Tag: Motley Fool Australia

This morning S&P Dow Jones Indices announced the June 2020 quarterly rebalance of the S&P/ASX Indices.

This is when a number of shares are added or removed from particular indices. Which can be a bigger deal than you might think, as billions of dollars are invested into funds which track indices like the S&P/ASX 200 Index (ASX: XJO).

In addition to this, fund managers often have mandates that allow them to only buy shares on a certain index. This can lead to them dumping shares which are removed from indices and buying shares which are added.

What changes have been made?

Given that S&P Dow Jones Indices skipped the March quarterly rebalance because of the market volatility, there have been a larger than normal amount of changes today.

Here’s a summary of some key changes that will be effective at the open on 22 June 2020.

S&P/ASX 20 Index

Gaming technology company Aristocrat Leisure Limited (ASX: ALL) has been added to the ASX 20 index at the expense of packaging company Amcor PLC (ASX: AMC).

S&P/ASX 50 Index

Infant formula and fresh milk company A2 Milk Company Ltd (ASX: A2M) will join the ASX 50 index later this month. It will take the place of embattled financial services company AMP Limited (ASX: AMP). Payments company Afterpay Ltd (ASX: APT) had been tipped for inclusion in the index but appears to have fallen just short.

S&P/ASX 100 Index

The shares of data centre operator NEXTDC Ltd (ASX: NXT) and gold miner Saracen Mineral Holdings Limited (ASX: SAR) have been strong performers in 2020. This has led to them being included in the ASX 100 index at the expense of shopping centre operator Unibail-Rodamco-Westfield (ASX: URW) and coal miner Whitehaven Coal Ltd (ASX: WHC).

S&P/ASX 200 Index

The benchmark index will welcome five new shares later this month. Centuria Industrial REIT (ASX: CIP), Megaport Ltd (ASX: MP1), Mesoblast limited (ASX: MSB), Omni Bridgeway Ltd (ASX: OBL), and Perseus Mining Limited (ASX: PRU) will join the illustrious index.

Making way for them will be Estia Health Ltd (ASX: EHE), Hub24 Ltd (ASX: HUB), Jumbo Interactive Ltd (ASX: JIN), Mayne Pharma Group Ltd (ASX: MYX), Pilbara Minerals Ltd (ASX: PLS), and Pinnacle Investment Management Group Ltd (ASX: PNI).

You might have noticed that there are five in and six out. This is because there has actually been 201 shares on the ASX 200 over the last few months. This was the result of Graincorp Ltd (ASX: GNC) spinning off its United Malt Group Ltd (ASX: UMG) business earlier this year.

Two surprising omissions from the new additions were Kogan.com Ltd (ASX: KGN) and Zip Co Ltd (ASX: Z1P). Both looked like strong candidates for inclusion after their remarkable share price gains this year. It looks like they will have to wait until September now.

More reading

• 3 gold mining shares that may be a buy today
• 5 things to watch on the ASX 200 on Friday
• Why is the A2 Milk share price underperforming?
• All Technology Index sees stunning comeback
• Why Afterpay, Amcor, Computershare, & Westpac 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 Jumbo Interactive Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Hub24 Ltd, MEGAPORT FPO, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Hub24 Ltd, Jumbo Interactive Limited, and MEGAPORT 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.

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Could this be the start of the second COVID-19 share market crash?

The S&P/ASX 200 Index (ASX: XJO) fell 3% yesterday and it’s expected to fall another 3% at the open. Who knows where it will finish by the end of today?

A second wave of COVID-19 was always a risk to the share market recovery. Countries like Australia, New Zealand, Taiwan and Vietnam have done a good job at controlling the spread of the virus. The north east of the US took the brunt of the initial wave. Now a lot of other US states are seeing rising numbers.

We’ve already seen that many places in the US can’t uniformly follow restriction rules, so this second wave could be harder to control. Although, the first wave didn’t really end.

Is this the second COVID-19 share market crash?

It certainly could be. A second wave was one of the key reasons that could start another share market fall. I don’t think the market was pricing in the high chance of a second wave. So if you’ve been saving your cash for another COVID-19 share market crash, this period is probably your chance.

But there’s a fair chance that this fall won’t be as bad as the first for a few reasons.

First, all of the central bank support is still there. Interest rates are still incredibly low in Australia, the US and Europe. It was seemingly the central banks stepping in that halted the crash in March.

Second, the US may be bad at controlling COVID-19 but many other places have gotten on top of it. Europe was in bad shape, but now daily case numbers are a lot lower. Several important countries in Asia are in control. We’re not looking at every developed country being in trouble. 

Third, people will expect a recovery. The first COVID-19 share market crash was only three months ago. There’s a good chance that once the market stops falling it will recover nicely again as people see value in lower prices.

Foolish takeaway

I’m going to be scanning the market today and next week to see if I can find any great opportunities. Be greedy when others are fearful. A 6% fall over 24 hours would certainly suggest that a COVID-19 share market crash may be starting. But it may be quicker and not as bad as the first. 

More reading

• Woolworths facing fresh threat from Amazon.com
• Is this why the NAB share price could be cheap today?
• ASX 200 to sink lower after Wall Street crashes on second wave concerns
• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops 3%, Webjet share price sinks

Motley Fool contributor Tristan Harrison 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 a growth investor, then you might want to take a look at the growth shares listed below.

I believe each of these companies are well positioned to grow their earnings at an above-average rate for many years to come. Which could potentially lead to their shares outperforming the market over the long term.

Here’s why I would invest $3,000 into these ASX growth shares once the dust settles on today’s market selloff:

Aristocrat Leisure Limited (ASX: ALL)

The first growth share I would suggest you consider buying is Aristocrat Leisure. While the gaming technology company is best known for designing and manufacturing many of the poker machines you’ll find in Crown Resorts Ltd (ASX: CWN) and countless casinos across the world, there is more to it than first meets the eye. Aristocrat Leisure also has a very lucrative digital business which is generating significant recurring revenues from its millions of daily active users. I believe this side of the business will be a key driver of growth over the next decade and expect it to become the biggest earner in the near future. 

Cochlear Limited (ASX: COH)

Another growth share to consider buying is Cochlear. I’m a big fan of the hearing solutions company due to the quality of its products, its strong long term growth prospects, and its high level of investment in research and development. I believe the latter will help keep its technology at the front of the pack and underpin solid earnings growth over the next decade and beyond. Another positive is its sizeable current market opportunity. The company estimates that less than 10% of people who would benefit from an implantable hearing solution are treated.

IDP Education Ltd (ASX: IEL)

A third growth share to consider investing $3,000 into is IDP Education. It is a provider of international student placement services and English language testing services. Over the last few years IDP Education has been growing at a rapid rate. And while its near term growth will inevitably be impacted by the pandemic, I expect it to accelerate again once the crisis passes. This could make it well worth considering a patient and long-term focused investment in its shares.

More reading

• 3 ASX shares to buy now with $10,000
• Can this ASX dividend share afford its 11% yield?
• 3 safe and strong ASX 50 shares to buy right now
• 3 quality ASX 200 shares to buy and hold until at least 2030
• 10 ASX 200 shares that are fit for the Queen

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 Cochlear Ltd. and Idp Education Pty Ltd. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The National Australia Bank Ltd (ASX: NAB) share price slumped 5.4% lower yesterday but is the ASX bank now in the buy zone?

Why the NAB share price slumped lower yesterday

Alongside the NAB shares sliding in yesterday’s trade, the S&P/ASX 200 Index (ASX: XJO) dropped 3.1%. The benchmark ASX 200 index closed at 5,960.60 points.

I don’t think there was a fundamental shift behind yesterday’s ASX bank move although, according to reporting in the Australian Financial Review (AFR), not all investors are bullish on the ASX banks in 2020.

It’s worth noting the NAB share price opened up 5.1% on Tuesday and led the ASX 200 higher. 

Yesterday’s slump could simply be investors closing out positions and netting some tidy gains. After all, NAB’s value has rocketed 37.4% since bottoming out in the bear market on 23 March.

Is NAB a cheap ASX bank share to buy today?

After NAB’s price fall yesterday, it’s now down more than 33% from its 52-week high of $30 per share.

NAB does have a large business banking segment which does create some headaches for investors. I think whether NAB is cheap depends on how you view the business’s recovery in 2020 and 2021.

Restrictions are starting to ease which is good news for the economy and corporate earnings. If NAB’s debtors continue to pay their loans then the Aussie bank’s earnings could surprise the market in October or November.

However, there’s plenty of uncertainty remaining in the economy. One of the big question marks is how the removal of the current government stimulus measures will impact on the Aussie economy.

I think there could still be long-term value in the NAB share price at $19.07 per share. The ASX banks have historically been strong dividend shares and I think that will continue in 2021 and beyond.

Foolish takeaway

Yes, the NAB share price slumped lower yesterday but the trend in the past few months has been upward. That could mean there’s a chance to buy for a good price if you’re a buy and hold investor looking at the decades ahead.

More reading

• ASX 200 to sink lower after Wall Street crashes on second wave concerns
• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops 3%, Webjet share price sinks
• These ASX 200 stocks just got downgraded by top brokers
• These ASX shares are the best way to invest overseas

Motley Fool contributor Ken Hall 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The good times are over for the Dow Jones Industrial Average (DJINDICES: ^DJI). The Dow was down 4.3% at 11:50 a.m. EDT Thursday as the possibility of a second wave of the novel coronavirus spooked investors.

Confirmed cases of the virus are surging in some places around the U.S. following the easing of lockdown measures and the reopening of the economy. In Texas, more than 2,500 cases were confirmed on June 10, setting a record for the state. Florida, California, and nearly a dozen other states are also seeing an increase in cases.

Apple (NASDAQ: AAPL) outperformed the Dow thanks to some analyst price-target bumps, but shares were still down amid the broad sell-off. Disney (NYSE: DIS) stock was hit much harder. The company is preparing to reopen its U.S. parks in a highly uncertain environment.

Apple outperforms on analyst optimism

Apple couldn’t fully escape the steep sell-off in the major stock indices on Thursday, but a trio of analyst price target bumps helped limit the damage. Apple stock was down just 1.4% by late morning, making it one of the best-performing Dow components.

Wells Fargo chimed in on Thursday morning, raising its price target on Apple stock from $315 to $385. The bank based its optimism on mobile phone registration data for April and May in China, which showed a recovery in smartphone demand. Apple’s total revenue from China was down 7.5% in the quarter ended March 28.

Bank of America also got in on the action, reiterating a buy rating on Apple stock and raising its price target from $340 to $390. BofA expects a quick recovery in demand in emerging markets, strong App Store sales in China, and gross margin improvements due to a mix shift toward pricier iPhones. However, the bank sees U.S.-China trade tensions and a lengthening iPhone replacement cycle as two risks facing the tech giant.

Lastly, HSBC upgraded Apple stock from reduce to hold, raising its price target from $225 to $295. The upgrade was based on the expectation that Apple will have a successful launch of 5G iPhones later this year.

How well Apple’s new iPhones sell this year will depend partly on the state of the U.S. economy. While the situation is improving following the easing of lockdown measures across the country, a potential second wave of the novel coronavirus could dampen that recovery. If consumers aren’t keen on shelling out for an expensive new smartphone amid a recession, Apple stock may have a rough road ahead.

Disney slumps as second wave fears mount

Few companies are more exposed to risk in a second wave of the virus than Disney. The stock was down 5.8% by late Thursday morning as investors chewed on the idea that the pandemic is far from over.

Disney is planning to begin a phased reopening of its Disney World Resort in Florida on July 11. The company has also unveiled plans to begin reopening its Disneyland Resort in California on July 9. Under the plan, which still requires government approval, various portions of the resort will reopen on dates ranging from July 9 to July 23. Capacity will be significantly limited, and a new theme park reservation system will be in place.

The big question: How many guests, especially those who need to fly in from other parts of the country, will return to the company’s properties amid a pandemic? This question is complicated by the potential for a second wave of the virus, which could make people less likely to make the trip. Disney may be facing a long period of depressed attendance, and it may take a successful vaccine for the company’s parks business to fully recover.

Disney stock has surged from its March low on optimism surrounding the company’s reopening of its properties. That optimism seems to be fading as cases of the virus surge in some parts of the country.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX investors brace to ride the next wave of “irrational exuberance”
• Here’s why it’s vital your ASX shares have a moat
• Should ASX 200 investors want share buybacks or dividends?

Timothy Green owns shares of Bank of America. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool Australia has recommended Apple and Walt Disney. 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 Dow Jones Tumbles 1,200 Points on Virus Fears; Apple Stock Outperforms; Disney Stock Plunges appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The S&P/ASX 200 Index (ASX: XJO) looks set to sink lower again on Friday after Wall Street had its worst day of trade since March.

At the time of writing, SPI futures are pointing to the ASX 200 falling a sizeable 181 points or 3.05% at the market open this morning.

What happened on Wall Street?

U.S. investors were heading to the exits in their droves last night after concerns over a second wave of coronavirus spooked the market.

According to CNBC, the U.S. topped two million coronavirus cases after the virus began to spread more quickly in states that aggressively reopened their economies. These include states such as Texas, Arizona, and North Carolina.

Texas, which was one of the first states to ease lockdown restrictions, has been hit particularly hard. The state has reported three consecutive days of record-breaking hospitalisation numbers.

Evercore ISI macro research analyst, Dennis DeBusschere, appears concerned that a second wave could put economic and company growth expectations at risk.

In a note, courtesy of CNBC, DeBusschere said: “With TX, AZ, CA new cases and hospitalizations increasing and investors concerned that recent protest will fuel a wave of infections, the risk of persistently weak economic and earnings growth has increased. S&P fair value estimates are falling as a result.”

And while the U.S. Federal Reserve is supporting the market with its monetary policy, he warned that the Fed cannot “offset a severe COVID second wave.”

This ultimately led to the Dow Jones Industrial Average crashing 1861.82 points or 6.9% lower on Thursday. This was the Dow’s fourth-worst point loss ever and puts it on course to record its worst weekly decline since mid-March.

Elsewhere, the S&P 500 fell a sizeable 5.9% and the technology-focused Nasdaq index sank 5.3% lower.

Almost all shares were sold off.

While 11 out of 11 sectors traded lower for the day, some areas of the market fell more than most.

Banks, travel companies, and energy shares were particularly poor performers. The latter was driven by a sharp decline in oil prices amid concerns that a second wave could cause another decline in demand.

This could mean it will be another tough day of trade for the likes of Commonwealth Bank of Australia (ASX: CBA), Santos Ltd (ASX: STO), and Webjet Limited (ASX: WEB) on Friday.

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops 3%, Webjet share price sinks
• These ASX 200 stocks just got downgraded by top brokers
• 3 of the best ASX 200 blue chip shares to buy today
• Why the Webjet share price isn’t a bargain buy

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

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On Thursday the S&P/ASX 200 Index (ASX: XJO) ended its winning streak and sunk notably lower. The benchmark index fell a disappointing 3.05% to 5,960.6 points.

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

ASX 200 expected to extend its decline.

It looks set to be another bleak day of trade for the ASX 200 after Wall Street crashed lower overnight. According to the latest SPI futures, the benchmark index is expected to sink 185 points or 3.1% lower at the open. On Wall Street the Dow Jones dropped 6.9%, the S&P 500 fell 5.9%, and the Nasdaq sank 5.3%.

Wall Street sell off.

U.S. stocks have just had their worst day in three months after a spike in coronavirus cases in the United States led to concerns over a second wave. Very few shares were spared during last night’s selloff. Airlines, travel shares, banks, and retailers were sold off. This could put further pressure on the likes of Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Webjet Limited (ASX: WEB) today.

Oil prices tumble lower.

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could come under significant pressure after oil prices crashed lower overnight. According to Bloomberg, the WTI crude oil price dropped 9% to US$36.05 a barrel and the Brent crude oil price crashed 8.5% to US$38.17 a barrel.

Gold price pushes higher.

Gold miners including Newcrest Mining Limited (ASX: NCM) and Saracen Mineral Holdings Limited (ASX: SAR) could be pushing higher today after the market crash sent the gold price jumping higher. According to CNBC, the spot gold price rose 0.85% to US$1,735.20 an ounce.

JB Hi-Fi shares given neutral rating.

The JB Hi-Fi Limited (ASX: JBH) share price could be fully valued according to analysts at Goldman Sachs. Although the broker was impressed with the retailer’s trading update on Thursday, it has only lifted its price target to $39.30. So, with its shares closing the day at $40.22, Goldman has held firm with its neutral rating.

More reading

• ASX 200 to sink lower after Wall Street crashes on second wave concerns
• ASX 200 drops 3%, Webjet share price sinks
• These ASX 200 stocks just got downgraded by top brokers
• Why the Webjet share price isn’t a bargain buy
• These ASX shares are the best way to invest overseas

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

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Do you have $1,000 to invest into the stock market? I believe you should pick one of the eight ASX shares I’m going to outline in this article.

The share market is recovering from the coronavirus selloff a few months ago. The ASX is still down compared to its mid-February level.

You don’t need to have $20,000 to start investing in ASX shares. You don’t even need to have $1,000. People can start with as little as $500.

It may be hard to know where to start investing with $1,000. I’ve got some ideas for you.

An exchange-traded fund (ETF)

iShares S&P Global 100 (ASX: IOO). The stronger Australian dollar puts Aussies in a good position to buy international shares.

This ETF invests in the biggest global businesses. I like that this ETF is invested in businesses from various countries like the US, France, Switzerland and so on. It’s not based on one country, region or industry. 

ASX shares aren’t the only companies worth investing in. The ETF is currently invested in shares like Microsoft, Alphabet and LVMH.

A diversified ETF

Vanguard Diversified High Growth Index ETF (ASX: VDHG). It can be hard to know which ETF to go for. So why not choose a diversified ETF which invests in several other ETFs?

It’s invested in large cap ASX shares, international shares, smaller shares and bonds.

This ETF is the type of pick that could be your only investment and you’d do quite well with it. It doesn’t have the best growth credentials compared to some other ETFs, but it will be good enough with low costs.

Quality listed investment companies (LICs)

I think that WAM Microcap Limited (ASX: WMI) and PM Capital Global Opportunities Fund Ltd (ASX: PGF) are two of the best LICs to go for right now.

WAM Microcap invests in small cap ASX shares. PM Capital Global invests in international shares. WAM Microcap seems set up to perform well with its small cap hunting ground. Meanwhile, global shares can offer up many more opportunities than our domestic market.

Both of these LICs had made strong long-term returns before COVID-19. I believe this performance will return as the market recovers. They also both have pretty high dividend yields.

ASX small cap shares

The smaller shares on the ASX could be some of the best opportunities. Small caps are much earlier along in their growth journey.

I really like Pushpay Holdings Ltd (ASX: PPH) and Bubs Australia Ltd (ASX: BUB). Both of them are now cashflow positive and they’re still generating huge revenue growth. The horrible circumstances actually seem to be accelerating the growth of both businesses.

In five years they could be two of the best mid cap shares on the ASX.

A great investment conglomerate

There aren’t many conglomerates on the ASX. Some investors don’t like conglomerates because of all the moving parts and the complicated structure. But I really like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). It has been operating for over a century, it continues to grow and diversify its investment portfolio and pays an ever-growing dividend. The ASX share is still down more than 10% from the pre-coronavirus high.

A cheap construction

Brickworks Limited (ASX: BKW) is one of the best value ASX shares right now in my opinion. Brickworks construction company is a large shareholder in Soul Patts and it also owns a growing industrial property trust. The value of these two assets alone make Brickworks seem cheap.

The best time to buy a cyclical construction business is when confidence is low, such as this period. Construction will return to a more normal level at some point, so I think it could be opportunistic to buy Brickworks whilst things look uncertain. The US and Australian governments will be counting on construction for some of the economic recovery.

Foolish takeaway

I believe each of these shares are great opportunities for the long-term. At the moment I think one of the LICs, Brickworks, Bubs and Pushpay are more likely to generate the stronger returns over the next three years. It depends whether you’re looking for income or capital growth.

More reading

• How the A2 Milk and Bubs share prices have performed during the pandemic
• 3 ASX 200 shares I’d buy for 2020 and beyond
• Where to invest $500 into ASX shares right now
• 2 ASX shares I’d buy in a heartbeat
• Here are another 2 insanely cheap ASX 200 shares to buy right now

Tristan Harrison owns shares of PM Capital Global Opportunities Fund Ltd, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended BUBS AUST FPO and PUSHPAY FPO NZX. 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 for a source of passive income, then the dividend shares listed below could be good options for you.

Here’s why I think these two ASX dividend shares are great options right now:

Vanguard Australian Shares High Yield ETF (ASX: VHY)

The first option I would recommend investors look at is actually an exchange traded fund which gives you exposure to a diverse group of dividend shares. The Vanguard Australian Shares High Yield ETF provides investors with low-cost exposure to companies that have higher forecast dividends relative to other ASX-listed companies. It achieves diversification by restricting the proportion invested in any one industry to 40% of the total ETF and 10% for any one company.

Vanguard believes that this investment approach provides investors with an efficient way to capture long-term market performance, as well as a source of income along the way. Among its holdings you’ll find the big four banks, miners, telco giant Telstra Corporation Ltd (ASX: TLS), and the conglomerate listed below. I estimate that its units provides a forward dividend yield of at least 5% at present.

Wesfarmers Ltd (ASX: WES)

Another dividend share to consider buying is Wesfarmers. I think the conglomerate is a great option for investors due to the quality and diversity of its portfolio and management’s long track record of making earnings accretive acquisitions. The latter could come into play in the near future given the sizeable cash balance the company is sitting on. This follows the recent sell down of its stake in supermarket giant Coles Group Ltd (ASX: COL).

Overall, I’m confident that Wesfarmers is well-positioned to deliver solid earnings and dividend growth over the next decade. For now, I estimate that its shares offer investors a decent forward fully franked ~3.6% dividend yield.

More reading

• Is the Wesfarmers share price good value?
• Why I think Wesfarmers is the best ASX blue chip
• Leading brokers name 3 ASX 200 shares to sell today
• ASX 200 jumps 2.4%, unloved shares keep rising
• Not keen on Westpac? Then buy these top ASX dividend shares instead

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 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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ASX shares took a bit of a tumble today. The S&P/ASX 200 Index (ASX: XJO) dropped by around 3%. I’ve got my eyes on some high quality ASX shares if the COVID-19 selloff gets worse.

Only time will tell whether this is the start of another extended decline for the ASX or whether it was just a temporary blip during the recovery.

If today’s drop does lead to another painful decline then I’ve got my eyes on these top ideas:

Share 1: Pro Medicus Ltd (ASX: PME)

On a day that the ASX dropped 3%, the Pro Medicus share price went up 2.7%. That’s an impressive performance.

I think Pro Medicus is one of the best ASX shares. But it’s also one of the most expensive.

It’s very rare to find a business on the ASX with an earnings before interest and tax (EBIT) margin of above 50%. In the FY20 half-year result it reported an EBIT margin of 50.2%. This means that a lot of new revenue can flow straight to the bottom line. This strong economic performance means Pro Medicus’ cash reserves and dividend can increase at a fast rate. It also doesn’t have any debt.

The ASX share continues to win large international contracts. Each new client it wins gives it a stronger reputation to win over the next client in the pipeline.

I think it speaks volumes that Pro Medicus initiated a share buyback whilst other ASX shares were doing dilutive capital raisings during the COVID-19 share market crash.

However, I personally wouldn’t want to consider buying Pro Medicus shares unless it dropped under $22.50 again.

Share 2: Australian Ethical Investment Limited (ASX: AEF)

Australian Ethical’s share price fell 7.2% today. The ethical fund manager has been very volatile over the past nine months due to the bushfires and the recent coronavirus crash.

I think Australian Ethical is a very promising ASX business. Before COVID-19 it was rapidly growing funds under management (FUM).

Fund managers are very scalable because it doesn’t really cost much more to manage $2.1 billion compared to $2 billion. The early superannuation withdrawal and the decline of the share market won’t have helped the ASX share’s FUM. But that will hopefully just be a temporary setback for Australian Ethical.

If it can keep attracting more clients and benefit from rising superannuation contributions then this ASX share could be one to watch. I like that it doesn’t have any debt and it continues to grow its cash balance.

However, I’m waiting for a share price under $4 to buy shares.

Foolish takeaway

I may be waiting a long time to buy Pro Medicus and Australian Ethical shares. They’re two of the most promising ASX shares out there. I just want to buy them for a price that’s quite a bit cheaper.

More reading

• ASX 200 Weekly Wrap: ASX bulls crash through 6,000 points
• These were the worst performers on the ASX 200 last week
• ASX 200 down 0.35%: UBS upgrades NAB and Westpac, Qantas soars again
• These ASX healthcare shares could be long term market beaters
• Why Austal, Evolution, Newcrest, & Pro Medicus are tumbling lower

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 Australian Ethical Investment Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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