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Last week the S&P/ASX 200 Index (ASX: XJO) ran out of steam and just fell short of making it eight successive weeks of gains. The benchmark index edged 10.7 points or 0.2% lower to end at 6,664.8 points.

Thankfully, not all shares dropped with the market. Some even managed to record very strong gains.  Here’s why these were the best performing ASX 200 shares last week:

Credit Corp Group Limited (ASX: CCP)

The Credit Corp share price was the best performer on the ASX 200 last week with an 18.5% gain. Investors were fighting to get hold of the debt collector’s shares after it announced a binding agreement to acquire the Australian Purchased Debt Ledger (PDL) book of Collection House Group Limited (ASX: CLH). Credit Corp has agreed to pay a total consideration of approximately $160 million plus the provision of a short-term loan of $15 million, which is expected to be fully repaid within 9 months.

Smartgroup Corporation Ltd (ASX: SIQ)

The Smartgroup share price was some way behind as the next best performer with a 9.8% gain. The catalyst for this was the salary packaging and novated leasing company releasing its guidance for FY 2020. Smartgroup revealed that it is expecting to report an adjusted net profit after tax before amortisation of $65 million. While this is down almost 20% from a year earlier, it appears to be a lot better than many investors were expecting.

Challenger Ltd (ASX: CGF)

The Challenger share price was on form and jumped 8.5% higher last week. This was driven by news that the annuities company has entered into an agreement to acquire MyLifeFinance for $35 million. MyLifeFinance is an Australian-based customer savings and loans bank, which is owned by Catholic Super. Challenger believes the acquisition is “highly strategic” and allows it to “significantly expand” its secure retirement income offering.

A2 Milk Company Ltd (ASX: A2M)

The a2 Milk share price rebounded strongly from a heavy decline a week earlier and rose 8%. This appears to have been down to bargain hunters swooping in to buy shares on the belief they were oversold last week following its earnings guidance downgrade. In addition to this, late in the week the company revealed that it has entered into a binding agreement to acquire a 75% interest in dairy nutrition business Mataura Valley Milk.

More reading

• These were the worst performers on the ASX 200 last week
• 2 ASX growth shares to buy when the market reopens
• ASX 200 rises on Christmas Eve
• ASX 200 up 0.5%: BHP Samarco update, A2 Milk’s acquisition, Credit Corp rockets
• Why the Credit Corp (ASX:CCP) share price is surging 19% higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk and Challenger Limited. The Motley Fool Australia has recommended SMARTGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) was unable to make it eight successive weeks of gains and slipped lower last week. The benchmark index fell 10.7 points or 0.2% to end at 6,664.8 points.

While a number of shares dropped lower with the market, some fell more than most. Here’s why these were the worst performing ASX 200 shares last week:

AGL Energy Limited (ASX: AGL)

The AGL share price was the worst performer on the ASX 200 last week with an 8.8% decline. Investors were selling the energy company’s shares after it downgraded its guidance. AGL now expects its net profit after tax to be in the range of $560 million to $660 million this year. This is down from its prior guidance of $500 million to $580 million and represents an 11% reduction at the midpoint. Weak wholesale prices are partly to blame for its underperformance.

Nearmap Ltd (ASX: NEA) 

The Nearmap share price wasn’t far behind with a 7.7% decline last week. This is despite there being no news out of the aerial imagery technology and location data company. However, a week earlier, analysts at Macquarie downgraded the company’s shares to a neutral rating and cut the price target on them to $2.40. Its analysts suspect that a rotation to value and cyclical stocks could weigh on Nearmap’s shares in the near term.

Resolute Mining Limited (ASX: RSG) 

The Resolute share price was out of form and dropped 6.7% over the four days. This appears to have been driven by a spot of weakness in the gold price last week. It wasn’t just the Resolute share price dropping lower. A number of other gold miners also recorded disappointing declines. This led to the S&P/ASX All Ordinaries Gold index losing 3% of its value last week.

AMP Ltd (ASX: AMP)

The AMP share price dropped 5.9% lower last week. This is despite there being no news out of the financial services company. However, prior to last week, the AMP share price was up over 30% since the start of November. This could have led to some investors taking a bit of profit off the table ahead of the Christmas break.

More reading

• ASX 200 rises on Christmas Eve
• ASX 200 up 0.5%: BHP Samarco update, A2 Milk’s acquisition, Credit Corp rockets
• 10 incredible quotes that sum up investing in 2020
• Iron ore prices poised to hit US$180 next month: Westpac
• 5 things to watch on the ASX 200 on Thursday

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 Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some top small cap ASX shares out there to consider for an investment portfolio.

A smaller business may have more growth potential because it’s earlier on in its growth journey.

Here are three small cap ASX share ideas:

Over The Wire Holdings Ltd (ASX: OTW)

According to the ASX, Over The Wire has a market capitalisation of approximately $250 million.

Fund manager NAOS Small Cap Opportunities Company Ltd (ASX: NSC) is a fan of this business. It has various segments including a national voice network, public cloud, cyber security services and on-demand cloud connectivity. The company also recently acquired Digital Sense, which mostly provides services to large and government clients. Over 90% of Digital Sense’s revenue is recurring in nature.

The fund manager’s thinking with Over The Wire is that it will be able to demonstrate to potential clients that it has a wide array of services and help businesses that have complex needs.

Over The Wire has made two acquisitions recently which, together, could increase the earnings before interest, tax, depreciation and amortisation (EBITDA) by $14 million over the next two years.

Naos thinks that the small cap ASX share could have a normalised run-rate of more than $35 million in FY22 which could mean significant free cash flow generation and could see Over The Wire command a premium EBITDA multiple.

According to Commsec, at the current Over The Wire share price it’s valued at 17x FY23’s estimated earnings.

City Chic Collective Ltd (ASX: CCX)

According to the ASX, City Chic has a market capitalisation of $911 million.

City Chic is a global omni-channel retailer that specialises in plus-size women’s apparel, footwear and accessories. It has a number of brands including City Chic, Avenue, CCX, Hips & Curves and Fox & Royal. It has a network of 96 stores across Australia and New Zealand, websites operating in Australia, New Zealand and the US, marketplace and wholesale partnerships with major US retailers such as Macys and Nordstrom, and a wholesale business with European and UK partners such as ASOS and Zalando.

Fund manager Chris Prunty from QVG Capital thinks that the e-commerce theme will continue to grow after COVID-19 has passed. For a business like City Chic, the fashion ASX share’s ability to sell products online underlines its ability to build a market-leading position for itself.

The small cap ASX share recently announced an acquisition. It’s going to buy UK-based plus-size brand Evans from Arcadia Group. Evans’ e-commerce and wholesale businesses generated £26 million (A$46 million) of sales for the financial year to August 2020. However, the acquisition doesn’t include the physical store network.

Management are excited by the opportunity to directly expand into the UK market which may have a total addressable market of $9 billion.

At the current City Chic share price, it’s valued at 27x FY23’s estimated earnings according to Commsec.

Nick Scali Limited (ASX: NCK)

Nick Scali has a market capitalisation of $772 million according to the ASX.

Fund Manager Matt Williams from Airlie Funds thinks Nick Scali is going to benefit from a lower unemployment rate and consumers could continue to benefit from the government stimulus.

A couple of months ago the small cap ASX share released a trading update which said that its total sales orders for the first three months of FY21 were up 45% on the previous year and this trend continued through October. Excluding store closures in Melbourne and Auckland, comparable store sales orders went up 59% in the first quarter.

Online orders were also up 47% in the first quarter of FY21 and it expects the earnings before interest and tax (EBIT) contribution from online to be higher in FY21 than previously expected.

Nick Scali is now expecting net profit after tax in the first half of FY21 to grow by 70% to 80%.

More reading

• Top brokers name 3 ASX shares to buy today
• Why Bigtincan, Over the Wire, Resolute, & Uniti shares are dropping lower
• Here’s what is dragging the Over the Wire (ASX:OTW) share price lower
• The City Chic (ASX:CCX) share price has been tipped to jump 21% higher from here
• Here’s why this fundie thinks City Chic (ASX:CCX) is an attractive ASX share

Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd. The Motley Fool Australia has recommended Over The Wire Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Warren Buffett – chair and CEO of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) – is one of the most successful and famous investors of all time.

He has become famous for steering Berkshire to success after success over the past near-seven decades. Over that time, Class A Berkshire shares have appreciated from roughly US$12.50 in 1964 to US$335,779 today.

Part of Berkshire’s success has no doubt been its rather unique structure. Unlike most companies in the top echelons of the US share market, Berkshire is a conglomerate. It owns massive stakes in a wide range of businesses, including Coca-Cola Co (NYSE: KO), American Express Company (NYSE: AXP) and (more recently) Apple Inc (NASDAQ: AAPL). It also owns a massive portfolio of businesses outright. These include Duracell, Dairy Queen and Geico.

Many companies have attempted to emulate Buffett’s strategy, none with quite the level of success though. But there have been recent signs that 2 Aussie fund managers are having a go as well.

Normally, a fund manager’s modus operandi is to buy small portions of shares of successful businesses, much like we ordinary retail investors do. Just like an ASX retail investor might spread their money across a range of blue chip shares, a fund manager might have 10, 20 or even 100 different positions. These positions would be larger in scale than those of a retail investor, but the same principle applies.

2 candidates for the ‘ASX’s Warren Buffett’

But 2 ASX fund managers have recently shown through their actions that they might be trying a different, more Buffett-esque approach.

Last week, we found out that ASX fund manager Geoff Wilson had put in a bid to acquire in full the shares of ASX telecom company Amaysim Australia Ltd (ASX: AYS) through his Listed Investment Company (LIC) WAM Capital Limited (ASX: WAM).

Not shares of Amaysim, but Amaysim period. WAM Capital does not usually do business this way. This LIC holds a wide portfolio of at least 20 different ASX shares, most recently of which included Elders Ltd (ASX: ELD) and Flight Centre Travel Group Ltd (ASX: FLT). For WAM, this looks set to be the first acquisition of an entire listed ASX company outside the fellow fund manager space.

Just a few days later, we were treated to the news that another ASX fund manager, Magellan Financial Group Ltd (ASX: MFG), is making a similar move. Magellan has reportedly entered into an agreement to acquire a full 10% of the private fast-food chain Guzman y Gomez (GYG). GYG is not currently a public company, but there have been recent stirrings of an upcoming IPO. The deal will set Magellan back $86.8 million in cash.

These moves are somewhat unusual for ASX fund managers, and yet here we are. They are also reminiscent of Warren Buffett’s methods of bringing businesses into his fold.

Will these moves work out for Magellan or WAM? That remains to be seen. But it’s not hard to see where they are getting their inspiration. Who knows, perhaps in a decade we will be calling Mr Wilson and Magellan’s Hamish Douglass the ‘ASX’s Warren Buffett’.

More reading

• 3 ASX 200 shares that keep growing the dividend
• ASX 200 drops over 1%
• 2 reasons why the Magellan (ASX:MFG) share price is attractive
• Why the Magellan (ASX:MFG) share price is on watch today
• Magellan (ASX:MFG) launches new ETF offerings

Sebastian Bowen 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 Berkshire Hathaway (B shares) and recommends the following options: short January 2021 $200 puts on Berkshire Hathaway (B shares) and long January 2021 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares), Elders Limited, and Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Buying today’s cheap dividend stocks could be a very profitable move over the next 10 years. Not only do they offer the opportunity to make an attractive passive income, they could also deliver high capital returns.

Their low valuations and increasing popularity in a low interest rate environment could even mean that they double in price over the next decade. As such, building a diverse portfolio of income shares today could be a worthwhile idea. 

Cheap dividend stocks with capital growth potential

Despite the stock market recovery in 2020, there are a wide range of cheap dividend stocks available to buy today. In many cases, they have dividend yields that are significantly higher than their long-term averages. This suggests that they could offer wide margins of safety that provide scope for capital growth over the long run.

The past performance of the stock market shows that company valuations generally revert to their long-term averages following bear markets. Certainly, this may take time in some cases – especially where companies face challenging near-term operating conditions. However, dividend shares with solid finances and affordable shareholder payouts may be able to overcome difficulties in the short run to produce impressive returns in the coming years.

The increasing popularity of dividend shares

One factor that could have a positive impact on the valuations of today’s cheap dividend stocks is their income appeal on a relative basis. Investors who are seeking to obtain a worthwhile passive income in 2021 are unlikely to have much success elsewhere. High property prices have squeezed yields, while low interest rates have pushed income returns on bonds and cash to extremely low levels.

As such, demand for income shares could increase over the coming months and years. This may push their prices higher, resulting in capital gains for investors. And, with interest rates set to remain at low levels for a prolonged period of time due to economic uncertainty, the long-term outlook for today’s cheap dividend stocks could continue to improve.

Doubling an investment in dividend shares over the next decade

A 100% return on today’s cheap dividend stocks over the next decade may sound unlikely to some investors at the present time. After all, risks such as political instability and coronavirus are expected to persist in 2021.

However, a 100% return in 10 years requires an annual growth rate of around 7%. Given that the stock market has produced an annualised total return of around 8% in the past, a 7% return seems very achievable. It could even be argued that the low share prices of many dividend stocks mean that their returns could be above the long-term market average in the coming years. This may even allow an investor to double their money over a shorter timeframe than a decade as a stock market rally takes hold.

More reading

• Invest like Warren Buffett and buy and hold these ASX shares in 2021
• 5 exciting small cap ASX shares to watch in 2021
• 2 outstanding ETFs for ASX investors to buy
• 5 fantastic ASX shares to buy in 2021
• How I’d invest in REIT stocks to earn a passive income

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Legendary investor Warren Buffett is a big advocate of buying and holding shares. It is a strategy he has used with great effect to amass his vast fortune over the last six decades.

The good news is that there is nothing to stop readers from following in his footsteps and replicating his investment style.

But which shares would be good buy and hold options? Listed below are two to look closer at:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

This pizza chain operator is targeting strong growth over the long term. At the end of FY 2020, the company was operating 2,668 stores across Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, and Denmark.

While this might sound like a huge store network, management believes it still has a significant runway for growth in the future. The company is aiming to more than double its network to 5,500 stores by 2033. It is also aiming to grow its same store sales by 3% to 6% per annum over the medium term.

If it successfully delivers on these objectives, then the combination of organic and inorganic growth could underpin solid sales growth over the long term.

Goldman Sachs currently has a buy rating and $88.00 price target on its shares.

Zip Co Ltd (ASX: Z1P)

Zip has been a very strong performer in 2020. It has delivered very impressive sales, customer, and merchant growth over the last 12 months. This has been driven by its successful international expansion, the growing popularity of buy now pay later as a payment method, declining credit card usage, and the seismic shift to online shopping.

In addition to this, the company has supported its growth through the expansion of its product offering. This includes launching Zip Business and its Tap & Zip product. It also just raised $120 million via an institutional placement to support its growth.

One broker that appears very positive on the company’s future is Morgans. Its analysts recently reaffirmed their add rating and put a $8.89 price target on its shares.

More reading

• 3 of the best ASX shares to buy right now
• Here’s why the Zip (ASX:Z1P) share price is in focus today
• ASX 200 down 0.85%: ANZ CFO resigns, tech shares tumble, iron ore jumps
• Is the Zip (ASX:Z1P) share price a buy yet?
• New BNPL enters ASX: How it promises to be different

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 ZIPCOLTD FPO. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At the small end of the Australian share market, there are a number of companies with the potential to grow materially in the future.

Five that investors might want to get better acquainted with are listed below. Here’s what you need to know about them:

Alcidion Group Ltd (ASX: ALC)

Alcidion is an informatics solutions company. It provides software that has been designed to improve the efficacy and cost of delivering services to patients and reduce hospital-acquired complications. Demand for its software has been increasing and has led to a number of major contracts with healthcare institutions in the UK.

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan is a provider of enterprise mobility software. The company’s software allows sales and service organisations to increase sales win rates, reduce expenditures, and improve customer satisfaction. This is achieved through improved mobile worker productivity. It has a large number of blue chips using its platform, including banking giant Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Nike.

IntelliHR Ltd (ASX: IHR)

IntelliHR is a cloud-based human resources and people management platform provider. It has been growing very strongly this year. For example, during the first five months of FY 2021, IntelliHR revealed an impressive 148% increase in subscriber numbers. As a result, it now has almost 30,000 contracted subscribers on its books. This has underpinned similarly strong revenue growth. As of its last update, the company’s contracted annual recurring revenue (ARR) was up 81.3% to $2.8 million.

Pointerra Ltd (ASX: 3DP)

Another small cap to look at is Pointerra. It is a growing technology company with a focus on the commercialisation of 3D geospatial data. Pointerra’s software allows users to manage, visualise, and share large digital 3D datasets. This software is able to extract vital information from the data that would otherwise take many hours to do. Management estimates that its market opportunity is currently worth a massive $500 billion annually.

Whispir (ASX: WSP)

Whispir is a software-as-a-service communications workflow platform provider. Its software platform allows businesses and governments to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. Management believes its platform revolutionises customer engagement, business resilience, and operational communications process.

More reading

• 3 top ASX shares to buy in 2021
• Why Bigtincan, Over the Wire, Resolute, & Uniti shares are dropping lower
• Here’s why the Bigtincan (ASX:BTH) share price is dropping lower
• 2 exciting small cap ASX shares growing rapidly
• Why Afterpay, Alcidion, Eagers Automotive, & Pacific Smiles are storming higher

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 BIGTINCAN FPO and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and Pointerra Limited. The Motley Fool Australia has recommended Alcidion Group Ltd, BIGTINCAN FPO, Pointerra Limited, and Whispir Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It isn’t hard to see why exchange traded funds (ETFs) are becoming increasingly popular with Australian investors.

These funds give investors the opportunity to invest in a large number of shares through just a single investment.

Not only does this make diversification so much easier, it also means investors can gain exposure to markets or themes that would have been near impossible to do so 10 years ago.

Two popular ETFs that ASX investors might want to get better acquainted with are listed below:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The first ETF to look at is the BetaShares Asia Technology Tigers ETF. It gives investors exposure to a portfolio of technology shares in the Asia market that are revolutionising the lives of billions of people in the region. Among the fund’s largest holdings you will find giants such as Alibaba, Baidu, JD.com, Samsung, and Tencent.

Today I am going to focus on Baidu and Tencent. Baidu is often referred to as the Chinese version of Google due to its dominant search engine business. But like Google, there is far more to Baidu than just a search engine.

The company has a focus on artificial intelligence (AI) and is aiming to become an autonomous vehicle powerhouse in the future. In respect to AI, in 2019 the company ranked number one in the amount of AI-related patent applications in China for the second consecutive year.

Tencent is another key holding in the portfolio. It is one of the world’s largest tech companies and has a focus on video games and social media. The company is best known for its WeChat app, which is used by over 1.2 billion people for messaging, e-commerce, digital payments, and entertainment.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

Another ETF that is proving popular with investors is the VanEck Vectors Morningstar Wide Moat ETF. It gives investors a piece of 48 US-based stocks which have sustainable competitive advantages or “moats”.

Moat is a term that Warren Buffett often talks about. The legendary investor likes to invest in companies with moats, as these sustainable competitive advantages support strong pricing power, which in turn underpins solid long-term earnings growth and returns for investors.

Among the VanEck Vectors Morningstar Wide Moat ETF’s holdings are the likes of Amazon, American Express, Boeing, Coca-Cola, Microsoft, Pfizer, and Yum! Brands. Over the last five years the ETF has outperformed the ASX 200 index with a net return of ~16% per annum for investors.

More reading

• Got cash to invest? Here are 3 ASX shares to buy
• 3 ETFs for ASX investors to buy in 2021
• Is this the perfect ETF to buy for 2021?
• 4 leading ASX growth shares to buy for 2021
• 2 ETFs offering strong international diversification

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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With a new year on the horizon, now could be an opportune time to consider making some new additions to your portfolio.

To help you on your way, I’ve picked out five ASX shares which have been tipped as buys. They are as follows:

Altium Limited (ASX: ALU)

The first share to look at is Altium. It is an award-winning printed circuit board (PCB) design software provider. Over the last few years, Altium has earned itself a leading position in a growing electronic design market. But the company isn’t settling for that. It is now aiming to dominate this market with its cloud-based Altium 365 product. Analysts at Credit Suisse are positive on its future and recently initiated coverage on Altium with an outperform rating and $42.00 price target.

Appen Ltd (ASX: APX)

Another share to look at is Appen. It is a leading developer of high-quality, human annotated datasets for machine learning and artificial intelligence (AI). It does this for some of the biggest tech companies in the world such as Facebook and Microsoft. It also helped Apple with the development of its virtual assistant, Siri. Macquarie is positive on the company’s growth prospects and has an outperform rating and $43.00 price target on its shares.

CSL Limited (ASX: CSL)

CSL is one of the world’s leading biotechnology companies. It is made up of two businesses, CSL Behring and Seqirus. CSL Behring is the number one player in a global plasma therapies industry worth a massive US$30 billion per year. Whereas Seqirus is now the number two player in the US$6 billion global influenza vaccines industry. UBS is a fan of CSL and has a buy rating and $346.00 price target on its shares. It notes that product development has been a key driver of growth and appears confident this will continue in the future.

NEXTDC Ltd (ASX: NXT)

Another share to look at is NEXTDC. It is a leading data centre operator with operations across Australia. It has also recently opened up offices in Singapore and Tokyo, with a view to expanding into these markets. This could give its already impressive growth a lift, especially thanks to the increasing demand for its services due to the structural shift to the cloud. Goldman Sachs is very positive on its future and has a buy rating and $13.20 price target on its shares. The broker even suggested the NEXTDC share price could go to $20.00 based on high but not unrealistic assumptions.

Pushpay Holdings Group Ltd (ASX: PPH)

A final ASX share to look at is Pushpay. It is a donor management and community engagement platform provider with a focus on the faith sector. Pushpay has been a very strong performer this year and recently reported a 53% increase in half year operating revenue to US$85.6 million. This is still only scratching at the surface of management’s medium to long term revenue target of US$1 billion. Analysts at Goldman Sachs are fans of the company. They have a conviction buy rating and ~$2.59 price target on its shares.

More reading

• 2 ASX growth shares to buy
• 3 ASX shares for growth, income, and value investors
• 2 of the best ASX healthcare shares to buy in 2021
• 7 top ASX biomedical shares in 2020
• In a record-breaking year, here are some of the world’s most popular 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 Appen Ltd, CSL Ltd., and PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Real estate invest trust (REIT) stocks experienced a mixed 2020. Many of them delivered falls in their valuations as a result of changing demand among consumers and businesses. For example, offices and retail units are in lower demand as working from home becomes more popular.

However, the wider property sector could experience an improving performance as the economic recovery takes hold. With many trusts trading at low prices, now could be the right time to buy them to make a generous passive income.

The prospects for REIT stocks

As with many companies, the prospects for REIT stocks continue to be relatively uncertain in the short run. The coronavirus pandemic is putting pressure on retailers and a variety of other businesses. This may mean that some landlords face rent collection challenges that put their financial outlook under a degree of pressure.

However, on a long-term view, investing in the property sector could be a shrewd move. The industry could benefit from a likely economic recovery over the coming years that provides improving confidence among businesses and consumers. The end result could be stronger financial performances from property companies.

Many REIT stocks may also have the financial strength to adjust their asset portfolios to adapt to changing demands within the commercial property sector. For example, they may be able to invest in flexible office space or warehousing, or shift their focus towards new market segments that provide stronger growth prospects over the coming years.

Investing in listed property stocks today

When investing in REIT stocks, it is crucial to ensure there is sufficient diversity. Some companies are focused on one specific area, such as retail units. Therefore, it could be worth buying multiple stocks so that an investor has exposure to a broad range of assets in different market segments and locations. This may produce a more resilient passive income that is likely to grow at a faster pace over the long run.

Meanwhile, buying property stocks at a discount to their intrinsic values could be a shrewd move. Even though the sector has recovered to some extent from the 2020 stock market crash, it is still possible to purchase REIT stocks at low prices. In some cases, they may even trade at a wide discount to their net asset value. Cheaper stocks can provide greater scope for high returns in the long run.

Of course, in the short run a number of companies could experience further challenges. Risks such as the coronavirus pandemic are known unknowns that may yet have a negative influence on the economy’s outlook in the early part of 2021. As such, it is crucial to adopt a long-term outlook on REIT stocks. Over the coming years, their low valuations, diverse portfolios and recovery potential could produce a growing passive income.

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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