Looking for 2 quality ASX shares to add to your investment portfolio?

I think Bapcor Ltd (ASX: BAP) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) are worth taking a good look at.

Both have established market positions and strong long-term growth prospects.

Bapcor

Bapcor is the largest and leading second-hand car parts distributor in Australia and New Zealand. It has a range of brands under its umbrella including Burson, Autobarn and Autopro.

The company has grown its presence in both countries in recent years. It has achieved this through acquisitions and the expansion of its existing business chains. It has now grown to the point where it has a strong scale advantage against its major competitors.

Bapcor is also expanding into Thailand. This could provide it with a launching pad for further expansion across Asia.

Following a recent capital raising of $180 million, the company’s balance sheet is now much more robust. These funds will see it through prolonged downturn caused by the coronavirus pandemic.

Bapcor was impacted harshly during the early phase of the pandemic. However, business activity now looks set to pick-up as lockdown restrictions are easing in both Australia and New Zealand.

The growth of the electric vehicles market could potentially be a long-term risk to Bapcor. Electric vehicles have far fewer parts and require significantly less maintenance than internal combustion engine cars. However, I don’t see this trend having any significant impact on Bapcor’s operating margins in the short-to-medium term.

Bapcor currently offers a fully franked forward annual dividend yield of 2.95%.

Soul Patts

Another quality ASX share to consider adding to your share portfolio is Soul Patts. It has investments in a wide range of industries. These span from pharmacies to telecommunications, mining and building products. This provides Soul Patts with a high level of diversification and helps make it a strong defensive share. It also helps provide Soul Patts with a buffer to any market volatility.

Soul Patts has a strong long-term track record of outperforming the ASX index. In addition, it has been listed on the ASX for over a century and has paid a dividend every year in that time.

The company also keeps significant levels of cash on its balance sheet. This places it in a strong position to snap up any future investment opportunities that may arise.

Soul Patts currently offers an attractive fully franked forward annual dividend yield of 2.99%.

More reading

• Australian businesses are running out of cash
• Is the share market facing another February 2020 moment?
• Coronavirus second wave potential could drive investment portfolio changes
• 3 ASX shares that I’d invest $1,000 into EVERY month
• 2 ASX shares I plan to hold til I’m 100

Motley Fool contributor Phil Harpur owns shares of Bapcor. The Motley Fool Australia owns shares of and has recommended Bapcor and Washington H. Soul Pattinson and Company 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 Paragon Care Ltd (ASX: PGC) share price is a standout performer on the market today as investors react to a business update.

At the time of writing, Paragon Care shares have rocketed 83.33% to 22 cents apiece.

Paragon Care is a provider of medical equipment, devices and consumables for the Australian and New Zealand healthcare market.

The company also offers equipment repair, maintenance and total equipment management through its service and technology division.

Over the years, the primary way Paragon Care has grown its business has been through acquisitions. As such, the company has a many number of brands under its banner, including Insight Surgical, REM Systems, MediTron, and Immulab.

Why is the Paragon Care share price spiking?

This afternoon, Paragon provided an update regarding the impact of COVID-19 on its business.

In prior trading updates, Paragon noted demand for its products and services were being affected by restrictions and the cancellation of non-essential elective surgery.

As such, Paragon’s revenue in April 2020 tracked at 30% less than the prior year, allowing the company to be eligible for JobKeeper payments.

When Paragon disclosed these developments to the market in late April, it expected the significantly lower revenues to continue throughout the remainder of the June 2020 quarter.

However, the company announced today it has seen a “solid” improvement in its May and June revenues. Paragon attributed this to a higher than expected level of elective surgery cases due to recent favourable policy changes by the Federal Government.

As a result, the company is expecting its FY20 revenues to exceed $220 million. For context, Paragon delivered full-year revenues of $236 million in FY19.

Other developments

According to today’s release, Paragon has made “significant progress” towards its previously announced strategy of delivering a more efficient cost structure. 

To date, the company has achieved more than $4 million of permanent annualised cost savings. It expects this amount to double over the next financial year.

Additionally, Paragon advised that its rationalisation of 14 individual businesses into four main pillar businesses is “well advanced”. This rationalisation has seen the company integrate its businesses into the four pillars of devices, diagnostics, services, and capital & consumables.

Paragon said it will provide more details of this restructure, along with the associated costs, when it reports its full-year FY20 results in late August 2020.

More reading

• 3 ASX payments shares that could double your money
• Give your portfolio a boost with these ASX blue chip shares
• The latest ASX 200 stocks to be slapped with a broker downgrade
• Australian businesses are running out of cash
• Bapcor and 1 other quality ASX share to add to your portfolio

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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The ASX is home to a growing number of exciting tech companies. Each year the list seems to get bigger. ASX tech shares were dominated by traditional sectors of telecommunications and IT services just a decade ago. However, since then, sector coverage has expanded significantly. It now also includes companies linked with a growing number of industries. Think data centres, cloud computing, the Internet of Things (IoT), logistics, and the buy now pay later (BNPL) industry.

Here we look at 3 of my top tech share picks right now: NEXTDC Ltd (ASX: NXT), Appen Ltd (ASX: APX) and Altium Limited (ASX: ALU).

NEXTDC

NEXTDC has evolved over the past decade to be Australia’s largest local data centre provider. Global international data centre providers like Equinix, Global Switch and Digital Realty dominated the market by 5-10 years ago. However, NEXTDC has grown significantly during that time. It now rivals these providers in terms of market scale and data centre efficiency.

The company has a nationwide network of Tier III and Tier IV data centre facilities throughout Australia. It continues to expand rapidly with a number of data centres under construction.

NEXTDC recently completed a $672 million equity raising. This will further assist in its expansion strategy.

Appen

Appen has evolved to become a global leader in providing data with respect to machine learning and artificial intelligence (AI).  

This ASX tech company services a range of industry players. This includes major technology companies such as Apple (NASDAQ: AAPL), automakers, and governments. For example, Appen assists Apple and Alphabet’s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google in training their virtual assistants like Siri in how to interact with their users.

In a market update in late May, Appen revealed that there has been minimal impact on its major customers to date during the coronavirus pandemic.

I believe that Appen is very well placed to see continued strong growth, driven by the rising demand for artificial intelligence products.

Altium

Another ASX tech share that I would consider adding to your share portfolio is Altium. This tech company designs software that enables engineers to produce printed circuit boards (PCBs) for a broad range of devices. This includes everything from computers to cars and an increasing number of devices that make up the ‘Internet of Things’ (IoT).

Altium revealed in a May update, that it possibly won’t reach its aspirational goal of US$200 million in total revenue during FY 2020. This is a result of the current challenging economic consequences. Despite this, I believe the long-term future for Altium is very bright, driven by the rapidly expanding IoT market.

More reading

• The Appen share price just hit a record high: Is it too late to invest?
• Top brokers name 3 ASX 200 shares to buy today
• How to get rich by investing in ASX shares
• How ASX 200 shares like Xero could help you retire early
• Best growth shares to buy with $4,000

Phil Harpur owns shares of Altium, Appen Ltd, and NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia owns shares of 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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If you’re concerned that some popular dividend shares will see their yields fall to zero, then you might want to take a look at the ones listed below.

I believe all three have robust business models that will ensure that they are able to continue paying dividends for a long time to come. Here’s why I like them:

Coles Group Ltd (ASX: COL)

I think Coles is one of the most defensive shares on the Australian share market and well-placed to grow its sales, earnings, and dividend whatever the economy throws at it. And while the same could be said for rival Woolworths Group Ltd (ASX: WOW), I believe Coles is the better value option. At present, I estimate that its shares are trading at ~21x FY 2021 earnings, whereas Woolworths’ shares are trading at almost 26x estimated FY 2021 earnings. Its shares also offer a more generous dividend yield, which I estimate will yield a fully franked 3.9% next year.

Telstra Corporation Ltd (ASX: TLS)

Another top dividend share to consider buying is Telstra. As with Coles, I believe it is a highly defensive share and well-positioned to at least maintain its 16 cents per share dividend over the next couple of years. Especially given its free cash flow forecast, cost cutting plans, and easing NBN headwind. If it does maintain its dividend, its shares will provide investors with a fully franked 5% dividend yield.

Wesfarmers Ltd (ASX: WES)

A final dividend share to consider buying is Wesfarmers. Once again, I think it has attractive and defensive qualities. Especially in the current environment, where the government is supporting home improvements. I expect this to give its Bunnings business a big lift. Which is particularly important, given how the hardware giant is now its biggest contributor to earnings following the spin-off of Coles. At present, I estimate that Wesfarmers’ shares offer investors a forward fully franked ~3.6% dividend yield.

More reading

• This top fund manager believes dividend yields are going to 0%. Where should you invest?
• Is the Woolworths share price a secret buy?
• Ready to invest $5,000? I’d buy these ASX dividend shares today
• Why I think the Telstra share price could hit $4 in 2020
• Coronavirus second wave potential could drive investment portfolio changes

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. 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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The Red 5 Limited (ASX: RED) share price is cratering today. Red 5 shares are down a staggering 35.22% at the time of writing to 22 cents a share after closing yesterday at 34 cents a share.

Red 5 is an ASX gold miner that operates the Darlot and King of the Hills gold mines in the Eastern Goldfields region of Western Australia. Today’s share price move will be very disappointing for the company, considering it was just included in the All Ordinaries Index (ASX: XAO) 2 days ago. The drop puts Red 5 towards the bottom of the company’s 52-week range of 16–40 cents per share.

Why the Red 5 share price is tanking today

The catalyst for this dramatic share price move appears to be an ASX release that the company put out before market open this morning. In this release, Red 5 management listed a number of concerns investors are clearly reacting to today.

Firstly, the company is planning to “scale down” underground ore production at its King of the Hills mine over the second half of 2020 in order to commence open pit ming at its recently acquired Great Western project.

Secondly, Red 5 is reporting that it is expecting substantially reduced gold production from its Darlot mine in the quarter ending 30 June 2020 due to malfunctioning equipment and higher dilution of gold ore than was originally expected. According to the release:

A recent crusher breakdown has resulted in lost production of ~3,200oz which, together with lower than forecast average mining grades as a result of dilution, has resulted in production for the June 2020 Quarter of ~21,000 oz (compared with guidance of 26,000 – 30,000 oz). FY20 production is expected to be ~93,000 oz (compared with guidance of 98,000 – 102,000 oz).

The company reports that as of June 2020, the mine is back to full production capacity.

Red 5 managing director mark Williams had this to say about the release today:

While we are disappointed that Darlot production has again been impacted in the short term due to the issues outlined in this release, we are confident that the measures implemented will stabilise production and improve predictability to put us on track to achieve our FY21 forecast.

This FY21 forecast is an expected 90,000–98,000 ounces of gold at an all-in sustaining cost of $1,830–$2,030 an ounce. At the time of writing, the gold price is $2,552.50 in Australian dollars, or US$1,772.

More reading

• ASX 200 Weekly Wrap: ASX back in the green
• Splitit share price rockets 33% on new Mastercard deal
• ASX 200 Weekly Wrap: ASX bears take control as market volatility returns
• 2 crazy cheap ASX 200 shares you could still buy
• Flight Centre share price and other ASX 200 travel shares look set to continue rising

Motley Fool contributor Sebastian Bowen 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 S&P/ASX 200 Index (ASX: XJO) is having a bit of a Goldilocks day and can’t seem to decide whether it thinks ASX shares are too hot, too cold or just right. After open, we saw a surge, followed by a dip and now (at the time of writing) we are sitting pretty flat at 5,978 points.

Regardless of what the ASX 200 does today or tomorrow, there are signs some investors are worried about the current level of the ASX share market, particularly given the ongoing issues surrounding coronavirus and its economic impact around the world.

So if the ASX 200 does crash again, for whatever reason, how would you respond?

Well, personally, I’ll be buying more shares. Here are 3 ASX shares I have my eye on for if the markets tank again in 2020:

An ASX healthcare leader

CSL Limited (ASX: CSL) is one of the top shares on my watchlist for if the ASX 200 tumbles again. I was watching CSL shares like a hawk through the March crash, but the price didn’t really get down to a level I thought was a bargain. Alas, the market rebounded and here we are today. Whilst I don’t think CSL will be able to continue growing at its previous breakneck speeds, I still think this company will make a top, long-term investment. It’s a global leader in the blood medicines and vaccinations space and has an unrivalled Research and Development department.

An ASX dividend beast

WAM Research Limited (ASX: WAX) is a dividend-focused listed investment company (LIC) that I already own shares in. This LIC is still offering a robust starting yield of 7.2% today (with full franking) but during the March crash, the WAM Research share price dropped to 93 cents. At that level, the shares would have offered a starting yield of more than 10%. At those prices, I think WAM Research was a no-brainer for a top income investment. I certainly won’t be wasting a second opportunity to buy shares at those levels if it was presented again.

A payments growth share

Zip Co Ltd (ASX: Z1P) is a buy now, pay later (BNPL) provider that has also seen a strong recovery since the March crash. Back then, Zip shares dipped as low as $1.05 — a long way from their current price of $5.97 (at the time of writing). This may be a volatile share to own, but I couldn’t resist picking up some Zip shares if we retested those levels on the ASX again in 2020.

More reading

• Is the share market facing another February 2020 moment?
• Can the Newcrest share price crest to new highs?
• Here’s why I think the Link share price has a huge growth opportunity ahead
• The CBA share price is down 13% this year. Is it a cheap buy?
• Why the CSR share price is falling today

Sebastian Bowen owns shares of WAM Research Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and ZIPCOLTD FPO. 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 Appen Ltd (ASX: APX) share price has been a strong performer again on Wednesday.

At one point today the shares of the global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence were up over 5% to a record high of $35.56.

When Appen’s shares hit that level, it meant they were up 60% since the start of the year.

Why is the Appen share price at a record high?

Investors have been buying Appen’s shares this year after the release of a strong full year result and positive guidance for FY 2020 in February.

In respect to the latter, the company is expecting to deliver underlying EBITDA in the range of $125 million to $130 million this year. This represents a 23.8% to 28.7% increase on FY 2019’s underlying EBITDA of $101 million.

Pleasingly, since February, Appen has been able to reaffirm this guidance twice despite the pandemic. The first time was in the middle of April and the second time was as recently as the end of May at its annual general meeting.

This is quite the opposite of fellow market darling Altium Limited (ASX: ALU), which has made a series of gentle downgrades to its guidance this year because of the pandemic.

How is Appen performing?

At its annual general meeting, Appen spoke positively about current market conditions. And although it notes that there has been a global slowdown in digital ad spending, this has had a minimal impact on its major customers to date.

In fact, demand for its services has been growing strongly. So much so, year-to-date revenue (including any orders in hand for delivery to customers) came to $350 million as of May.

Appen revealed that year-to-date revenue as at May 2020, including any orders in hand for delivery to customers, amounted to around $350 million. This compares favourably with its total revenue of $536 million for the 12 months to 31 December 2019.

It also advised that it is continuing to strengthen its market position through continued investment in technology. It expects this to support it long-term growth trajectory.

Should you invest?

Although its shares are certainly not cheap at 40x estimated FY 2021 earnings, I still see value in them for long term-focused investors.

This is due to the expected growth of the artificial intelligence and machine learning markets and its important position inside them.

I expect demand for its services to increase materially over the next decade and underpin strong earnings growth that ultimately justifies the premium its shares trade at today.

More reading

• These 5 ASX shares were last week’s top performers
• ASX 200 Weekly Wrap: ASX back in the green
• Are these small cap ASX tech shares the next Afterpay or Appen?
• Where to invest $10,000 into ASX shares next week
• How to become a millionaire in 25 years with $20 a day

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 Altium. The Motley Fool Australia owns shares of 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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Is the share market facing another February 2020 moment? COVID-19 infection numbers continue to rise across the world, yet shares keep climbing.

Back in February 2020, COVID-19 was still in its early days of spreading across the world. Italy still only had a few hundred confirmed cases and the US only had a handful of cases. Outside of China, there were only a few thousand confirmed global cases.

But the trajectory of the infection then was clear – it was rising rapidly. That’s what caused the February 2020 market selloff to start.

But the infection trend has been good for quite a while in Europe, North America and Australia, infection numbers were falling. The improving situation was one of the main reasons why the share market has performed so well. The NASDAQ has actually reached a new all-time high, though the S&P/ASX 200 Index (ASX: XJO) hasn’t fully recovered yet.  

But now things are going the wrong way. There are cases of community transmission in Victoria. There are several states in the US like Texas and California which are seeing record new cases as well as record hospitalisations. Countries like Germany, Portugal, South Korea and others are seeing rising numbers again after restrictions were lifted.

What happens if things get worse again?

The OECD has warned that GDP will fall by 6.3% in Australia if there is a return of lockdowns. Thankfully only Victoria is thinking about lockdowns at the moment, most of the other states are free of COVID-19.

The OECD has also made a prediction that the OECD unemployment rate will reach 10% with little recovery of jobs in 2021 if there’s a second save of global infections. World GDP will drop 7.6% in 2020 if that happens. If there isn’t a second wave, unemployment will only reach 9.2% and GDP will drop 6% this year.

There are two clear potential scenarios. To me, it seems like investors are investing as though there aren’t going to be any other major COVID-19 disruptions this year. There are still huge outbreaks going on in places like Brazil and India. These two countries alone are meaningful contributors to the global economy.

Why I think the share market is acting like February 2020

For some reason it took the market a while to realise how much damage COVID-19 was going to do to the global economy and to confidence. Don’t get me wrong, areas of the world like Vietnam, New Zealand, Taiwan and most of Australia are now in a robust position. Borders are closed and citizens largely know how to act to avoid spreading the virus.

But I wouldn’t bet on the US implementing another widespread lockdown again despite the resurgent infection numbers. Who knows what will happen with the share market if COVID-19 is still prevalent around the time of the election?

What I think this means for shares

Just like in February 2020, I don’t think investors are fully taking into account how infectious or damaging COVID-19 is.

I think are some shares that have justifiably performed well over the past three months. Pushpay Holdings Ltd (ASX: PPH), A2 Milk Company Ltd (ASX: A2M), Bubs Australia Ltd (ASX: BUB), Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), Ansell Limited (ASX: ANN) are some of the names I’d be happy to buy if the share market sold off again because I don’t believe their earnings would fall (much).

However, there are other businesses which I think would be at risk of a share price decline because investors may be too optimistic about the situation. And governments may not throw more money at citizens again. 

But don’t become too bearish. No-one knows what the share market will do next, so it’s best not to spend too much time trying to predict things. Investing is a long-term endeavour, it’s not just about what happens in 2020. I plan to keep investing every month into the best opportunities that I can see because of the long-term growth potential. Don’t forget that healthcare teams around the world are trying to find treatments and develop vaccines. A healthcare breakthrough could be very beneficial to people’s risk appetite. 

Some of the shares that could be a good idea to protect against another market fall are MFF Capital Investments Ltd (ASX: MFF) due to its large cash position and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) for its defensive investments.

More reading

• 3 ASX shares I’d buy if the market crashes again
• This top fund manager believes dividend yields are going to 0%. Where should you invest?
• Can the Newcrest share price crest to new highs?
• Here’s why I think the Link share price has a huge growth opportunity ahead
• The CBA share price is down 13% this year. Is it a cheap buy?

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO, PUSHPAY FPO NZX, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Ansell 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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In a media release today, Allan Gray Chief Investment Officer, Simon Mawhinney made a prediction for ASX share dividend yields.

He said the yields for the majority of ASX listed companies could soon be zero or near zero. According to the release, “Allan Gray is progressing on the basis that dividend yields will be close to zero in the near future for the majority of ASX-listed companies.”

The fund manager also stated that APRA had written to banks and insurers in April requesting a reduction in dividends.

This has likely contributed to the dividend cuts from Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC),  Australia and New Zealand Banking GrpLtd (ASX: ANZ) and National Australia Bank Ltd. (ASX; NAB). CommBank, Westpac and ANZ have suspended their dividends entirely while NAB has cut its dividend significantly.

The diamonds in the rough

However, not all news regarding ASX share prospects was negative in the release. The fund manager pointed out that some companies have benefited from the wave of events brought on by the coronavirus and were in a position to lift their dividends. The examples provided included Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL). These staples have benefited from both panic buying and the coronavirus shutdowns. 

Additionally, the fund manager pointed out there is a significant gap between defensive shares cyclical shares. For instance, healthcare and utilities versus materials and banks. According to the release, the April market rally saw defensive companies that had performed well prior to COVID-19 favoured against cyclical companies. If the announcement is correct, this disparity will not continue.

Mr Mahwinney said:

“This divergence can’t continue indefinitely and it is important not to forget what might already be priced into cyclical company share prices. Everything has a price and a momentum shift into cyclically-depressed shares seems well overdue”.

An example of a defensive company fitting this description is Ansell Limited (ASX: ANN). Ansell rallied close to pre-coronavirus prices in April and has since reached new record highs. 

If the fund manager is correct, cyclical companies that may rally include BHP Group Ltd (ASX: BHP), Woodside Petroleum Limited (ASX: WPL) and Bank of Queensland Limited (ASX: BOQ). Each are now trading at significantly lower share prices than sold for prior to the coronavirus pandemic.  

The opportunities

The release also spoke to ASX share opportunities, “Despite earnings and dividend headwinds, we believe investors with a firm focus on the fundamentals and the long term will benefit from mispricing opportunities currently in the market.

“These opportunities are in those companies that typically have strong balance sheets and excellent asset bases, but which can be bought at extremely depressed prices given earnings headwinds”.

One example of a company that may meet Simon Mawhinney ‘s dividend opportunity suggestion is Treasury Wine Estates Ltd (ASX: TWE). Treasury Wine has a strong balance sheet and an excellent asset base of high-quality brands. Currently, the Treasury Wine share price is significantly depressed and it is down 44% from its 52-week high of $19.47. While Treasury earnings could face headwinds from the coronavirus, we can likely see its yield recover in the long term.

More reading

• The CBA share price is down 13% this year. Is it a cheap buy?
• Top brokers name 3 ASX 200 shares to buy today
• Is the Woolworths share price a secret buy?
• My 3 high-yield ASX dividend shares to buy now
• Coronavirus second wave potential could drive investment portfolio changes

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia has recommended Ansell 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 Newcrest Mining Limited (ASX: NCM) share price is trading at $31.14 at the time of writing, which is down around 30% from its all-time high seen in November 2010. During the same period, the S&P/ASX 200 Index (ASX: XJO) is up more than 20%. However, the ASX gold miner has been closing the performance gap and has outperformed the ASX 200 by almost 15% over the last 52 weeks.

Can the Newcrest share price continue to outperform and climb back to its all-time highs?

Enter the knight in golden armour

Central banks globally had expanded their balance sheets at an unprecedented pace following the global financial crisis (GFC). They had only barely managed to start reducing them when COVID-19 struck. Now the pace of balance sheet expansion makes the GFC run look like a child’s play.

So, what has this got to do with Newcrest? A lot. Like all mining companies, its financial performance is directly linked to the price of the product it mines and sells – gold. And gold is an asset with strong linkages to inflation as it is considered an inflation-hedge. So, if the central bank balance sheet expansions lead to an uptick in inflation, gold price would be going up as well.

However, contrary to what many expected, central bank actions, post-GFC, have not led to any inflation spike, to date. In fact, what we have seen is quite the opposite. Inflation has continuously fallen the world over. So, could this time be different?

In my opinion, yes, because of the following reasons:

• To deal with the massive socio-economic disruption caused by COVID-19, governments the world over have also entered the fray aggressively with their fiscal policies. We might soon see their central banks directly monetising the government debt. If that were to happen, inflation would soon be knocking at our doors.
• During the GFC, the bailouts had been passed through banks and large corporates. Directly or indirectly, much of that ended up being invested in assets like equities and property, which caused asset price inflation across the globe. During the current COVID-19 crisis, many of the bailouts have resulted in funds directly reaching the public at large. Their expenditure pattern is going to be different and largely on consumables like daily essentials. This might cause inflation to show up at retail level instead of in asset markets like it did during the GFC.
• COVID-19 has caused severe supply chain disruptions and I believe we are yet to see its impact fully in our daily lives. Sharp reduction in demand because of global lockdowns and pre-COVID inventory is not going to last forever. I believe supply will not be able to keep up with demand (even a reduced demand) as the lockdowns ease. And a higher demand than supply scenario will see a rise in inflation as customers bid up the prices of goods and services.

If inflation were to raise its head, one of the most direct beneficiaries would be gold and gold mining companies like Newcrest.

This golden sword cuts both ways

Even if it is deflation and not inflation that we get down the road, deflation is bound to adversely impact asset prices including equities down the line. And gold also happens to be a safe-haven asset – it generally rises in price when equity markets are falling. For instance, in the week ending 12 June, the Newcrest share price rose by 3.6%, while the ASX 200 declined by 2.5%, resulting in an outperformance of 6.1%.

Apart from the above 2 scenarios, gold also does well during periods of geo-political uncertainty. Geo-political fault lines are coming under increased pressure at various points globally and any flare up would be good for gold and Newcrest shares.

Thus, an investment in a gold mining company like Newcrest could do well under multiple scenarios and provide your investment portfolio with much-needed genuine diversification. Its current market capitalisation is $25.41 billion. Newcrest shares are trading at a price-to-earnings ratio of 29.32 with a dividend yield of 1.05%.

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Motley Fool contributor Arpan Ranka 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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