Tag: Motley Fool Australia

Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Commonwealth Bank of Australia (ASX: CBA)

According to a note out of Morgan Stanley, its analysts have retained their underweight rating but lifted the price target on this banking giant’s shares to $61.50. The broker believes that its retail business could struggle in the near term and suspects this could lead to a sizeable dividend cut or even a deferral. The Commonwealth Bank share price ended the week at $68.68.

InvoCare Limited (ASX: IVC)

A note out of the Macquarie equities desk reveals that its analysts have downgraded this funerals company’s shares to an underperform rating with a reduced price target of $10.20. Macquarie believes that InvoCare’s earnings could fall short of expectations in FY 2020 due to lower average case prices and social distancing initiatives reducing winter flu deaths. In addition to this, the broker suspects that it could be losing market share. InvoCare’s shares last traded at $11.36.

Treasury Wine Estates Ltd (ASX: TWE)

Another note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating and cut the price target on this wine company’s shares to $9.30. The broker notes that consumers are turning their attention to value wines. It feels this shift to value could weigh on its margins in FY 2021. And while the reopening of restaurants should be a boost, it is concerned that Treasury Wine may have to discount its products to support its sales. The Treasury Wine share price ended the week at $10.69.

More reading

• Top brokers name 3 ASX 200 shares to buy next week
• Why the ultra-rich are hoarding gold
• 2 blue chip ASX 200 dividend shares to buy next week
• What is the price/earnings (p/e) ratio?
• 2 great value ASX 200 shares I’d buy next week

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

The post Top brokers name 3 ASX 200 shares to sell next week appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2CsO32P

Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of UBS, its analysts have retained their buy rating and NZ$22.00 (A$20.63) price target on this infant formula and fresh milk company’s shares. The broker has been looking at industry data and believes a2 Milk’s market share has held firm. As a result, it suspects there is upside risk to its earnings guidance. In addition to this, it appears confident on the future thanks to price increases and a potential new product launch. I agree with UBS and would be a buyer of a2 Milk’s shares next week.

Afterpay Ltd (ASX: APT)

Analysts at Ord Minnett have retained their buy rating and lifted the price target on this payments company’s shares materially to $64.70. According to the note, the broker believes Afterpay is well-positioned to take advantage of the accelerated shift to online shopping. It suspects there could be almost 10 million active customers using its platform by the end of FY 2020. I think Ord Minnett is on the money with Afterpay and feel it could be a top long term option.

Premier Investments Limited (ASX: PMV)

A note out of the Macquarie equities desk reveals that its analysts have upgraded this retail conglomerate’s shares to an outperform rating with an improved price target of $20.11. According to the note, the broker believes that Premier Investments is well-positioned for growth thanks to its strong brands and growing online sales. I think Macquarie is spot on and Premier Investments could be a great option for investors looking to gain exposure to the retail sector.

More reading

• Top brokers name 3 ASX 200 shares to sell next week
• Why the ultra-rich are hoarding gold
• Which shares to buy if the ASX tumbles
• 2 blue chip ASX 200 dividend shares to buy next week
• How to become a millionaire in 25 years with $20 a day

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of A2 Milk and AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Top brokers name 3 ASX 200 shares to buy next week appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/37TmmvF

Relying on dividend shares for a passive income in retirement may become an increasingly likely scenario for many people. Low-interest rates mean that income-producing assets such as cash and bonds may be unable to provide a sufficient income to cover living costs in older age.

Clearly, dividend shares are riskier than many other mainstream assets. However, through holding cash for emergencies and identifying high-quality businesses, it may be possible to rely on dividend shares for a passive income in retirement.

The risks of holding dividend shares

Dividend shares experience price fluctuations like any other asset. However, capital returns may not be the main priority of retirees. They may be more focused on the level of income received from their portfolio. This could prove to be unreliable due to the risks faced by the world economy.

For example, many income shares have decided to reduce or cancel their dividends in response to the uncertain operating conditions they now face. A retiree who holds such companies will now experience a fall in their income in the short run. Although dividends may return among businesses who have delayed or cancelled, there are no guarantees that this will take place.

Therefore, relying on dividend shares for a passive income is a riskier strategy compared to holding lower-risk assets. There is always a chance that dividend cuts will negatively impact on your level of income.

Low relative returns

The problem facing retirees is that, in most cases, dividend shares offer a far superior income return than other mainstream assets. Low-interest rates mean that cash and investment-grade bonds may provide an insufficient level of income. Since policymakers may attempt to support the economy’s recovery through a loose monetary policy, the prospect of higher interest rates seems limited.

Building a portfolio for dividend shares

Therefore, many retirees may find that they focus their capital on dividend shares in order to generate a sufficient level of income. Should this be the case, buying a diverse range of businesses could help to lower your risks. You will be less reliant on a small number of companies to provide a passive income in retirement.

Similarly, purchasing companies with defensive business models and sound finances could further strengthen your passive income. They may be better equipped to survive an economic downturn, and therefore less likely to reduce their dividend payments.

Investors may also wish to hold cash to provide support and peace of mind should dividend cuts be ahead. This would also provide financial resources to overcome challenging economic periods that limit dividend-paying shares over a period of time.

More reading

• Top brokers name 3 ASX 200 shares to sell next week
• Top brokers name 3 ASX 200 shares to buy next week
• Why I’d buy cheap stocks in today’s market
• Where I would invest $50,000 into ASX shares immediately
• How I’d invest in today’s market to make a million

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.

The post Retirees: can you retire on just dividend shares? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3elhC4s

Buying cheap stocks after the recent market crash may not seem all that appealing to many investors. With the potential for a second wave of coronavirus across many of the world’s major economies, stock prices could come under further pressure in the coming months.

However, the past performance of the stock market shows that it has always been able to recover from crashes to post new record highs. Therefore, buying cheap stocks that have solid financial positions today could provide you with the greatest scope to benefit from a turnaround for equities over the long run.

Recovery potential

While a return to previous highs may not seem all that likely in the short run (despite the recent rally), over the long term it seems probable. The stock market has a strong track record of recovering from challenges such as the global financial crisis, the tech bubble and many other difficulties that have caused investor sentiment to weaken and cheap stocks to become more widely available.

Certainly, coronavirus is an unprecedented event for investors to overcome. It is still too soon to know how significant its impact will be on a wide range of sectors and economies. But previous downturns and bear markets have spawned the same uncertainties among investors. Yet, sentiment has always proceeded to improve after even the most severe declines in stock prices.

Buying cheap stocks

Many investors aim to buy stocks when they are low, and sell them when they are high. One of the main difficulties in implementing this strategy is that for a stock to be cheap, there often must be a significant risk ahead that prompts weaker financial performance or declining investor sentiment.

At the present time, many of the risks facing the world economy appear to have been priced in to stock valuations by investors. Therefore, it is possible to buy high-quality businesses while they are trading on low valuations. This could provide you with a more attractive risk/reward opportunity, since buying any asset at a lower price can provide greater scope for capital growth.

Although there is a risk that cheap stocks will continue to fall in price, over the long run many valuations on offer across the stock market suggest that a wide margin of safety may already be on offer.

Financial strength

Of course, for cheap stocks to deliver on their long-term recovery potential, they must survive a challenging short-term outlook. Therefore, it is vital that investors select companies that have attributes such as modest debt levels, dominant market positions and the right strategies to reduce costs if required in the short run.

Through buying the most appealing businesses while they trade on low valuations, you could boost your portfolio’s long-term growth prospects and improve your financial circumstances in the coming years.

More reading

• Where I would invest $50,000 into ASX shares immediately
• How I’d invest in today’s market to make a million
• Why ETFs are great for passive investing
• Where to invest $10,000 into ASX shares next week
• Why the ultra-rich are hoarding gold

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.

The post Why I’d buy cheap stocks in today’s market appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2Yjj0Pv

If I were fortunate enough to have $50,000 sitting in a savings account, I would consider putting it to work in the share market.

After all, the potential returns on offer are vastly superior to what you’ll get from an Australia and New Zealand Banking GrpLtd (ASX: ANZ) savings account.

For example, at present, ANZ is offering a lowly 0.05% per annum standard variable rate. This is roughly in line with what the other big banks are offering and would yield just $250 in interest per year.

As a comparison, over last 30 years the Australian share market has generated an average annual return of approximately 9.5%. If it were to do this again over the next 12 months, your $50,000 would turn into $54,750.

With that in mind, I have picked out three top shares which I think could provide strong returns for investors over the coming years. They are named below:

Altium Limited (ASX: ALU)

Altium is a printed circuit board design software company which is benefitting greatly from the rapidly growing Internet of Things (IoT) market. With more and more electronic devices being designed and manufactured, the company has been experiencing increasing demand for its key Altium Designer product. And with the IoT market tipped to grow materially in the future, Altium looks well-placed for growth.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another ASX share to consider buying is Domino’s. I think the pizza chain operator would be a great option for these funds due to its strong brand, popular product, and its positive long term outlook. Over the next five years Domino’s aims to deliver annual same store sales growth of 3% to 6% and annual organic new store additions of 7% to 9%. I expect this to underpin strong earnings growth for many years to come.

NEXTDC Ltd (ASX: NXT)

A final ASX share to consider buying is this data centre operator. NEXTDC has been experiencing significant and growing demand for its world class centres over the last couple of years. This has particularly been the case in 2020 after the pandemic accelerated the shift to the cloud. I expect this trend to continue and support very strong earnings growth as it scales.

More reading

• 3 quality ASX shares to buy now to get rich later
• I would buy and hold Kogan and these ASX shares until 2030
• 3 ASX shares I’d buy because of the online sales boom
• Should you buy Domino’s shares right now?
• 2 ASX shares to buy for beginners

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Where I would invest $50,000 into ASX shares immediately appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2Yh8cRY

The recent share market crash could present a buying opportunity for investors who can adopt a long-term approach to their portfolios. Of course, in the short run, many share prices could experience declines, should the global economic outlook deteriorate.

However, by focusing your capital on the highest-quality shares available and diversifying across a range of sectors, you could obtain a favourable risk and reward ratio while prices are low. This could increase your chances of making a million over the coming years.

A long-term approach

Investing during, or shortly after, a market crash can lead to disappointing results in the short run. For example, the economic impact of coronavirus may prove to be worse than investors are factoring. This may cause share prices to experience further falls that produce paper losses for investors.

As such, it’s important to adopt a long-term approach when investing during high share market volatility. The track record of equities shows that they experience periods of decline at fairly regular intervals. However, these periods have been followed with strong recoveries leading to record share market highs. As such, buying shares today while they offer wide safety margins could enable you to benefit from the long-term recovery potential.

A focus on quality

As with every economic downturn, some companies will not survive. For example, it may experience a decline in sales and be unable to pay fixed costs. Or, it may have taken on too much debt during the economic boom and be unable to service it.

Therefore, it is worth assessing the financial strength of a business before purchasing a slice. This may include focusing on its debt levels, cash flow strength and interest coverage ratio to realise the likelihood of it surviving a period of low sales. It may also be worth checking the company’s performance in prior economic downturns to assess its defensive characteristics when sales were under pressure.

Diversifying across multiple sectors

On top of buying high-quality companies for the long term, diversifying across sectors may be a sound move during a market crash. Some sectors, such as travel and leisure, may struggle to emerge intact from the current crisis. They may face a prolonged period of weaker demand that reduces return prospects.

As such, having exposure to a range of sectors could reduce overall risk and improve return prospects. This could enable you to fully access the share market’s long-term recovery potential. And it could boost your chances of generating a 7-figure portfolio in the coming years.

More reading

• Why ETFs are great for passive investing
• Where to invest $10,000 into ASX shares next week
• Why the ultra-rich are hoarding gold
• Which shares to buy if the ASX tumbles
• 2 blue chip ASX 200 dividend shares to buy 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.

The post How I’d invest in today’s market to make a million appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/37Tc1jl

Exchange-traded funds (ETFs) are great for passive investing in my opinion.

The idea behind an ETF is that investors can buy a fund through a stock exchange like the ASX. Previously, people had to apply to the fund provider directly and buy unlisted units.

Some of the biggest providers in Australia are Vanguard, Blackrock (iShares) and BetaShares.

Here are some of the main reasons why they’re great for passive investing:

Usually based on a diversified index

ETFs are usually diversified because they’re based on a good, diversified index.

Diversification is an important part of lowering investment risk. Being invested in dozens or hundreds of shares is usually lower risk than owning a portfolio of a handful of shares.

For example, Vanguard Australian Shares Index ETF (ASX: VAS) is invested in 300 ASX shares and iShares S&P 500 ETF (ASX: IVV) is invested in 500 US shares.

Something like Vanguard U.S. Total Market Shares Index ETF (ASX: VTS) is invested in thousands of shares.

Not only do ETFs offer diversification by the sheer number of shares owned, but the broad based ETFs are also invested across a variety of industries like IT, healthcare, industrials and so on. Owning shares in different industries helps in times like this current COVID-19 era. 

However, you can also invest in industry-specific ETFs like BetaShares Asia Technology Tigers ETF (ASX: ASIA) or Vanguard Australian Property Securities Index ETF (ASX: VAP).

Constantly shifting holdings

One of the most difficult things with investing in individual shares is that it’s hard to know what to buy and when to sell.

I’ve already mentioned that ETFs offer upfront diversification. But I like that you don’t have to think about what to buy or sell with this type of investment. It’s regularly making the automatic investment decisions for you.

As businesses get bigger and claim more market share, they’ll become a bigger part in the index. Similarly, if there are shares that are performing poorly then their market caps will decline and they will become a smaller part of the ETF’s holdings.  

Low costs

One of the biggest benefits of ETFs is that the best ones come with very low costs. Tracking an index doesn’t cost much for the provider. It’s not like an active fund manager that charges high fees.

Some options have management fees that are very close to 0%, which leaves more of the returns in the hands of the investor. The iShares S&P 500 ETF has an annual management fee of 0.04%, Vanguard U.S. Total Market Shares Index ETF has an annual management fee of 0.03% per annum. Even BetaShares Australia 200 ETF (ASX: A200), an ETF focused on the ASX, only has an annual management fee of 0.07%.

Fees can act like termites on your nest egg fund. If you’re paying high fees it could mean tens of thousands of dollars less for your portfolio by the time you hit retirement.

Solid returns

There is a lot of analysis out there that shows a lot of active managers regularly underperform the index, particularly after fees. There are some fund managers that add value, but you have to be picky finding them.

You hardly need to do any investing research to invest in an ETF, yet it’s possible to produce returns better than a professional who’s looking at shares full time. How great is that?

Different options have different performances. The ones that have a high level of exposure to US shares have done particularly well in recent years.

For example, the iShares S&P 500 ETF has returned an average of 15.7% per annum over the past decade to 31 May 2020.

Over the past five years BetaShares NASDAQ 100 ETF (ASX: NDQ) has produced an average return per annum of 20.1%.

Vanguard Australian Shares Index ETF has produced an average return per annum of 7% per annum over the past decade. Australian shares haven’t performed as well, but don’t forget that we’re in the middle of the COVID-19 pandemic which has hurt bank share prices more than some other sectors.

Foolish takeaway

I think that passive investing is the way to go for many people, particularly if they don’t have the time or mindset to invest in individual shares. You could even create a portfolio with a combination of ETFs and the best individual growth shares. 

More reading

• These 3 ASX ETFs are yet to recover from the market crash
• 3 quality ASX shares to buy now to get rich later
• How the ASX 200 can help first home buyers save for a deposit
• I don’t normally buy ETFs, but I would buy these 2
• Looking to diversify your portfolio? Try these ASX ETFs

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and BetaShares Asia Technology Tigers 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.

The post Why ETFs are great for passive investing appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2NfpZ5x

If you’re interested in adding some new ASX shares to your portfolio, then the three listed below could be worth considering next week.

I believe they could be among the best shares on the ASX and destined to be strong performers over the next few years. Here’s why I would invest $10,000 into them when the market reopens:

Appen Ltd (ASX: APX)

I believe that Appen could be one of the best shares on the ASX. It provides or improves the data that is used for the development of machine learning and artificial intelligence products. Given how important these products are becoming for businesses, you won’t be surprised to learn that demand for its services has been growing rapidly. I’m confident this demand will remain strong for many years to come and underpin above-average earnings growth over the 2020s.

Pushpay Holdings Ltd (ASX: PPH)

Another ASX share to consider buying is this donor management system provider. The number of churches using Pushpay’s platform has been increasing at a strong rate over the last few years and has driven stellar revenue growth. In FY 2020, for example, Pushpay reported a 42% increase in customer numbers to 10,896. Pleasingly, this is just scratching the surface of its huge opportunity in a niche but lucrative market. Demand for its platform has been particularly strong this year and recently led to management upgrading its guidance for FY 2021. It now expects earnings before interest, tax, depreciation and amortisation (EBITDA) of US$50 million to US$54 million, up from its previous guidance of US$48 million to US$53 million. This will be double FY 2020’s earnings.

Xero Limited (ASX: XRO)

A third ASX share to look at buying is Xero. It is a cloud accounting software company which has been a very strong performer over the last few years. This positive form continued in FY 2020 when Xero once again delivered impressive top line growth of 30% year on year. And due to its increasing margins thanks to the benefits of operating leverage, its EBITDA grew 52% to NZ$139.2 million. I’m confident Xero still has a long runway for growth thanks to its massive global market opportunity and its high quality and sticky product.

More reading

• What is the price/earnings (p/e) ratio?
• How to become a millionaire in 25 years with $20 a day
• These were the best performers on the ASX 200 last week
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• ASX tech shares: 2 exciting small caps to watch closely

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. 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.

The post Where to invest $10,000 into ASX shares next week appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2NbcqEg

Time to switch to gold?

With the S&P/ASX 200 Index (ASX: XJO) in full recovery mode, you would think that investors everywhere are basking in the gains that both ASX shares and share markets around the world have given investors over the past 3 months. After all, the ASX 200 is up more than 30% since its 23 March low.

But according to reporting in the Australian Financial Review (AFR), the world’s richest investors are not coming to the party. Instead of barrelling back into shares, the world’s ultra-rich are instead turning to the oldest of investments – gold.

According to the AFR report, advisers to the world’s ultra-rich are recommending as much as a 10% allocation to gold, which is far above the token amounts that were apparently being recommended before the COVID-19 pandemic.

This is despite gold prices rising more than 14% since the start of the year. One troy ounce of gold will set you back around US$1,723 today – or $2,520 in our dollars.

So why are the ultra-rich ignoring shares in favour of gold?

Well, it’s out of fear in my view. Fear of a second wave of coronavirus infections, fear of loose monetary policy, fear of asset bubbles and fear of inflation.

See, shares (despite their many benefits) are not an ultra-safe place to store your wealth if capital preservation is a priority, as we saw in March. And right now, there are growing signs that the unprecedented amount of government intervention in the markets (in particular the US) is driving the rally in shares prices we have been witnessing of late.

What happens if (or when) the US government starts tapering off quantitative easing and bond-buying? Or what happens if it never does? I think these are the questions that the ultra-rich are asking themselves right now. And the logical conclusion for a worst-case scenario is using gold.

Should we all copy the ultra-rich and buy gold?

I do think it can be advantageous to emulate and take lessons from wealthy investors. But I also think that the priorities of the ultra-rich and the everyday investor are disparate. The ultra-wealthy (in my opinion) are typically more concerned about the preservation of wealth rather than building wealth. In this context, I think using gold makes sense.

But I don’t think it makes sense for us Foolish investors who are trying to build long-term wealth with shares. Even though ASX shares are volatile, history shows us that they remain the best asset class for building wealth over long periods of time. We can’t really say the same about gold in my view.

So instead of selling all of your shares and buying up bullion, I think most investors will be better off just sticking to a long-term portfolio of quality ASX shares.

More reading

• 2 blue chip ASX 200 dividend shares to buy next week
• These were the best performers on the ASX 200 last week
• Short-sellers are stepping up their attack against these popular ASX shares
• ASX 200 up again, ASX retailers make big gains
• These 3 ASX ETFs are yet to recover from the market crash

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.

The post Why the ultra-rich are hoarding gold appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2UZtPUT

To say we live in uncertain times is possibly the greatest understatement of the year so far. The market is rocking back and forth from peaks to troughs in response to rapidly-changing world events. If the share market were to drop again by, say, 10% then I would be looking at these shares to buy for my portfolio.

Second chance value shares

For me, a value share is a good company that is underappreciated by the investing community. Moreover, when crashes happen good companies often get trampled in the rush for the exits. In March there were dozens of good companies selling at great prices. 

Fortescue Metals Group Limited (ASX: FMG) is one of the shares I bought heavily during the ASX trough. I think it is undervalued even today. However, if I can get it cheaper I will try to do that. I am happy to wait to see if it is going to dip again before the economy starts to normalise. Fortescue is selling at a reasonable price to earnings ratio (P/E) of around 6.

Another great value ‘buy’ if the market falls would be Wesfarmers Ltd (ASX: WES). I do not own this share at the moment but I would buy in if the price were to fall by a reasonable amount. I like what this company is doing to reduce poor-performing retail outlets. Recent work to release capital and closing down smaller stores took courage. Also, and most importantly, Wesfarmers has an online asset that is a direct competitor to Kogan.com Ltd (ASX: KGN).

Great growth shares to buy

Of course, everyone wants the chance to buy into Afterpay Ltd (ASX: APT) if the share price lowers again. Personally, though, I think this is pretty unlikely. For me, I would be very interested in investing in EML Payments Ltd (ASX: EML) if the price was to lower to a more reasonable level. Currently, it has a P/E of 102 which indicates the market thinks it will earn a lot in the near future. For me, this seems a little high.

Zip Co Ltd (ASX: Z1P) has nearly doubled in the past month. It now has a market capitalisation of $2.39 billion versus the Afterpay market cap of $15 billion. At best this company has to increase its value 6 times, which I do not believe it’s likely to. I would buy into Zip Co if it reduced its market cap by 25 – 50%. Given the tenuous nature of the market and of these new buy now pay later shares, I think that is a possibility.

Foolish takeaway

There is a lot of value on the share market today, and a lot more opportunity if it were to fall again in the near future. One of the keys to investing is to be patient. Another important discipline is to not get worked up if you ‘miss out’ on an opportunity. There will be others, and there is always something you can do to grow your capital. 

More reading

• Consider these blue chip ASX shares for strong dividend yields
• How to turn $20,000 into $250,000 in 10 years with ASX shares
• How to become a millionaire in 25 years with $20 a day
• These were the worst performers on the ASX 200 last week
• Australian retail sales up 16.3% in May

Daryl Mather owns shares of Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and Wesfarmers Limited. The Motley Fool Australia has recommended Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Which shares to buy if the ASX tumbles appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2V1iljC