In this article I’m going to look at where I’d invest $10,000 if I were lucky enough to be given that amount of money.
I’m going to choose three ASX shares: a LIC, an ETF and a value share.
Here are my three ASX picks to invest $10,000 into:
NAOS Small Cap Opportunities Company Ltd (ASX: NSC) – $3,500
At 31 December 2018 this Naos LIC was trading at a 10% discount to its pre-tax net tangible assets (NTA) per share. I like to think of the 10% discount (or more) as a gauge of whether to buy LICs to account for the expensive management fees.
This Naos LIC targets ASX shares with market capitalisations between $100 million and $1 billion, which is a good range of shares that aren’t tiny but have plenty of room to grow.
Despite a tough first year, this reporting season could be the time where Naos’ high-conviction holdings could start outperforming. For example, MNF Group Ltd (ASX: MNF), Consolidated Operations Group Ltd (ASX: COG) and Over The Wire Holdings Ltd (ASX: OTW) are all predicted to unveil profit growth in the short-term.
It also comes with a grossed-up dividend yield of 11%, which is very attractive if the dividend can be maintained or grown over the next couple of years.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) $3,000
An ETF obviously trades at its asset value, so there’s no easy discount to be found here. However, Asian share values have been trashed over the past year because of the ongoing trade war between the US and China. Both countries are making signals about wanting to get a deal done, which could give a quick valuation boost.
The MSCI is also including more Asian shares into its indexes – more buyers of Asian businesses should lead to higher prices.
According to Vanguard, this Asian ETF is trading with a price/earnings ratio of 11, it has an earnings growth rate of 10.7% and a return on equity (ROE) ratio of 15.8%. Those are all attractive metrics to me.
As a bonus, it has a dividend yield of 2.9%.
Paragon Care Ltd (ASX: PGC) – $3,500
Paragon Care is one of my favourite value shares at the moment. It’s trading at less than 9x FY19’s estimated earnings.
It has been hard to get a real gauge on Paragon’s true underlying business with all of the acquisitions and capital raisings over the past couple of years. But, it has been growing pro-forma earnings each year as well as the dividend.
Fairly high levels of debt are a concern, but the good level of organic revenue growth, the ageing demographic tailwinds and online purchasing platform for clients makes the valuation seem attractive in my opinion.
It currently has a trailing grossed-up dividend yield of 7.4%.
Each of these ASX shares are trading at better value than a year ago and I think each of them has pleasing investment attributes. The Naos LIC and Paragon also offer very good dividend yields, they could be good picks for income investors.
Motley Fool contributor Tristan Harrison owns shares of NAO SMLCAP FPO, Paragon Care Limited, and VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended Paragon Care 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.