I’m always on the lookout for ways to diversify my portfolio whilst maintaining strong returns. If you can mitigate risk whilst also beating the market then that’s a powerful combination.
Diversification usually means investing into different industries and perhaps businesses that offer geographical diversification away from Australia.
Here are three shares that I think would offer good diversification:
Domain Holdings Australia Limited (ASX: DHG)
Domain is the owner of the second most popular property website in Australia, Domain.com.au. Being the second most popular website owner means it attracts a lot of property vendors, which in turns attracts a lot of property buyers. This gives it a strong economic moat.
The company is attractive to younger property seekers because it has the best property app, which suits ‘millennials’. Domain is a good way to get exposure to the property market.
It’s currently trading at a bit lower valuation than its rival at 37x FY18’s estimated earnings.
National Veterinary Care Ltd (ASX: NVL)
National Veterinary Care is the second largest veterinary operator in Australia and New Zealand. It will have 67 clinics at the end of July and is registering decent organic growth, it revealed today that it has achieved like for like organic revenue growth of just over 3% in the year to date.
The company can still acquire a lot more clinics due to how fragmented the veterinary industry is. It could easily double to 130 clinics over the next few years, or more. It’s expecting revenue growth of at least 25% this year.
It’s currently trading at around 23x FY18’s estimated earnings.
Gateway Lifestyle Group (ASX: GTY)
Gateway is one of the country’s largest retirement village operators. There is an ageing tailwind in Australia that should lead to increase demand for Gateway’s growing number of homes.
I like that Gateway has much more reasonable and sustainable fees than its competitors. It should be able to generate long-term growth as it increases its rental income. The residents get rental assistance and, with the pension, it only takes up 20% of their total government assistance, which is a healthy level of their budget.
It’s currently trading with a distribution yield of 5.2%.
I like all three shares but I currently only own shares of National Vet Care. I’m interested in adding shares of Gateway, however property prices are declining and interest rates are rising – which mean it might be better to wait a year or two to buy.
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Motley Fool contributor Tristan Harrison owns shares of NATVETCARE FPO. 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 Scott Phillips.