 ASX retail shares have surged higher in 2020

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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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