In times of a bear market, you want to make sure you own the highest-quality shares that you can. The ASX is down again this morning.
The coronavirus is causing a lot of economic pain and it’s already a human tragedy.
It may take a while to get over this. It could take longer than some are expecting. It could also be quicker. It’s impossible to know what’s going to happen. The coronavirus is unpredictable. People’s behaviour is unpredictable. Government responses are unpredictable.
Just focus on business quality and the rest will take care of itself over time.
Here are two great ideas:
Magellan High Conviction Trust (ASX: MHH)
The highest-quality businesses in the world could be some of the best options to consider during this selloff.
This listed investment trust (LIT) only invests in around 10 names that it thinks are the absolute best global ideas. Some of those ideas are: Alibaba, Alphabet, Microsoft, Facebook and Visa.
These businesses have strong operating models, good profit margins and very attractive outlooks. Whilst some of them are likely to see an earnings hit in 2020, each business should still be able to make solid profits. Technology businesses are going to see less coronavirus disruption compared to industries like travel or retail.
A bonus is that these holdings in the portfolio have strong balance sheets. Which is precisely what you need to ride through this uncertainty.
It’s currently trading at a 7.5% discount to its underlying net asset value.
Altium Limited (ASX: ALU)
In terms of businesses listed on the ASX, I think Altium is one of the best. Indeed, I think it has it all.
It has a high earnings before interest, tax, depreciation and amortisation (EBITDA) margin. It has a solid cash total, with no debt, on its balance sheet. Its services are provided digitally because it’s a software business – Altium 365 is a cloud offering, perfect in this environment. It has great management. It has a long-term growth tailwind. It wants to pay a growing dividend.
At the time of writing it’s down 20% since 21 February 2020 and it’s down 36% since 17 February 2020. I think it looks attractive for a long-term buy today.
We won’t often get the chance to buy some of the best businesses at significantly lower prices. Don’t forget that interest rates in Australia and abroad are down to ultra-lows again – this makes shares even more attractive. I’d love to buy some shares today.
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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. 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.