Here are 2 ASX stocks that have flown under the radar in 2019 and look set to deliver again in 2020. Both companies could be excellent additions for investors looking to balance their portfolio with exposure to growth and defensive areas.
Baby Bunting Group Ltd (ASX: BBN)
Baby Bunting Group is a retailer with a network of 50 stores across Australia, specialising in baby and toddler products. The company’s share price has rocketed in 2019, fuelled by strong full-year results and currently trading at 52-week highs.
Baby Bunting smashed market expectations when the company reported results for FY19. The company reported a 37.4% increase in EBITDA, a 43.3% lift in net profit and a 21% jump in total sales. In a struggling retail environment, the company’s strong sales performance was driven by new and improved product range and better import arrangements with suppliers.
Baby Bunting has been able to dominate competitors with a 12% share of the domestic baby goods market which is worth $2.4 billion. As a result, 4 of the company’s competitors which include Babies “R” US and Baby Bounce have gone into administration. Analysts expect the company to continue its growth and capture 30% of total sales from defunct retailers. Baby Bunting also intends to increase its store count from 50 to 80, with 6 new stores opening in FY19.
ASX Ltd (ASX: ASX)
ASX Ltd has been a quiet achiever in 2019 with the market operator’s share price surging more than 38% for the year. The ASX continues to be a favourite among investors for its defensive revenue streams and strong dividend yield.
Earlier this year ASX Ltd reported a 5% increase in operating revenue when it presented earnings for FY19. The ASX also achieved a 3.5% increase in EBITDA and a 5.7% lift in net profit after tax in comparison to the year prior. The company cited that the strong performance was driven by an increase in listings and higher initial capital risings. In addition, growth in trading services and stronger derivatives and OTC markets contributed to the result.
ASX shares are a favourite among income investors for its defensive earnings potential. Interest and dividends are an important source of income for the company and this segment rose by 25.7% for FY19. Shareholders were also rewarded with a special dividend of 129.1 cents in 2019 following the company’s sale of its stake in Iress Ltd (ASX: IRE).
I think that both Baby Bunting and ASX Ltd have had a great run in 2019 and could offer investors more in 2020.
Baby Bunting looks to have great potential for growth, with the company well poised to dominate the baby goods market. However, concerns of the retail environment could cast doubt among investors who are looking for a more stable sector. ASX, on the other hand, is a great defensive alternative, with a monopoly-like business model and proven earnings record.
Both companies could complement each other by giving investors exposure to both income and growth. The most prudent strategy would be to put both companies on a watchlist and wait for suitable entry points.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has recommended IRESS 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.