MENU

Buy these 4 shares for strong diversification

Don't put all your eggs in one basket...

Australia is one of the richest countries in the world. However, diversification is not utilised by a lot of Australian investors. Most people have a lot of their wealth tied up in one or a handful of properties plus bank shares. Arguably, the bank shares are also heavily linked to the property market.

Therefore, I think it’s very important for every investor to diversify away from these two areas.

Here are four ideas to do that:

Costa Group Holdings Ltd (ASX: CGC)

Costa is one of Australia’s largest food-producing companies. It grows berries, citrus fruit, tomatoes, mushrooms and avocadoes.

It’s taking particular attention to the avocado industry because millennials like myself just can’t get enough of avocadoes on toast and various other things.

In all seriousness, Costa is an attractive business because it’s building up its business in Australia, China and North Africa. It’s rare for a food company on the ASX to be so geographically diverse. As the global population rises the demand for food will also increase.

Costa is currently trading at 24x FY19’s estimated earnings.

Auckland International Airport Ltd (ASX: AIA)

Many investors will be aware that Sydney Airport Holdings Ltd (ASX: SYD) trades on the ASX, but an even better option could be the airport company based in Auckland.

Auckland Airport is receiving growing numbers of international passengers thanks to New Zealand’s appeal. I think it’s a better option for investors because in the long-term Sydney Airport will have competition once the other airport opens in the city. Melbourne is likely to steal some of the international passenger growth as well, whereas Auckland will always be the biggest city and be the main gateway into the country.

It’s currently trading at 28x FY19’s estimated earnings.

National Storage REIT (ASX: NSR)

National Storage is Australia and New Zealand’s largest self-storage provider. Many investors want to boost their income whilst still getting exposure to property. I think real estate investment trusts (REITs) are a good way to do that, but several REIT sectors like shopping centres and office buildings face structural headwinds.

Being the biggest means National Storage has the best economies of scale, so it can offer a lower price or achieve higher margins compared to its competitors.

It’s currently trading with a trailing distribution yield of 5.99%.

National Veterinary Care Ltd (ASX: NVL)

National Vet Care is one of my favourite small cap stocks. It operates in the defensive industry of veterinary practices, yet is growing earnings at a strong rate thanks to its acquisition strategy of adding more vet clinics to its network.

It has a goal of adding five or six clinics a year, but it’s currently adding clinics faster than that. The company has started paying a dividend too, meaning it could be a good option for growth and income over the next few years.

It’s currently trading at 18x FY17’s earnings.

Foolish takeaway

I think all four shares are good ways to diversify your portfolio and I’d be happy to buy all four at the current prices. If I had to choose one, it would be National Vet Care because of its recent share price decline.

Want even more diversification ideas? I also own this top stock in my portfolio, which is a leader in the auto industry.

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tristan Harrison owns shares of NATVETCARE FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. The Motley Fool Australia has recommended National Storage REIT. 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.

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.