MENU

3 ASX shares that could be crushed by Amazon

The long-awaited arrival of the Amazon behemoth is finally close at hand. Should all retail businesses now run for the hills?

Not according to the retail legend behind Harvey Norman Holdings Limited (ASX: HVN), Gerry Harvey. He thinks Amazon will find it harder to conquer Australia, particularly with our higher wages, stricter rules and geographically large country.

His plan involves at least price matching or even price beating Amazon. That may be fairly easy for him to say, but it’s the individual Harvey Norman stores that will be the battleground.

Suffice to say, decreasing prices is great for customers and good for Harvey Norman’s market share, but it could be a big drain on profit margins.

I am a fan of Australian business, but it’s going to be hard for many retail businesses like Harvey Norman, JB Hi-Fi Limited (ASX: JBH), Woolworths Limited (ASX: WOW) and others to grow profits. If they can’t grow profit then the share price won’t grow much.

Woolworths is trading at 22x FY17’s estimated earnings, JB Hi-Fi is trading at 14x FY17’s estimated earnings and Harvey Norman is trading at 11.5x FY17’s estimated earnings.

However, Amazon isn’t the only problem on the horizon for Aussie retailers. Retail is a cyclical industry that rises and falls with the overall economy. The amount of debt that Australians have built up, combined with the slowing job market and several other factors raises some more question marks for me.

I don’t think that every single retail business is under pressure. BWX Ltd (ASX: BWX), Afterpay Holdings Ltd (ASX: AFY) and Greencross Limited (ASX: GXL) all have growing retail businesses.

However, I think there are both cyclical and fundamental changes that are happening that are going to impact the retail industry over the next few years. I am staying away from nearly all retail businesses because they don’t have any competitive advantage that can’t be replicated online.

I wouldn’t want to hold retail stocks, instead I’d want to hold one of these three fast growing businesses that could do very well over the next five years.

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks means stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

The contrast to these "new breed" blue chips couldn't be greater... especially the very real prospect of significant share price gains, something that's looking less likely from the usual blue chip suspects.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison owns shares of Greencross Limited. The Motley Fool Australia owns shares of BWX Limited and Greencross 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.