Tag: Motley Fool Australia

Buying cheap stocks after the recent market crash may not be a priority for investors who are seeking to build a nest egg so they can retire early. After all, volatility continues to be high across the stock market, and a further downturn after the recent rebound cannot be ruled out.

However, the track record of the stock market shows that it is likely to return to a sustained bull market over the long run. Through buying a diverse range of shares now while they are cheap in many cases, you could generate higher returns than other assets and improve your financial prospects for retirement.

Investing in cheap stocks today

A risky future means that there continue to be many cheap stocks available despite the market’s recent rebound. History suggests that buying them now while they offer wide margins of safety, and holding them over the coming years, could be an effective means of obtaining impressive returns.

For example, major risks continued to be present in the aftermath of the global financial crisis. This caused many stocks to trade at low prices, with investor sentiment taking a substantial amount of time to improve. However, as an accommodative monetary policy gradually stimulated the world economy, the operating conditions facing businesses improved and their share prices recovered.

Although the same outcome cannot be guaranteed following the current economic crisis, the scale of fiscal and monetary policy stimulus in major economies suggests that a long-term recovery is likely. After all, the economy has always returned to growth following even its most severe recessions. As such, while risks remain, now could be the right time to capitalise on weak investor sentiment through buying cheap stocks.

Appeal versus other mainstream assets

Buying cheap stocks may not produce higher returns than other assets in the short run due to an uncertain economic outlook. However, over the long run assets such as cash and bonds may produce disappointing returns.

Low interest rates look set to remain in place for a sustained period of time. This could mean that fixed-income securities and cash fail to improve your spending power – especially since the scale of monetary policy stimulus being implemented in major economies has the potential to cause a rise in global inflation in the coming years.

Other assets such as property may also be relatively risky. It is much more difficult to build a diverse property portfolio than it is within the stock market due to factors such as the cost of homes.

As such, from a risk/reward perspective, cheap stocks could prove to be a superior means of obtaining an attractive risk/reward ratio for the long term. They may catalyse your financial prospects and help to improve your chances of enjoying an early retirement.

More reading

• Is this the right time to be investing in the share market?
• Top brokers name 3 ASX shares to sell next week
• Is the Vanguard Australian Share ETF the best long-term ASX investment?
• I’d take these 3 steps to get ready for another stock market crash
• 5 things to watch on the ASX 200 next week

Motley Fool contributor Peter Stephens 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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Is the Vanguard Australian Share ETF (ASX: VAS) the best long-term ASX investment?

Vanguard Australian Share ETF is an exchange-traded fund (ETF) that is invested in around 300 ASX shares. Indeed, its aim is to track the S&P/ASX 300.

What is Vanguard?

Vanguard is an investment business like many others. However, there is a significant difference. The owners of Vanguard are the investors, it shares the profit with investors by lowering the costs as much as possible.

Lower costs is a great outcome because fees can be a big influence on the net returns. The lower the fee, the higher the net return.

Fees

The ETF has an annual management fee of just 0.10%, that’s one of the lowest-costing portfolio investment options for ASX shares.

That fee is so low that it barely reduces the overall return at all. There’s a chance it could go even lower as the ETF gets bigger and there are even more scale benefits.

Diversification

One of the main reasons to consider ETFs is that they offer really good diversification. Vanguard Australian Share ETF is invested in 300 ASX shares, though there is a large allocation to financials and resources shares. That’s not the most attractive diversification, particularly as the largest two sector allocations aren’t with areas with big growth potential like technology. 

Financials has a 26.9% allocation and materials has a 19.5% allocation. Healthcare is the only other sector with an allocation of more than 10% with a 12.2% holding.

Its top 10 holdings at 30 June 2020 were: CSL Limited (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ), Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW), Macquarie Group Ltd (ASX: MQG) and Transurban Group (ASX: TCL).

However, I think as newer businesses, like Afterpay Ltd (ASX: APT), grow and become bigger influences on the index then Vanguard Australian Share ETF will become more appropriately diversified.

Returns

The ETF hasn’t been a very strong performer over the past decade, with Australia’s ASX blue chips struggling to generate meaningful shareholder returns with the Hayne royal commission and now COVID-19 hurting earnings.

Over the past decade Vanguard Australian Share ETF has returned an average of 8.2% per annum. The last five years have been even more disappointing with an average return per annum of 5.9%.

It’s particularly disappointing that most of the return over the past five years – 4.35% per annum – has just been the income paid by the ETF. There has been hardly any capital growth.

Distribution yield

ASX shares are known for being generous dividend payers. Vanguard Australian Share ETF has a distribution yield of 4.1% according to Vanguard, not including the franking credits, which would make the grossed-up yield above 5%.

That’s a solid yield considering the official RBA interest rate is just 0.25%. I’d rather receive dividends than get a tiny amount of interest from the bank account.

Is Vanguard Australian Share ETF a buy?

If you want a passive way to invest into ASX shares then I think this could be one of the simplest ways to do it. It’s a good way to almost match (less fees) what the ASX 300 index does. ASX shares have performed well over the decades.

However, I think there are plenty of diversified investment options that could offer better long-term growth. ASX banks like CBA, which are a big part of the index right now, offer little compound growth potential in my opinion, however I think an ETF like BetaShares Global Quality Leaders ETF (ASX: QLTY) could deliver long-term growth with the types of businesses that it’s invested in.

More reading

• 3 quality ETFs I’d buy for my portfolio
• How to turn $20,000 into $100,000 with ASX ETF shares
• Is it time to dollar-cost average into ASX shares?
• 5 simple steps to financial independence
• 3 tips for investing in ASX 200 shares for beginners

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. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Transurban Group, 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 recent stock market crash may have been followed by rapidly-improving investor sentiment, but a number of risks continue to face the world economy. For example, geopolitical tensions in Europe and the US, as well as continued growth in the number of coronavirus cases, could cause investor sentiment to weaken in the coming months.

As such, investors may wish to hold some cash so they can take advantage of buying opportunities. Through identifying the most attractive stocks available today, as well as reassessing your portfolio holdings, you may be able to build a solid portfolio of stocks for the long term.

Cash holdings

Having cash available to invest during a market crash can put any investor in an advantageous position. They may be better able to capitalise on low valuations that may prove to be temporary in nature.

As such, having some cash within your portfolio at the present time could be a shrewd move. As mentioned, a number of risks continue to face investors that could lead to a decline in stock prices. This could mean that avoiding being fully invested in shares provides the capacity to take advantage of buying opportunities, as well as peace of mind.

Clearly, holding cash for the long term is unlikely to produce desirable returns. However, having it on hand during periods of market volatility, and with the prospect of a second market crash on the horizon, may be a logical move.

Identifying attractive stocks ahead of a market crash

As was the case in the recent market crash, share prices can quickly rebound after a decline. This means that long-term investors may only have a short window of opportunity to take advantage of undervalued opportunities.

Therefore, identifying the stocks you are positive about prior to a decline for the stock market could be a sound move. It may enable you to react more quickly to a fall in share prices, since you are likely to know which companies in specific sectors may be worth buying when their prices include wide margins of safety.

Assessing your portfolio holdings

Similarly, assessing your portfolio holdings prior to a market crash could be a sound move. For many stocks, their outlooks have changed dramatically since the start of the year. As such, their investment appeal may have altered materially, which could mean that now is the right time to sell them in order to provide the opportunity to reinvest in stronger businesses should they trade at more attractive prices.

Of course, this does not mean that you should avoid a buy-and-hold strategy. Over time, the stock market is likely to recover from any future market crash. But by holding the most attractive stocks from a risk/reward standpoint, you can generate high returns in the long run.

More reading

• Is this the right time to be investing in the share market?
• Top brokers name 3 ASX shares to sell next week
• Investing in cheap stocks today can help you to get rich and retire early
• Is the Vanguard Australian Share ETF the best long-term ASX investment?
• 5 things to watch on the ASX 200 next week

Motley Fool contributor Peter Stephens 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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Last week was a much better one for the S&P/ASX 200 Index (ASX: XJO). Optimism over a potential coronavirus vaccine led to the benchmark index rising 1.3% over the period to 6,004.8 points.

There’s another busy week coming up for the ASX 200 next week. Ahead of it, I thought I would take a look to see what we should be watching out for.

Here are five things to watch next week:

ASX futures pointing higher.

The benchmark ASX 200 looks set to start the week on a positive note. According to the latest SPI futures, the ASX 200 is poised to open the week 42 points higher on Monday. This is despite a reasonably subdued finish to the week on Wall Street. On Friday the Dow Jones rose 0.2%, the S&P 500 edged slightly higher, and the Nasdaq index fell 0.9%.

Commonwealth Bank FY 2020 result.

The Commonwealth Bank of Australia (ASX: CBA) share price will be in focus on Wednesday when it releases its full year results for FY 2020. According to a note out of Goldman Sachs, its analysts are expecting FY 2020 cash earnings from continued operations (pre-one offs) of $7,815 million. This represents an 8% decline on the prior corresponding period. The broker is forecasting a final dividend of 100 cents per share. Elsewhere, National Australia Bank Ltd (ASX: NAB) is scheduled to release its third quarter update on Friday.

Telstra result, dividend on watch.

One of the most eagerly anticipated results of earnings season will be released on Thursday when Telstra Corporation Ltd (ASX: TLS) hands in its report card. 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 despite it forecasting a 22% decline in net profit after tax to $2.4 billion. I agree with Goldman and feel Telstra’s dividend is sustainable from its current cash flows.

Challenger FY 2020 result.

The Challenger Ltd (ASX: CGF) share price has been out of form in 2020. Investors will no doubt be hoping that its full year results on Tuesday are the catalyst to getting it heading in the right direction again. The annuities company has provided guidance for normalised net profit before tax at the bottom end of the range of $500 million and $550 million in FY 2020. This compares to $548 million in FY 2019.

SEEK to release full year results.

The SEEK Limited (ASX: SEK) share price could be on the move on Wednesday when it releases its full year results. According to a note out of Goldman Sachs, its analysts are expecting revenue growth of 4% to $1,603 million. However, this isn’t expected to flow through to its earnings. Goldman expects a 10% decline in EBITDA to $410 million. This is in line with its guidance. And while the broker suspects SEEK may not provide guidance for FY 2021, it is forecasting FY 2021 EBITDA growth of 16% to $476 million.

More reading

• Why it’s a good time to buy and hold ASX shares
• These were the best performing ASX 200 shares last week
• ASX 200 falls 0.6%, REA Group reports
• Why the Coca-Cola share price and these ASX stocks just got upgraded by brokers to “buy”
• Ready for the “80% stock market crash”?

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Telstra 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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There are at least two ASX shares in my portfolio that I plan to own until I’m 100.

I think owning shares for the ultra-long-term is the best way to invest, if you can find the right ideas. Less transactions means less brokerage costs and less capital gains tax events. You don’t want to hand over more of your compounding wealth to tax than necessary, if you can help it.

But you can’t commit to holding any random share for the ultra-long-term. It needs to be a business which has a sustainable long-term business model and has the potential to beat the market over many years.

These are (at least) two ASX shares that I can see myself holding for many years to come:

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT). It owns a variety of farm types including almonds, macadamias, cattle, cotton and vineyards.

Farmland has been a useful asset for hundreds of years, I don’t think that’s going to change for the next few decades at least, unless technology somehow completely changes our food production.

The farmland landlord tries to lease its farms to high-quality tenants like Olam, JBS, Select Harvests Limited (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE). It’s these large businesses that are the ones most likely to remain financially resilient and keep paying rent even during a recession. They also have the most resources to afford investing for growth, which will help Rural Funds charge higher rent in future years.

The ASX share has a diversified property portfolio, not just by the farm type but also geographically. Rural Funds’ farms are spread across different states and climactic conditions, which somewhat reduces the risks. The REIT owns a lot of water entitlements for tenants to use. 

Rural Funds is a good option for long-term income. It has rental indexation built into its contracts – the contracted growth is either a fixed 2.5% annual rise or it’s linked to CPI inflation, plus market reviews.

The REIT regularly invests in productivity improvements at its own farms, which should boost the value of its farm and lead to long-term rental growth.

Occasionally the ASX share will make acquisitions that diversify the farm’s holdings further and increase the earnings potential.

Management aim to increase the distribution by 4% each year. At the current Rural Funds share price the FY21 distribution guidance of 11.28 cents per unit equates to a forward yield of 5.4%.

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

Soul Patts has already been listed on the stock exchange since 1903. I think it has a great chance of being around until at least 2103 because of how it operates.

It’s an investment conglomerate that invests in both listed and unlisted businesses. It can change its investments as the years go by. Each of its large equity investments were once a lot smaller and Soul Patts has benefited from their long-term growth.

Some of the ASX shares that Soul Patts owns are: TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Bki Investment Co Ltd (ASX: BKI) and Clover Corporation Limited (ASX: CLV).

Soul Patts’ unlisted businesses include resources, agriculture and swimming schools. Soon it will be invested in regional data centres.

The management of Soul Patts try to invest in a contrarian fashion with a defensive focus. For example, swimming schools is one of those services you’d expect parents to keep using even during a recession. Though this COVID-19 pandemic brought up some difficult conditions.

The ASX share has outperformed the ASX index over the ultra-long-term and I think that could continue with its new investments like regional data centres and agriculture.

I also think that the ASX share is one of the best dividend shares. It has grown its dividend every year since 2000. It has paid a dividend every year since it listed in 1903. That’s a great, reliable record.

Soul Patts funds its dividend from the investment income it receives. In other words, the dividends and interest it receives from its assets. After paying for its expenses, it then pays out a large percentage of the cashflow as a dividend to shareholders. But that cashflow stream is steadily growing as Soul Patts’ investments grow their dividends.

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

Foolish takeaway

Both of these ASX shares could be around for many decades to come. I think they can both deliver growing dividends and long-term capital growth.

More reading

• Why I would add Coles and this ASX share to my retirement portfolio
• 3 property shares I’d rather buy over an investment property
• 3 ASX dividend shares raising their dividends like clockwork
• Want to invest $3,000 into ASX blue chips?
• Buy these ASX dividend shares if the RBA cuts rates

Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, 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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Although there have been a large number of dividend cuts and deferrals this year because of the coronavirus, there are still plenty of companies sharing their hard-earned profits with shareholders.

Two quality shares which continue to perform well and look set to pay dividends largely as normal over the next 12 months and beyond are listed below.

Here’s why I would buy these ASX dividend shares next week:

BHP Group Ltd (ASX: BHP)

The first dividend share to consider buying is BHP. I believe the mining giant is well-positioned to generate strong free cash flows in FY 2021 thanks to its world class and low cost operations and favourable commodity prices. In addition to this, the Big Australian has a number of growth opportunities that I’m confident could generate compelling returns on investment in the coming years. Another positive is the current iron ore price, which is trading comfortably above the US$110 a tonne mark. If it remains in or around this level throughout FY 2021, BHP will be printing money. And given the strength of its balance sheet, this could mean bumper dividends for shareholders. Based on the current BHP share price, I estimate that it will provide a forward fully franked ~4.9% dividend yield in FY 2021.

BWP Trust (ASX: BWP)

Another dividend share to consider buying is BWP Trust. It is a real estate investment trust and the landlord to 68 Bunnings Warehouse stores. Last week BWP released its full year result and revealed a 1% increase in profit (before gains on investment properties) to $117.1 million. But perhaps even more impressive was its result including the gains on investment properties. At a time when most retail property companies are marking down the value of their properties, BWP’s have appreciated in value. As a result, including property gains, BWP’s profit was up 24.4% to $210.6 million. I believe this demonstrates the quality of its portfolio and its positive outlook even during the toughest of economic times. With its full year result, management provided guidance for an FY 2021 distribution of ~18.29 cents per unit. Based on the current BWP share price, this represents a 4.7% yield.

More reading

• Ready for the “80% stock market crash”?
• Why BHP, Corporate Travel, Harvey Norman, & Nick Scali shares are pushing higher
• Is the BHP share price a good coronavirus hedge?
• Why I would buy CBA and this ASX dividend share
• This is the only ASX sector tipped to report earnings growth this reporting season

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

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If you’re looking to construct a $100,000 share portfolio, you’ll no doubt be on the lookout for investment ideas.

To help you on your way, I have picked out a few shares from different areas of the market which I think could be excellent core holdings.

Here’s why I think investing some of the funds in these shares would be a very smart move:

Altium Limited (ASX: ALU)

In the tech sector you’ll find Altium. It is the electronic design software provider behind the Altium Designer platform. Demand for its platform has been growing strongly in recent years thanks to the growing Internet of Things (IoT) and artificial intelligence (AI) markets, which are causing a proliferation of electronic devices globally. In addition to this, the company has a number of other businesses supporting its growth including workflow solution platform NEXUS and electronic parts search engine Octopart. Given the favourable industry tailwinds and its leadership position in the electronic design market, I believe Altium is well-placed to achieve its revenue target of US$500 million in FY 2025. This compares to its FY 2020 revenue of ~US$189 million.

CSL Limited (ASX: CSL)

My favourite share in the healthcare sector is this biotherapeutics company. I think it would be a great option, especially after a recent pullback in its share price. As of Friday’s close, the CSL share price is trading 20% lower than its 52-week high. I see this is a buying opportunity for investors due to its very positive long term outlook. While plasma collection difficulties could weigh on the performance of its CSL Behring business in FY 2021, I’m optimistic that strong demand for vaccines will go some way to offsetting this. Beyond FY 2021, I believe CSL is well-positioned for growth. This is thanks to its lucrative portfolio of therapies and vaccines and CSL’s pipeline of therapies under development. Combined, this pipeline has the potential to generate billions of dollars in sales over the next decade.

Goodman Group (ASX: GMG)

Finally, in the property sector I would be buying Goodman Group. It has a focus on commercial and industrial property and appears very well-positioned for growth over the long term. This is due to the strength of its portfolio and future developments. I’m particularly positive on Goodman Group due to its focus on high-quality properties in key locations that it believes will deliver sustainable returns for investors. These include logistics and warehouse facilities which have exposure to the rapidly growing ecommerce market through agreements with Amazon, DHL, and Walmart.

More reading

• 2 of the best ASX shares to buy right now
• Ready for the “80% stock market crash”?
• Why I would buy and hold CSL shares today
• The best blue chip ASX shares to buy today
• Invest like Warren Buffett and buy these ASX shares

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 Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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Investors don’t know whether to buy or sell their ASX shares right now.

Tech and gold are surging higher but we’re seeing many industries struggle. Hospitality, travel and real estate have been hit hard by the coronavirus pandemic.

But if you’re a long-term investor, you have to ignore the short-term noise. Here’s why I think it’s a good time to buy and hold ASX shares right now.

Why you should buy and hold right now

Many first time investors are trying their hand at investing this year. A sub-section of those investors have started day trading – buying and selling stocks with very short holding periods.

That’s not investing, that’s just gambling. While the S&P/ASX 200 Index (ASX: XJO) has generally trended up over time, day by day fluctuations are somewhat random.

History has shown us that a buy and hold strategy can pay long-term dividends. Even experienced investors have been spooked by the recent bear market and looming economic headwinds.

However, I think now is the time to hold. Of course, the benchmark index is down (6.2%) in 2020 and you might be wary of purchasing ASX shares right now.

But a worse strategy than buy and hold is market timing. If you try and time the market with your entry and exit then you’re playing a fool’s game. I think you’re more likely to get burned on the way down as you wait for the bottom and on the way back up as you wait for a strong bull run.

That means a buy and hold strategy is a sensible move right now despite the market volatility.

Which ASX shares are good to buy and hold?

Once you’ve decided on your investing strategy, you have to choose your ASX shares to buy.

As mentioned, both tech and gold have been doing well. I think Nextdc Ltd (ASX: NXT) is one to watch in the data storage space while Newcrest Mining Limited (ASX: NCM) is a top gold producer.

If you’re after non-cyclical earnings, I like Coles Group Ltd (ASX: COL) as a solid buy with strong supermarket earnings.

More reading

• 3 quality ASX shares for a beginner’s share portfolio
• These were the best performing ASX 200 shares last week
• ASX 200 falls 0.6%, REA Group reports
• Why the Coca-Cola share price and these ASX stocks just got upgraded by brokers to “buy”
• The latest ASX 200 stocks downgraded by top brokers

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. 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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Are  you starting an ASX share portfolio for the first time? If so, I hope you discover, like me, that share investing not only is enjoyable but can also be a great way to supplement your income.

Or, maybe you are looking for some good share picks to add to your portfolio?

Either way, here’s why I believe the following 3 ASX shares could be good options for you.

Woolworths Group Ltd (ASX: WOW)

It’s not surprising that Woolworths is a very familiar brand name in Australia. The grocery retail giant is now Australia’s second-largest company based on revenue.

Woolworths has been reasonably successful at winning back customers from its rival Coles Group Ltd (ASX: COL) over recent years, achieving this with a strategy focusing on quality, service and competitive pricing.

Unlike many other retail companies, Woolworths’ revenue stream has been very resilient throughout the coronavirus pandemic. Supermarket stores have remained open because they provide an essential service. And Woolworths also delivers consumers a competitive online offering.

Another benefit is that Woolworths pays investors a forward annual dividend yield of 2.6% that is fully franked.

Macquarie Group Ltd (ASX: MQG)

Macquarie Group is a global financial services business headquartered in Australia. The company’s strategy focuses on its international investment banking operations.

I think Macquarie has become a more balanced and diversified business over the past few years. Previously, it was too focused on a small product set and got into trouble during the 2008 global financial crisis. However, in the current crisis triggered by the coronavirus pandemic, I believe Macquarie is now better positioned to weather the storm.

Macquarie currently pays investors an attractive forward annual dividend yield of 3.5%.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

My third recommendation is not an individual company, but what is referred to as an exchange traded fund (ETF). Vanguard invests in a broad basket of shares that are listed in range of overseas markets.

Vanguard’s 5 biggest listings include tech giants such as Apple Inc, Microsoft and Amazon. There is no doubt that the ASX offers investors lots of great options. However, by investing in this ETF,  you will get exposure to a broad range of quality shares that are not available on the ASX as individual listings.

Foolish Takeaway

I believe Woolworths, Macquarie Group and the Vanguard ETF are solid options for anyone starting their ASX share portfolio or building on previous investments.

Keep in mind, it’s a good strategy to expand your portfolio over time. This safeguard ensures that you have enough market diversification and not too much investment weighted on any individual listing.

More reading

• Why it’s a good time to buy and hold ASX shares
• Why the Coca-Cola share price and these ASX stocks just got upgraded by brokers to “buy”
• Ready for the “80% stock market crash”?
• Where will the Scentre share price close in August?
• Earnings preview: What to expect from the Woolworths FY 2020 result

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I believe the tech sector is a fantastic place to look for long term investment ideas. At this side of the market I feel there are a good number of shares that have the potential to generate strong long term returns for investors.

Two ASX tech shares that I think could be strong buys right now are listed below:

ELMO Software Ltd (ASX: ELO)

At the small end of the market you’ll find ELMO. It is a cloud-based human resources and payroll software company. It provides a unified platform to streamline processes including employee administration, recruitment, on-boarding, and payroll. Demand has been growing strongly for its software over the last few years as businesses move to automated platforms. This led to the company reporting annualised recurring revenue (ARR) of $55.1 million and statutory revenue of $50.1 million in FY 2020. This was a 19.7% and 25% increase, respectively, year on year.

Pleasingly, management expects to grow its ARR organically to between $65 million and $70 million in FY 2021. This represents year on year growth of 18% to 27%. Importantly, this does not include the benefits of potential acquisitions ELMO could make over the next 12 months. The company has a cash balance of $140 million and intends to deploy the majority of these funds in FY 2021.

Xero Limited (ASX: XRO)

At the large end of the market there’s Xero. It is a global cloud-based business and accounting software provider from New Zealand. It has been an exceptionally strong performer over the last few years and this continued to be the case in FY 2020. For the 12 months, Xero delivered a 30% increase in operating revenue to NZ$718.2 million and a 29% jump in annualised monthly recurring revenue to NZ$820.6 million. This was driven by an increase in its average revenue per user metric and a jump in total subscribers by 26% or 467,000 to 2.285 million subscribers.

And while FY 2021 will have challenges because of the pandemic and its impact on small businesses, Xero’s long term outlook remains very positive. This is thanks to its massive global opportunity, strong pricing power, sticky product, and high quality platform. Combined, I expect them to result in strong earnings growth over the 2020s.

More reading

• 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
• 3 ASX tech shares to buy in FY 2021
• ELMO Software share price on watch after delivering more strong growth in FY 2020

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’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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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