Australia is one of the richest countries in the world. However, diversification is not utilised by a lot of ASX 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 three ideas to do that:
National Storage REIT (ASX: NSR)
If you still want to be invested in the property market then National Storage could be the best way to do it.
It’s the largest self-storage business in Australia and New Zealand. Many of the ASX’s real estate investment trusts (REITs) have improved the land they sit on with office buildings or shopping centres. National Storage has low-value buildings where people are just renting space. Therefore, as land values rise, National Storage should be one of the better beneficiaries in the REIT space.
Over the long-term land in cities and towns should become increasingly valuable with growing city populations.
National Storage has grown its operating earnings consistently by balancing occupancy and rental charges.
It’s currently trading with a distribution yield of 5.5%.
Tassal Group Limited (ASX: TGR)
Tassal is an interesting idea because it’s Australia’s largest fish business with major salmon operations and its recently-added prawn acquisition.
The company has recently been given approval for expansion at Storm Bay, which will produce a total of 8,000 to 16,000 tonnes of salmon.
Tassal has pointed out that with a growing population and limited arable land, more of our food will depend on coming from sustainable sources in the ocean. Demand for salmon is increasing in Australia by 10% per annum.
It’s currently trading at 13x FY19’s estimated earnings with a grossed-up dividend yield of 5.5%.
Japara Healthcare Ltd (ASX: JHC)
This is one of Australia’s largest aged care businesses. Its share price has been truly pummelled by the prospect of an aged care Royal Commission. Indeed, its share price has nearly halved over the past year.
However, there is a decent possibility that the sell-off has been overdone. Japara is known in the industry as providing higher levels of care than a typical aged care facility, so it may not be affected as much as its competitors – indeed it could be a net long-term beneficiary if it’s able to consolidate some of the smaller operators because many of them are trading at a loss.
It has a significant number, over 1,000, of new beds becoming operational by the first half of FY22.
Japara is trading at under 13x FY18’s earnings and it has a property portfolio with a conservative book value of $532 million with a $156 million book value of developments. Over the long-term the current share price may (finally) appear cheap.
Whilst I’m not looking to expand the number of names in my portfolio, if I were I’d be quite interested in Tassal at the current price – however it does come with a wipe-out risk of disease which could devastate profit in the short-term.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
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Motley Fool contributor Tristan Harrison owns shares of JAPARA DEF SET. 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.
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