Australia is full of great investments at any one time. In fact, I had trouble coming up with only five to pick for this list.
But before I get into some of my favourite investments, it’s important to know a few things about the investments I’ve chosen below. Firstly, I have a high tolerance for risk – my single largest personal stock holding is in an unprofitable $140 million company. Therefore, what works for me may not work for you, or your portfolio.
Secondly, there are a few themes I think will play in 2016 and beyond, which are worth mentioning because they’ve helped augment my investments. For example, I think the Australian dollar will remain under pressure; mining stocks probably won’t have a good year in 2016; our transition away from the resources sector may not be all smooth sailing; and dividend stocks will still prove popular. I think you’ll see from my ideas below that these themes have helped shape my portfolio.
5 investments I’ve got my eye on this Christmas
Blue chip – Computershare Limited (ASX: CPU) is a multi-national share registry services business. It’s the company that sits between you (the shareholder) and the companies you own. Computershare is also responsible for paying company dividends and at any one time will hold billions of dollars of client money in safe assets (like government-backed bonds) until they’re required to pay the dividend. As global interest rates begin to rise, Computershare will be a net beneficiary of higher investment returns. The profit will flow virtually straight to the company’s bottom line.
Dividends – Retail Food Group Limited (ASX: RFG) serves as a reminder that a company’s shares can be considered both “income” and “growth”. The owner of Pizza Capers, Crust Pizza, Donut King, Gloria Jeans and more, has an impressive track record and a cheap share valuation to boot. As its international rollout continues, I except Retail Food’s profits to tick along nicely. At today’s share price, Retail Food Group is forecast to pay a dividend equivalent to a yield of 5.4% fully franked.
Small cap – Yowie Group Ltd (ASX: YOW) is the company behind the popular children’s confectionery that sold 65 million units in 1995 – its first year in the Australian market. After Cadbury failed to secure rights to the brand in 2005, the range was discontinued. However, under a new agreement reached in 2012, Yowie Group is now rolling out across the huge US market, together with a unique patent that protects the product from competition from the likes of Kinder Surprise. The patent is valid until April 2018. Yowie Group is unprofitable and a high-risk investment, in my opinion.
Exchange Traded Fund – ISHEUROPE CDI 1:1(ASX: IEU). Don’t let the name fool you, the iShares Europe ETF is simply a pool of assets, managed by BlackRock, designed to track all shares in the S&P Europe 350 Index. The ETF costs 0.6% per year to manage, contains $3.8 billion of funds, currently trades on a price-earnings ratio of 17x and pays distributions in Australian dollars (through Computershare). There are many ETFs offered by BlackRock, Vanguard and others, covering everything from European and US shares, to commodities and property. I like this ETF because it affords investors exposure to great European businesses like Nestle and Novartis.
Managed Fund – Cromwell Phoenix Opportunities Fund. Phoenix is an unlisted managed fund focused on ASX micro-cap companies. According to the company’s investment report to 30 June 2015, the fund returned 19.5% per year (inclusive of franking credits but after fees and expenses) since its inception in December 2011. Aside from an exceptional performance to date, I also like the fund because it doesn’t charge a management fee. It gets a 20% performance fee if its fulfils its mandate, subject to a high water mark; and has received numerous rewards from the industry. It’s a high-risk fund, but the minimum investment is $20,000.
Along with the five cheap shares and five dividend shares I’d buy hypothetical kids, the five investments listed above are at the top of my watchlist moving towards 2016. Undoubtedly, more due diligence is required; however, Fools could do a lot worse than investigate these five investments a little further, in my opinion.
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Motley Fool writer/analyst Owen Raszkiewicz owns shares of Yowie Group, Computershare and Retail Food Group. He does not have a financial interest in the Cromwell Phoenix Opportunities Fund.
Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Computershare and Retail Food Group 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 Bruce Jackson.