Getting diversification right for your ASX portfolio is one of the best ways to deliver strong returns. Diversification can mean spreading your investments across industries and geographies.
It’s a good idea to expand your portfolio into companies that operate in different industries. If you invest like everyone else, then you’ll get similar results.
Here are three ASX shares that I think would help diversify a portfolio:
Bapcor Ltd (ASX: BAP)
Bapcor is Australia and New Zealand’s largest auto parts business. I’m sure you have heard of two of its national networks: Burson and Autobarn.
I like that Bapcor may be able to offer us a defensive earnings profile. In leaner times people will put off buying a new car, if an important part breaks it’s cheaper just to replace that part. Bapcor’s earnings could grow in a downturn.
Bapcor has impressively increased same store sales, the number of stores and profit margins in recent years, boosting profit significantly. Expanding into Asian could be an excellent move.
Collins Foods Ltd (ASX: CKF)
Collins Foods is one of Australia’s leading fast food businesses. It operates a large number of KFC restaurants in several Australian states. This provides a steady level of earnings, with management acquiring a few extra Australian KFCs a year.
It has two major growth avenues. It is starting to acquire KFCs in Europe, which gives Collins Foods a much bigger growth runway than Australia. It also has plans to open dozens of Taco Bells in Australia as well.
This strategy won’t deliver huge growth in any given year, but it could lead to slow-and-steady growth of profit and the dividend for years to come.
UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP)
This is an exchange-traded fund (ETF) that invests in 50 of the largest businesses in Asia. You get exposure to technology businesses, banks, telcos and other sectors. Power often keeps going to the top, so the best shares to own over the long-term may just be the biggest ones.
Asia is going through enormous change and its businesses are some of the biggest beneficiaries. Some of this ETF’s top holdings includes Tencent, Alibaba and Samsung.
These three shares are very different to the typical ASX shares that are held by most investors. At the current prices I’d be happy to buy shares of each of them. But, I can understand if you think there are even better investments out there than Collins Foods’ KFCs.
Motley Fool contributor Tristan Harrison owns shares of Bapcor. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia has recommended Collins Foods Limited. 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.