I think that there are plenty of opportunities in the S&P/ASX 200 Index (ASX: XJO) right now.
But I’m not referring to shares like Commonwealth Bank of Australia (ASX: CBA) or BHP Group Ltd (ASX: BHP). I don’t think that financial or resource businesses are going to produce strong long-term returns, and I believe it’s far too early to be thinking about typically-cyclical shares right now.
Here are three ASX 200 shares that I think are great buying opportunities now:
REA Group Limited (ASX: REA)
Real estate sales have been disrupted just like most other industries which rely on a physical element to the service. Most people prefer being to able to walk through a property before choosing to buy it. And there aren’t many property buyers with how much uncertainty there is about the economy right now.
The REA Group share price has fallen 30% since the coronavirus declines started. All of the digital infrastructure is still there though. Realestate.com.au is still the prime piece of digital real estate for selling a property. It still has good profit margins.
The economy is currently on pause but REA Group is well placed to service property sellers and buyers as soon as things go back to normal in Australia.
It’s currently trading at 26x FY22’s estimated earnings and I think it’s a long-term buy today.
Brickworks Limited (ASX: BKW)
There are few businesses on the ASX that have displayed as much reliability or long-term strength as Brickworks. This is on display with its dividend which has been grown or maintained every year for over four decades.
The building products divisions in Australia and US are obviously going to be impacted by the coronavirus in the short-term. But it won’t be forever. Indeed, some construction work is still continuing with acceptable social distancing.
Until the economy returns to normal, how can Brickworks provide returns for shareholders? Well there’s an answer at this low share price. Its ‘investments’ and industrial property trust division can provide reliable earnings and income to Brickworks. Indeed, the value of those underlying assets backs up Brickworks’ entire market capitalisation. The building products segments are just a bonus.
Brickworks currently has a grossed-up dividend yield of 6.25% and I think it’s a long-term buy today.
Webjet Limited (ASX: WEB)
Webjet has undoubtedly been one of the hardest hit shares in the entire ASX 200 during this. The deterioration has been horrific and rapid for travel.
But it has now done a capital raising (at a very cheap price) to see it through to the end of the year, even if conditions remain extremely difficult.
Webjet was one of the market leaders of travel before the coronavirus came along. The recovery may take longer than some people expect, but after another fall of 9% today I think the valuation looks very compelling in most potential outcomes.
If Australia can get the coronavirus under control within its own borders then Webjet could start to see a pleasing recovery.
This is obviously a higher-risk idea than the other two shares with all the uncertainty. But with the share price down so heavily over the past two months, I think Webjet could be a potential high-reward idea with a 3-year outlook.
All three of these shares look like very good medium-to-long-term opportunities in my opinion. I’m most attracted to Brickworks because I think it’s the easiest to value in this environment. But REA Group and Webjet could be excellent long-term buys at today’s prices, assuming the coronavirus doesn’t hang around for too long (and there may be more volatility to come).
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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 Webjet Ltd. The Motley Fool Australia has recommended Brickworks and REA Group 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.