I’m always on the lookout for ways to diversify my portfolio with ASX shares 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:
Goodman Group (ASX: GMG)
Goodman is one of the largest property businesses on the ASX. It develops, owns and operates industrial and commercial properties all over the world.
It has warehouses, large logistics facilities and business & office parks. It’s quite likely that there is a Goodman site near to where you live if you’re in a major city.
Distribution and logistics facilities are very important in today’s technological world, particularly with e-commerce. Amazon and many of Goodman’s tenants are there for the long-term, it has a very high quality list of tenants at its facilities.
Goodman has grown its operating earnings by an impressive high single-digit amount each year.
It’s currently trading at 22x FY19’s estimated earnings with a distribution yield of 2.6%.
Auckland International Airport Ltd (ASX: AIA)
The key international airport gateway to travel to New Zealand, Auckland Airport, is operated by this high-quality business.
Every month it reports of more international passengers travelling through its terminal compared to last year. In September 2018 it revealed that international passengers grew by 6.4% and total passengers grew by 7.3%.
Westerners in their golden years and Asians want to explore the country with majestic scenery in bigger numbers every year.
However, it’s valued at a high price, it’s trading at 31x FY19’s estimated earnings with a dividend yield of 3%.
Apiam Animal Health Ltd (ASX: AHX)
This small cap vet operator has suffered from the de-rating of the other major veterinary clinic operators on the ASX.
However, it’s a fairly different business with a lot of its earnings relating to livestock in regional areas. The only comparable clinic earnings it generates is locations in regional cities. For example it is setting up vet clinics inside regional Petstocks – one recent location addition is in Bendigo.
It won’t shoot the lights out but, with Australia’s growing agricultural export industry and its expanding network of clinics, it could be trading at attractive value at 9x FY19’s estimated earnings with a grossed-up dividend yield of 4.4%.
I think all three of these businesses are good quality and could form part of a diversified portfolio. At the current prices Goodman and Auckland Airport don’t look cheap, I’d much rather buy shares of Apiam.
Some other shares that would be good ways of diversifying your portfolio are these reliable ASX shares that keep increasing their dividend every year.
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Motley Fool contributor Tristan Harrison owns shares of Apiam Animal Health Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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.