Buy these 3 shares for strong diversification

The share market is full of different businesses in different sectors, yet lots of investors are drawn to the same few shares of the big four banks, Telstra Corporation Ltd (ASX: TLS) and so on.

If an investor can diversify their portfolio without reducing the returns it achieves risk diversification and mitigates problems if a particular industry, such as big banks, faces a problem.

Here are three shares I’d be very happy to diversify my portfolio with:

TPG Telecom Ltd (ASX: TPM)

Most people have exposure to Telstra, but I think TPG is the better telco choice. It may also be losing out due to lower margins with the NBN like Telstra, but I think it can also gain more.

TPG is committed to offering customers the best deal and the best value they can get, which should win market share.

I’m also convinced that TPG’s plan to launch its own mobile networks in Australia and Singapore will be worthwhile because the launch of 5G should mean some customers are willing to ditch broadband altogether.

National Veterinary Care Ltd (ASX: NVL)

National Veterinary Care is one of the most exciting small caps in my opinion. It operates in the pet industry which offers steady growth thanks to the growing human and pet populations.

The business generates a lot of recurring revenue because three quarters of dogs and two thirds of cats visit the vet each year.

National Veterinary Care is generating decent organic growth but the main reason why I think it could be a market beater is that it’s acquiring more veterinary clinics at an impressive rate each year, which accelerates profit growth.

Macquarie Group Ltd (ASX: MQG)

If you have to buy a big bank then Macquarie would definitely be my choice. It is much more globally focused than the others and offers defensive earnings due to its asset management business.

Macquarie management seem to be more proactive and forward-thinking, which should see it navigate any problems the Australian and global economies have in the future, or at least do better than its large competitors.

The bank has provided guidance of around 10% profit growth for FY18, which is much better than its large financial peers.

Foolish takeaway

I believe that all three shares are quality businesses, but it’s worth being cautious at the current elevated prices of the market. Personally, I’d put National Vet Care ahead of the other two because it has the potential to grow a lot more over the next few years.

These top shares would also provide strong diversification for a portfolio.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean 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 2018."

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%.

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 NATVETCARE FPO. The Motley Fool Australia owns shares of and has recommended TPG Telecom Limited. The Motley Fool Australia owns shares of NATVETCARE 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 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.