While it might be tempting to load up a portfolio full of the hottest stocks like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO), having too much exposure to one particular sector can be a bad thing for a portfolio.

You only need to look at the travel sector to see this. Through no fault of their own, the shares of Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) have been crushed in 2020 because of the pandemic.

If you had a portfolio with significant weighting to the travel sector, you would be severely underwater right now compared to those with more balanced portfolios.

With that in mind, here are two top ASX shares you could diverse your portfolio with:

Betashares Nasdaq 100 ETF (ASX: NDQ)

The first option for investors to consider is the Betashares Nasdaq 100 ETF. As its name implies, this exchange traded fund gives investors exposure to the famous Nasdaq 100 index. These are 100 of the largest, non-financial businesses on the NASDAQ exchange. There are countless household names included in the fund such as Amazon, Apple, Costco, Netflix, Starbucks, and video conferencing provider Zoom. Given the positive outlooks for the companies on the index, I feel the exchange traded fund offers strong potential returns as well as diversity.

BHP Group Ltd (ASX: BHP)

If you’re one of the many investors that doesn’t have any exposure to the resources sector, then doing so could be an easy way to bring some diversification to your portfolio. My favourite option in the sector is BHP, just ahead of fellow mining giant Rio Tinto Limited (ASX: RIO). I like BHP due to its diverse and world class operations, their low costs, its strong balance sheet, and the bumper free cash flow it generates. The latter is likely to lead to generous dividend payments over the coming years.

More reading

• 3 top-notch ASX shares on my May watchlist
• 3 emerging trends in ASX resources shares
• 3 ASX dividend kings to buy and hold forever
• 3 cheap ASX 200 shares for value investors
• These ASX shares booked the biggest gains last week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and Xero. The Motley Fool Australia has recommended Flight Centre Travel 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.

The post Why diversification is important and how to diversify your portfolio with ASX shares appeared first on Motley Fool Australia.

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The Regional Express Holdings Ltd (ASX: REX) share price has more than doubled in the past 7 weeks, surging more than 140% from its low in late March. The positive price action dwarfs the recovery seen in the share price of its larger competitors Qantas Airways Limited (ASX: QAN) and Virgin Australia Holdings Ltd (ASX: VAH) over the same period.

Here’s why the Regional Express share price is flying and a closer look at whether Rex could be a long-term buy.

A potential three-airline market

Securities in Regional Express (Rex) entered a trading halt yesterday, following an article in the Australian Financial Review (AFR) that suggested the airliner was looking to expand its services. According to the article, Rex is looking to capitalise on the fragmented domestic market by investing $200 million into capital city services.

According to the report, the company plans to lease a fleet of 10 aircraft and hire new pilots, crew and ground staff. The new services offered by Rex will compete directly with Qantas, its subsidiary Jetstar and Virgin Australia as a budget and full-service airline.

How has Rex performed during the pandemic?

Regional Express operates exclusive services to 60 regional destinations in Australia and currently has a fleet of 60 Saab aircraft. The company has been able to maintain minimum services to regional Australia thanks to funding arrangements with both federal and state governments.  

The company was founded in 2002 and has made an operational profit every year since 2004. An interesting note from the article in the AFR is that Rex’s cumulative net profits over the past 6 years have exceeded the combined earnings of both Qantas and Virgin over the same period.

Despite the company’s resilience and consistent profitability, Rex has not been spared the impact of the COVID-19 pandemic. The airline withdrew its profit guidance in mid-March citing the uncertain trading environment. The company also released an open letter to the Deputy Prime Minister, which stated that regional operators like Rex could only last for a few weeks based on reserves without government assistance.  

Should you buy?

Given the distressed state of the domestic airline sector, Regional Express has found an opportune moment to enter the market. Rex currently dominates regional services, covering 85% of the routes offered. However, the move from being a purely regional airline to servicing capital cities could be interesting. If the company manages to build on its existing infrastructure and maintain a lower cost base, it should be competitive.

I think the prospect of Rex expanding its services would be great for consumers and potentially shareholders as well. I think a prudent strategy for investors would be to keep any eye on the sector and Rex in particular before making an investment decision.

More reading

• In a post-COVID world, could Australia be the next superpower?
• 3 ASX 200 pandemic winners and 3 losers
• Are there any safe havens in ASX aviation shares?
• These ASX 200 shares saw the biggest falls last week
• ASX 200 Weekly Wrap: New ASX bull run continues

Motley Fool contributor Nikhil Gangaram 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.

The post Up 140% since March: the ASX airline share flying under the radar appeared first on Motley Fool Australia.

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Is the Altium Limited (ASX: ALU) share price a buy after the electronic PCB software business gave investors a business update yesterday?

Here’s what Altium revealed

Altium said that since the last market update in early April, it’s anticipating some headwinds due to coronavirus impacts in the US and Western Europe.

May and June are typically the strongest months of the year for closing sales. So it’s going to cause problems for Altium’s FY20 result with the cash preservation priorities of small and medium size businesses affecting Altium’s sales. But Altium did say that engineers are still working on prototype designs. The electronics industry is still holding up relatively well.

In response to the problem, Altium has launched ‘attractive pricing’ and extended payment terms to drive volume. That’s not beneficial for revenue, margins or cashflow in the short-term. But I think it makes sense for the longer-term. Altium’s plan is to become the clear market leader by 2025, what happens in FY20 and even FY21 is less important than continuing to grow long-term market share.

The Altium share price fell almost 4% yesterday.

Altium is working even harder on rolling out its new cloud platform Altium 365 so that more clients will adopt to working on the platform. Altium 365 Standard was made available to all subscribers on 1 May 2020. According to management, it’s “off to a great start”. It won’t drive short-term revenue, but it’s important for transforming the industry and improving the recurring revenue.

The company said it’s still profitable and has a cash balance of more than US$77 million.

Due to the disruptions, the goal of US$200 million revenue this year is unlikely to be met.

Is the Altium share price a buy?

At around $35 the Altium share price is looking a little expensive for the short-term considering yesterday’s news. There could be heavier economic impacts to come this year. Though the very low interest rate does supposedly boost asset values.

Over the long-term I think investors will still do quite well at $35, but I’d rather buy at around $30. It’d be even better to buy for price much cheaper than $30, but we don’t know what the Altium share price is going to do.

More reading

• ASX 200 drops over 1% at the market close
• Is the Altium share price a buy after today’s update?
• ASX 200 sinks 1.3%: Big four banks drag ASX lower & Altium issues sales warning
• Why Altium, ELMO, Suncorp, & Webjet shares are sinking lower
• 3 ASX tech shares to buy now for long-term returns

Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. 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.

The post Is the Altium share price a buy? appeared first on Motley Fool Australia.

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