Although the ASX has had a few wobbles over the last couple of weeks, many investors would have hit the panic button and sold out. While I do think that many stocks are looking expensive in the current market, I’m still bullish on Aussie shares in general and am keeping that old saying that “time in the market is better than timing the market” in mind.
Saying this, if I had a $10,000 lump sum to deploy on the ASX today, here’s how I would do it:
Magellan Financial Group Ltd (ASX: MFG) – $3,000
Magellan has impressed this year with massive funds under management (FUM) growth and the continuing outperformance of many of its investment funds. With a long and solid track record of market-beating returns, Magellan is fast cementing a reputation as the best fund managers in Australia and the announcement of the new ASX-listed High Conviction Trust is another tailwind for this company.
BHP Group Ltd (ASX: BHP) – $3,000
The BHP share price has come off the boil in a big way over the last month. After touching $42 in early July, you can now pick up BHP for around $37.20 a share, which I think is looking competitive. BHP is one of the best and lowest-cost mining companies in the world and has a diversified earnings base across coal, iron, oil and copper assets – meaning it is well placed to weather any price slumps in a single commodity. On current prices, BHP is offering a trailing dividend yield of 4.27%, which is an added bonus.
Xero Limited (ASX: XRO) – $3,000
Xero shares might look expensive, but the success this software-as-a-service (SaaS) company has had scaling its product gives it a phenomenal growth runway on which it has only just started down. Xero can boast subscriber growth of 31% year-on-year from its most recent report, and revenue growth of 32% as well. On numbers like these, I am confident Xero can continue to knock it out of the park and be one of the best businesses to own for the next decade at least.
Cash – $1,000
It’s always prudent to keep some cash around for that rainy day – after all you, don’t want to be caught with your proverbial trousers down if there is a market crash and shares are on the cheap.
Warren Buffett always says that you shouldn’t own a share for 10 minutes unless you don’t plan on selling it for ten years. I would be very comfortable owning these three shares for the next decade and beyond. Prices are high at the moment, but cash won’t do you any good, so you might as well go with the best companies you can find.
5 stocks under $5
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*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. 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.