Tag: Motley Fool Australia

With low interest rates here to stay for some time to come, I believe the share market remains the best place to earn a passive income.

But which dividend shares should you buy? Three ASX dividend shares that I think would be great options are listed below:

BWP Trust (ASX: BWP)

BWP is a real estate investment trust which I believe is well-positioned to the continue its positive form during the pandemic and beyond it. This is because BWP’s warehouses are predominantly leased to home improvement giant, Bunnings Warehouse. I believe this is a fantastic tenant to have, especially given the way Bunnings continues to grow its sales during the crisis. I believe this means the risk of store closures and rental defaults is extremely low and periodic rental increases remain possible. At present I estimate that its units offer a 4.6% FY 2021 yield.

National Storage REIT (ASX: NSR)

I think this storage giant could be a good option for income investors. Although it is inevitable that National Storage will be impacted by the pandemic, I don’t believe this impact will be as negative as some of its real estate peers. This should allow it to continue paying a decent distribution during the crisis and then return to growing it modestly each year once things return to normal. Based on the current National Storage share price, I estimate that it offers a 4.4% FY 2021 distribution yield.

Rural Funds Group (ASX: RFF)

A final ASX dividend share to consider buying is Rural Funds. I think the agriculture-focused property trust is is one of the best income options. This is due to the quality and diversity of its assets and its very positive long term growth outlook. I believe Rural Funds strong portfolio puts it in a position to continue growing its distribution during the pandemic and beyond. In FY 2021 it expects to pay shareholders a 11.28 cents per share distribution. Based on the latest Rural Funds share price, this equates to a 5% yield.

More reading

• Investors wanting safe income should own these 3 ASX shares
• 2 ASX dividend shares for income investors to buy right now
• 3 dirt cheap ASX real estate shares
• Beat low interest rates with these ASX dividend shares
• Cash rate on hold until after 2022? Buy these ASX dividend shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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 Wednesday the S&P/ASX 200 Index (ASX: XJO) ended its winning streak and dropped slightly lower. The benchmark index fell 0.1% to 6,132 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 expected to jump.

The ASX 200 looks set to jump higher on Thursday after a very positive night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is set rise 43 points or 0.7% at the open. In the United States the Dow Jones rose 1.05%, the S&P 500 climbed 1.4%, and the Nasdaq index stormed 2.1% higher.

Telstra result, dividend on watch.

The Telstra Corporation Ltd (ASX: TLS) share price will on watch today when it releases one of the most eagerly anticipated results of earnings season. The main focus will of course be on its dividend. Opinion is divided on whether the telco giant will be able to maintain its 16 cents per share fully franked dividend. Goldman Sachs expects this dividend to be maintained. It is also forecasting a 22% decline in net profit after tax to $2.4 billion.

Oil prices rebound.

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could be on the rise on Thursday after oil prices rebounded. According to Bloomberg, the WTI crude oil price is up 2.2% to US$42.53 a barrel and the Brent crude oil price is 1.8% higher to US$45.31 a barrel. A larger than expected inventory drop in the U.S. supported prices.

Treasury Wine Estates FY 2020 results.

Also on watch today will be the Treasury Wine Estates Ltd (ASX: TWE) share price. This morning the wine company is due to release its FY 2020 results. According to a note out of Goldman Sachs, its analysts expect the company to report group sales of $2.65 billion and EBITS of $538.1 million. The latter is down 21% on the prior corresponding period.

Gold price lower.

Gold miners Newcrest Mining Limited (ASX: NCM) and Saracen Mineral Holdings Limited (ASX: SAR) will be on watch on Thursday after the gold price failed to rebound from yesterday’s heavy decline. According to CNBC, the spot gold price is down 1% to US$1,926.7 an ounce. Better than expected economic data sent bond yields higher and put pressure on the gold price.

More reading

• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result
• 2 safe and strong ASX dividend shares to buy during the COVID-19 crisis
• Is BetaShares Australia 200 ETF the best ASX ETF?
• These ASX stocks could be the next reporting season heroes
• How the Santos share price could gain from COVID-19 stimulus

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 and Treasury Wine Estates 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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I think there are a few ASX shares that every investor should own.

Some ASX shares may not be suitable because they don’t pay a dividend. Other ASX shares may disappoint because they don’t have enough growth potential – such as a business like Commonwealth Bank of Australia (ASX: CBA).

I own these two ASX shares in my portfolio and I think every investor would benefit by having them in their portfolio:

Altium Limited (ASX: ALU)

I think Altium, an ASX tech share, has a good chance of becoming one of the ASX’s future large blue chips.

It develops and provides electronic PCB software used to design the devices and vehicles of the future. It’s already being used by many of the world’s leading tech businesses like Amazon, Microsoft, Google, Telsa, Space X, John Deere and Broadcom.

I believe that Altium is a good diversified play on the world becoming increasingly technological. The ‘internet of things’ trend is only going to keep going in one direction in my opinion.

FY20 was a pretty difficult year because of COVID-19. Revenue only grew by 10%. However, there was good progress with its aim of becoming the world’s leading electronic PCB software business by 2025, its subscription base increased by 17% to over 50,000 during the year. Altium is aiming for 100,000 subscribers by 2025. This should help deliver US$500 million of total revenue.

Altium has a number of financial factors that make it a very appealing long-term ASX share. It has no debt. Altium has a growing cash balance. Its operating profit margins are growing over the long-term and its dividend is steadily rising as well – though I wouldn’t expect much growth from the final FY20 dividend.

If Altium can become the clear market leader by FY25 then I think Altium could easily beat the market over the next five years. At the current Altium share price it’s trading at 49x FY22’s estimated earnings.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is another ASX share that I think every investor should own.

I think it’s the type of share that you can invest in and not look at for another five or ten years. It’s very long-term focused.

Soul Patts is an investment house that is invested in a variety of industries like telecommunications, building products, property, pharmacies, swimming schools, resources and listed investment companies (LIC). Some of its biggest positions include TPG Telecom Ltd (ASX: TPG) and Brickworks Limited (ASX: BKW).

I think Soul Patts is worth being in every portfolio because it is a long-term market-beater and it’s also a really good dividend share. It has grown its dividend every year for two decades in a row.

In its FY20 half-year result the ASX share showed that over the past 20 years it has outperformed the S&P/ASX All Ordinaries Accumulation Index by an average of 4.6% per annum. Over the past five years it had outperformed the index by an average of 4.4%.

I believe that Soul Patts can continue to outperform the ASX over the long-term from this point as well.

It’s defensively positioned, so I think it can do well even if COVID-19 causes more problems. Two of its largest investments, TPG and Brickworks, have large levers to grow their profit and value over the long-term. TPG is going through a merger with Vodafone Australia whilst Brickworks is expanding in the US and building a large distribution warehouse for Amazon.  I like the growth sectors that Soul Patts is investing in recently such as regional data centres and agriculture.

At the current Soul Patts share price it offers a grossed-up dividend yield of 4.1%.

Foolish takeaway

I think both of the above ASX shares are among the best that Aussie investors could buy. At the current share prices I’d probably buy Soul Patts first – I think the next four months could be volatile for a higher-priced share like Altium. I want to see what Altium’s management comments for FY21 are later this month when it releases its FY20 result.

More reading

• Whatever happened to WAAAX shares?
• 5 quality ASX shares to buy in August
• Investors wanting safe income should own these 3 ASX shares
• 3 quality ASX shares to buy in August
• ASX reporting season reveals some upside surprises

Tristan Harrison owns shares of Altium and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of and has recommended Brickworks 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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I’m a big fan of growth shares and feel very fortunate to have such a large number to choose from on the Australian share market.

Three ASX growth shares that I think would be top options for investors are listed below. Here’s why I think they could generate outsized returns for investors over the next decade:

IDP Education Ltd (ASX: IEL)

The first growth share to look at is IDP Education. It is a leading provider of international student placement services and English language testing services. Given the closure of borders globally, IDP Education has been impacted negatively by the pandemic. However, with its shares down almost 50% from their 52-week high, I’m confident this is more than priced in now. In light of this, I think now could be an opportune time to invest. Especially given its strong balance sheet and its very positive long term growth outlook.

NEXTDC Ltd (ASX: NXT)

Another growth share to consider buying is NEXTDC. Unlike IDP Education, NEXTDC has been a big winner from the pandemic thanks to the accelerating shift to the cloud. The good news is that there’s still a long way to go for the cloud computing boom. According to global technology research firm Gartner, it has forecast that 80% of all organisations will shift their workloads to third-party data centres by 2025. Overall, I expect this to lead to increasing demand for its innovative data centre outsourcing solutions over the next decade.

ResMed Inc. (ASX: RMD)

A final ASX growth share to consider buying is ResMed. I’m confident the medical device company can continue its solid growth over the next decade thanks to its focus on the sleep treatment market. This lucrative market is growing quickly due to the proliferation of obstructive sleep apnoea and other sleep disorders. And given the quality of its products and software, I believe it is well-positioned to capture a growing slice of this market.

More reading

• Earnings preview: What to expect from the NEXTDC FY 2020 result
• Top brokers name 3 ASX 200 shares to buy today
• 3 ASX shares fighting COVID-19 and rewarding shareholders
• Has the CSL share price lost its ASX 200 market darling status?
• Where I’d invest $10,000 in ASX shares for the future

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty 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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The Helloworld Travel Ltd (ASX: HLO) share price gained an impressive 18.9% during the first 7 trading days of August. The travel service provider’s performance was helped by yesterday’s huge daily gain of 11.8%.

Today, Helloworld’s share price retracted sharply, down by 4.23%.

That still sees Helloworld’s shareholders with a 13.2% gain for the month of August, compared to a 3.0% gain in the All Ordinaries (INDEXASX: XAO).

But the company has a lot further to go before its share price regains is pre-COVID-19 levels. Travel shares were particularly hard hit by the social distancing measures, lockdowns, and state and national border closures put in place to contain the virus. And Helloworld was no exception.

Helloworld’s share price plunged 83% from 21 February before finding a bottom on 23 March. Since then the share price has rebounded 161%. But that still leaves it down 63% for the 2020 calendar year.

Currently trading for $1.81 per share, Helloworld’s market cap stands at $280.6 million.

What does Helloworld do?

Helloworld Travel, formerly Helloworld, is a travel service provider. The company sells international and domestic travel products and services in Australia, New Zealand, Asia and the South Pacific. Its 3 segments are retail, wholesale and travel management.

The retail segment acts as a franchisor of retail travel agency networks. These include Helloworld Branded Network, Helloworld Associate Network, Helloworld for Business and My Travel Group. The wholesale segment acquires air, cruise and land products which it sells through retail travel networks. Its travel management provides services to corporate and government customers. That includes booking customer flights and obtaining accommodations.

Why is the Helloworld share price tumbling today?

Last week and into the first 2 trading days of this week, investors were buoyed by increasing reports of a possible coronavirus vaccine and by slowly falling new infection numbers in hard hit Victoria.

Today, the news of new community transmissions of the virus in New Zealand resulted in fresh lockdown measures in Auckland. This likely led investors to believe that international travel, particularly the trans-Tasman bubble, are further off than hoped.

Combined with some likely profit taking after its gains of 19% in the first 7 days of August, the Helloworld share price closed down 4.2%.

More reading

• Helloworld share price drops 6% following business update
• Leading brokers name 3 ASX shares to buy today
• Why Cann, Flight Centre, Helloworld, & Zip shares are dropping lower
• Helloworld Travel unveils $50 million capital raising

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Helloworld 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 S&P/ASX 200 Index (ASX: XJO) fell by 0.1% today to 6,132 points.

Some of Australia’s biggest businesses reported their results today.

Commonwealth Bank of Australia (ASX: CBA)

The CBA share price fell 0.5% today in response to its FY20 result.

The major ASX bank announced that its cash net profit after tax (NPAT) fell by 11.3% to $7.3 billion. Profit was hurt by a higher loan impairment expense due to COVID-19 – there was a $1.5 billion COVID-19 provision.

Statutory NPAT rose by 12.4% to $9.6 billion due to gains on the sale of divestments.

CBA’s board declared a final dividend of 98 cents per share. The total FY20 dividend of $2.98 was down 31% compared to FY19.

The ASX 200 bank’s net interest margin (NIM) declined by 2 basis points to 2.07%. This decline was due to the impact of lower interest rates, partly offset by lower short term funding costs.

CBA said that at 31 July 2020, 135,000 of home loans and 59,000 of business loans were still being deferred – that’s 8% and 15% of the respective totals.

The bank’s CET1 ratio increased to 11.6%, up 90 basis points from a year ago. The deposit funding ratio was 74%, up from 69% in FY19.

CBA said that the next few months will be critical and some sectors will take longer to recover from COVID-19 impacts than others.

Transurban Group (ASX: TCL)

Transurban announced its FY20 result today which showed how much COVID-19 hurt its performance.

For the whole year, average daily traffic (ADT) was down 8.6% across its toll road networks. Proportional toll revenue decreased by 3.4% to $2.49 billion. Proportional earnings before interest, tax, depreciation and amortisation (EBITDA) and before significant items decreased by 6.4% to $1.89 billion.

The ASX 200 business reported a statutory loss of $153 million.

Transurban announced a final distribution of 16 cents per share for the six months to 30 June 2020. This takes the total FY20 distribution to 47 cents.

Management said that the FY21 distribution will be in line with the free cashflow it generates, excluding capital releases.

The Transurban share price dropped 1% today.

SEEK Limited (ASX: SEK)

SEEK also reported its FY20 result today. It saw revenue growth of 3% to $1.58 billion with reported EBITDA declining by 9% to $414.9 million.

Net profit after tax, excluding significant items, fell by over 50% to $90.3 million whilst the reported net loss was $111.7 million after including impairment charges of $198 million.

The ASX 200 business said that its Australia and New Zealand business was resilient and the launch of a new pricing model. SEEK Asia saw ongoing integration and investment to unlock long-term revenue potential.

SEEK decided not to pay a final FY20 dividend.

The CEO of SEEK, Andrew Basset, said: “The current macro outlook is highly uncertain. Our near-term profits will be impacted by COVID-19 but our focus is on executing and investing for the long-term. We are confident our investment and long-term focus is the right approach as SEEK’s revenue opportunity remains large and under-penetrated. If we invest and execute well, we can take advantage on improving conditions in the near-term but also a much larger longer-term revenue opportunity.”

The SEEK share price dropped 8.6% after suggesting that net profit may only be $20 million in FY21.

Magellan Financial Group Ltd (ASX: MFG)

Fund manager Magellan reported its FY20 result today. It said that its net profit rose 5% to $396.2 million and adjusted net profit increased by 20% to $438.3 million.

Magellan’s average funds under management (FUM) increased by 26% to $95.5 billion. This strong result led to Magellan’s total dividends for FY20 rising by 16% to 214.9 cents.

The ASX 200 fund manager also announced a new series of investment strategies that will utilise Magellan’s investment philosophy and research at a lower cost with diversified portfolios of companies. Within the launch will be a new sustainable/ethical strategy.

The business is continuing to make progress towards the launch of a retirement income product. It obtained a private binding tax ruling for the ATO and it’s working with other regulators for the rest of the necessary approvals.

The Magellan share price rose 2.8%.

More reading

• Why the Magellan share price might be a post-earnings buy today
• Is BetaShares Australia 200 ETF the best ASX ETF?
• Earnings season: Magellan share price climbs higher after positive annual report
• How did the CBA FY 2020 result compare with expectations?
• Fund managers have been buying these ASX shares

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended SEEK 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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With the coronavirus second wave putting pressure on Australia’s economic recovery, a number of companies may be forced to hold back on dividend payments in the short term

As a result, if you’re looking for dividend payments in the near term, then you might want to take a look at the safe and strong ASX dividend shares listed below.

Here’s why I would buy them for income:

Coles Group Ltd (ASX: COL)

The first safe and strong dividend share to consider buying is Coles. I think the supermarket giant is one of the best options for income investors due to its invaluable defensive qualities. These have been on display for all to see during 2020. At a time when the pandemic is causing many companies to defer or cancel dividends, Coles looks well-positioned to continue growing its dividend.

Beyond the pandemic I believe this positive form can continue thanks to its solid growth prospects, expansion opportunities, and its focus on automation. Coles’ current dividend policy aims to pay out between 80% and 90% of its earnings to shareholders. Based on this and the current Coles share price, I estimate that it currently offers investors a fully franked ~3.3% FY 2021 dividend.

Telstra Corporation Ltd (ASX: TLS)

Another safe and strong ASX dividend share to consider buying is Telstra. As with Coles, I think its defensive qualities are one of the main reasons to invest in its shares. These have also been on display during the pandemic, with Telstra able to reaffirm its guidance for FY 2020. Another reason to invest is its T22 strategy. This strategy is cutting costs materially and making Telstra a simpler and more efficient business. Combined with the easing NBN headwind, I believe a return to growth could be on the horizon in the coming years.

Until then, I’m confident Telstra’s 16 cents per share dividend is sustainable from its current free cash flows. Based on the current Telstra share price, this equates to a fully franked 4.7% yield. Incidentally, we won’t have long to wait to see if Telstra pays a 16 cents per share dividend in FY 2020. It is due to release its results on Thursday morning.

More reading

• Is BetaShares Australia 200 ETF the best ASX ETF?
• 2 ASX dividend shares to buy with $5,000 today
• Top ASX dividend shares to buy in August 2020
• Why the Coles share price just hit a new record high
• ASX dividend investors! Ignore shares in consumer staples at your peril

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. 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 interested in adding a little small cap exposure to your portfolio, then you might want to look at the shares listed below.

I believe these two ASX small cap shares have the potential to generate strong returns for investors over the next decade if everything goes to plan. Here’s why they are on my watchlist:

ELMO Software Ltd (ASX: ELO)

The first small cap ASX share to watch very closely is ELMO Software. It is a cloud-based human resources and payroll software company which provides businesses with a unified platform. This clever platform streamlines a number of processes such as recruitment, on-boarding, learning, and payroll.

ELMO has been growing at a very strong rate over the last few years, but still has a significant runway for growth in an ANZ market estimated to be worth $2.4 billion a year. It also has its foot in the UK market, which is worth ~$6.8 billion a year. Another positive is the company’s hefty cash balance of ~$140 million. The majority of these funds are going to be deployed for acquisitions in the near future.

MNF Group Ltd (ASX: MNF)

A second small cap ASX share to keep tabs on is MNF Group. Formerly known as MyNetFone, MNF is a leading provider of Voice over Internet Protocol (VoIP) technology. This technology is used to make telephone calls via the internet. Demand for VoIP services has been growing strongly over the last few years thanks to the NBN rollout. This growth was then given a major boost in 2020 because of the pandemic and the work from home initiative.

Looking ahead, given how many businesses appear to be seriously considering remote working as a permanent solution, MNF looks well-placed to benefit from the trend. I suspect this could make the MNF share price a market beater over the next decade.

More reading

• Where to invest $5,000 into ASX shares immediately
• These ASX tech shares could be strong buys right now
• Brokers name 3 ASX shares to buy right now
• Which 3 ASX tech shares are investing in long-term growth?
• Why Advance NanoTek, ELMO Software, ResMed, & Scentre shares are dropping lower

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 and recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended Elmo Software. 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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Magellan Financial Group Ltd (ASX: MFG), as of this morning, has joined the small but growing list of ASX companies that have now disclosed their FY2020 full-year earnings in this August reporting season.

By all indications, it has been well received by investors — judging by the 2.7% the market has added to Magellan shares today (at the time of writing). And fair enough too. The company did deliver a 20% rise in net profit after tax and a 10% bump for its dividend. Not bad for a year containing a pandemic and a share market crash.

So at its current level of $63.34 per share, is the Magellan share price a buy today?

What’s new at Magellan?

Magellan is amongst the largest fund managers in the country. It has exploded in value in recent years as it drew in investors with its globally focused, outperforming funds. For some context, 5 years ago Magellan was only asking around $19 a share. Fund managers are often quite cyclical or volatile companies as investors tend to pile in when markets are booming and pile out again when market’s crash.

We saw this in play earlier in the year, when Magellan went from around $75 a share to roughly $35 in the space of a month back in March and April. However, the share price has quickly rebounded in recent months, helped by massive fund inflows and continued outperformance during the market crash. To illustrate, Magellan’s flagship Global Fund has returned -0.25% over the past 6 months, which compares nicely against the -13.7% that the S&P/ASX 200 Index (ASX: XJO) has delivered over the same period.

Magellan has also announced a few new developments over the past week or 2. It will be restructuring its unlisted Global Fund and its listed equivalents — the Magellan Global Trust (ASX: MGG) and the Magellan Global Equities Fund (ASX: MGE) — into a ~$15 billion consolidated fund that will offer both open- and closed-ended units.

Along with its earnings today, Magellan also announced it will be expanding into offering low-cost, diversified exchange-traded products under a new ‘MFG Core’ brand. According to reporting in the Australian Financial Review (AFR), these new ‘Core’ funds will offer management fees of just 0.5% per annum and will follow an ‘active ETF’ model.

Is the Magellan share price a buy today?

I think Magellan is a great company and one that any ASX investor can consider adding to their portfolios. It’s reasonably priced (in my opinion) right now at nearly 15% off of its 52-week high for one. I also think that the new initiatives that Magellan are pursuing are very positive and will likely lead to strong growth in the months and years ahead. Thus, I would absolutely consider the current Magellan share price a buy today.

More reading

• Earnings season: Magellan share price climbs higher after positive annual report
• Why Aurizon, Cochlear, Magellan, & Westpac shares are pushing higher
• It’s ASX reporting season! Here’s what to watch out for this week
• Got $3,000? Buy these 3 top ASX shares right now
• Magellan share price falls despite strong July inflows

Motley Fool contributor Sebastian Bowen owns shares of Magellan High Conviction Trust. 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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Could BetaShares Australia 200 ETF (ASX: A200) be the best ASX exchange-traded fund (ETF) to invest in?

What is BetaShares?

BetaShares is one of the biggest ETF providers in Australia. It offers a variety of funds that are focused on different things like industry sectors, geographic regions or a specific index like the BetaShares Australia 200 ETF is.

What index does BetaShares Australia 200 ETF track?

ETFs that aim to follow an index will try to provide a return that is very similar to the index. The ETF I’m covering in this article tracks the ASX 200. That represents 200 of the biggest businesses on the ASX.

The ASX 200 has the largest amount of money allocated to the largest shares like Commonwealth Bank of Australia (ASX: CBA) and a very small amount allocated to the smallest shares in the ASX 200 like Wastern Areas Ltd (ASX: WSA) and Tassal Group Limited (ASX: TGR).

What are the biggest holdings of the ETF?

An ETF’s performance will be dictated by how its underlying holdings perform. If its largest holdings do badly then the ETF itself will inevitably produce disappointing returns.

As at 11 August 2020, BetaShares Australia 200 ETF had 7.9% allocated to CBA, 7.7% allocated to CSL Limited (ASX: CSL), 7.1% allocated to BHP Group Ltd (ASX: BHP), 3.9% allocated to Westpac Banking Corp (ASX: WBC), 3.4% to National Australia Bank Ltd (ASX: NAB), 3.2% to Wesfarmers Ltd (ASX: WES), 3.1% to Australia and New Zealand Banking Group (ASX: ANZ), 3% to Woolworths Group Ltd (ASX: WOW), 2.6% to Macquarie Group Ltd (ASX: MQG) and 2.4% to Telstra Corporation Ltd (ASX: TLS).

These are many of Australia’s most recognisable businesses which are leaders in their respective industries.

Sector diversification

The ASX has a high allocation to financials and materials. At the end of June 2020, 27.7% of the portfolio was invested in financial businesses and another 19.6% was invested in materials.

It’s not surprising those two sectors are so large in the BetaShares Australia 200 ETF’s holdings considering Australia’s large housing market and the huge commodity export industry.

However, the problem is that these two industries don’t have a lot of growth potential. I think it would be unwise to think commodity businesses can just keep generating more and more profit. Banks may also find it difficult to generate solid growth over the long-term.

It would be nicer if there was a higher allocation to tech shares, but that’s just how the ASX 200 is currently structured.

Is it the best ASX ETF?

In many ways it’s similar to Vanguard Australian Shares Index ETF (ASX: VAS), the same kind of weightings to the ASX blue chips and industries.

There is a slight difference in annual management fees between the two ETFs. The Vanguard ETF fee is 0.10% per annum but the BetaShares Australia 200 ETF has an annual management fee of just 0.07%. Every little helps, but both fees are so small that they’re both really good passive options.

The choice between the two comes down to whether you prefer the ASX 200 or ASX 300, and whether you want to go with Vanguard and BetaShares as the provider.

I’d be happy to invest in BetaShares Australia 200 ETF but there are a couple of other ETFs I’d prefer more. One is BetaShares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20), which excludes the biggest 20 businesses and the allocation to the other 180 shares offers more growth.

The other ETF I’d be more interested in buying is BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) which is invested in ASX tech shares like Afterpay Ltd (ASX: APT), Xero Limited (ASX: XRO), SEEK Limited (ASX: SEK) and Appen Ltd (ASX: APX). Technology shares have strong growth prospects with great gross profit margins compared to typical ASX shares.

More reading

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• 4 ASX shares to buy now for a post-coronavirus world
• Whatever happened to WAAAX shares?
• Is the Seek share price a long-term buy?
• 2 ASX dividend shares to buy with $5,000 today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and Wesfarmers Limited. The Motley Fool Australia has recommended SEEK 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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