Australia is one of the richest countries in the world. However, diversification is not utilised by a lot of ASX investors. Most people have a lot of their wealth tied up in one or a handful of properties plus bank shares. Arguably, the bank shares are also heavily linked to the property market.
Therefore, I think it’s very important for every investor to diversify away from these two areas.
Here are three ideas to do that:
Collins Foods Ltd (ASX: CKF)
Collins Foods is a large franchisee of KFC restaurants across Australia and Europe. It is also opening Taco Bells in Queensland, with growing Sizzler Asia royalty revenue.
Taco Bell could be another growth engine for the company with restaurants soon to be opened in Victoria. Management have predicted around 20 Taco Bells being opened by the end of the 2020 calendar year.
In the recent half year result it announced underlying profit growth of 9.1% with a 5.6% increase to the dividend. Its earnings are pretty defensive and it can keep growing revenue by just opening more stores in Australia and Europe.
Bapcor Ltd (ASX: BAP)
Bapcor is the largest auto business in Australia and New Zealand. The biggest driver of profit is Burson which continues to see sales grow each year. Bapcor is expanding Burson into Thailand which is now operating five stores in the Bangkok district.
Another reason to like Bapcor is that it’s diversifying its own earnings by acquiring truck part businesses. Trucks are an important part of vehicles on the road, so it makes a lot of sense for Bapcor to expand into this area.
Management are expecting another year of net profit growth of at least mid-single digits.
Future Generation Global Invstmnt Co Ltd (ASX: FGG)
This is a listed investment company (LIC) with a difference. It invests in Australian fund managers who are invested in overseas shares who provide their services for free so that Future Generation global can donate 1% of its net assets per annum to charities focused on youth mental health charities.
Each underlying fund manager will have their own portfolio, so this LIC offers excellent diversification.
Whilst this LIC doesn’t have a big dividend yield, it recently announced in its monthly update that it’s trading at a 13.7% discount to the net assets.
I think all three of these shares are trading at attractive prices and could beat the market. At the current prices I’d probably go for Future Generation Global first because of the large discount and underlying diversification of owning many quality global shares rather than just one share.
However, these top ASX shares could be even better picks than Future Generation Global.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.