In a world of exchange-traded funds (ETFs) and easy-to-access information on the internet, we need to invest well to beat the market.
Not every investment is going to work well, sometimes you need to take risks. But it only takes one or two investments to go really well to substantially outperform the market average.
That’s why I would invest $10,000 in these ASX shares:
Webjet Limited (ASX: WEB) – $2,000
Sometimes the best time to buy shares is when they look riskier, like in 2016 with many resource shares.
Webjet’s FY20 earnings are going to take a Thomas Cook hit, but FY21 and beyond looks promising – particularly if you can look beyond short-term cyclical economic worries. Leisure and corporate travel are both expected to grow strongly into the future and Webjet benefits from both sectors.
Management think the Webjet earnings before interest, tax, depreciation and amortisation (EBITDA) margin can keep growing. Webjet seems like a business that will strongly benefit from increasing economies of scale.
It’s currently trading at 12x FY21’s estimated earnings.
A2 Milk Company Ltd (ASX: A2M) – $3,000
A2 Milk has excellent brand power. It’s quite an achievement to turn basic products into a luxury brand, which is why Chinese customers are willing to pay so much for the tinned gold.
One of the best things about A2 Milk is its international growth. There are few consumer shares on the ASX that offer a growth story in the huge markets of the US and China.
FY20’s net profit growth is probably not going to be as high as some investors were hoping for, but there’s still plenty of potential growth with most of Asia, Europe and Canada to sell into in the coming years.
A2 Milk is trading at 25x FY21’s estimated earnings.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – $3,000
Soul Patts is my favourite conservative investment idea because of its diversified underlying portfolio, long-term focus and contrarian approach.
It has a track record of outperforming the ASX index and I think the current share price, which is 20% lower than a year ago, is attractive to buy right now.
Long-term capital growth combined with a growing dividend from Soul Patts could be too good to pass up.
Soul Patts is currently trading with a grossed-up dividend yield of 3.7%.
Rural Funds Group (ASX: RFF) – $2,000
The Rural Funds share price is recovering, but it’s still only trading at around its net asset value (NAV) per unit.
But compared to the rest of the real restate investment trust (REIT) sector, I think Rural Funds looks cheap because most other REITs are valued at a significant premium to their balance sheet valuations.
Rural Funds aims to increase its distribution by 4% per year, which it has been successful at doing so far in its listed life.
It currently offers a FY20 distribution yield of 6%.
I think all four of these shares look like good opportunities at the moment, particularly in light of the low interest rates. Soul Patts is my favourite long-term pick, but Webjet could be the strongest performer over the next three years if its earnings rebound strongly in FY21.
These 3 stocks could be the next big movers in 2020
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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Webjet Ltd. 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.