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Extended jobkeeper: Which ASX shares to buy?

The government announced this week that the jobkeeper program will be extended until 28 March 2021. Obviously this has potential ramifications for ASX shares.

At the moment eligible employees and sole traders are getting $1,500 a fortnight. There was a concern that the country faced a financial cliff at the end of September 2020 when support was scheduled to end.

The government said it will pay $1,200 per fortnight from 28 September 2020 to 2 January 2021 and then $1,000 per fortnight from 4 January 2021 to 28 March 2021. However, employees that work(ed) less than 20 hours a week on average will get $750 per fortnight for the first period and $650 per fortnight for the second period.

But which ASX shares are worth buying in response to this?

Well, first you should consider whether the trends in March and April will continue over the rest of the year and into the first quarter of 2021.

There have been plenty of ASX retailers that have seen large growth in the past few months. I’ll give you some examples:

Shares to think about

JB Hi-Fi Limited (ASX: JBH) said that JB Hi-Fi Australia and The Good Guys has seen sales growth of 20% and 23.5% in the second half of FY20. It’s expecting net profit growth of 20% to 22% in FY20. Perhaps JB Hi-Fi will continue to see high demand for its products.

Adairs Ltd (ASX: ADH) revealed that its like for like sales growth in the second half of FY20 was more than 27% with online sales growth of 92.6%. Maybe people will continue to spend on their home furnishings.

Nick Scali Limited (ASX: NCK) said that its written sales order growth was 20.4% in the fourth quarter of FY20. The second half profit is expected to be up 15% to 20% compared to the prior corresponding period. It’s possible that households will continue to spend on higher end furniture.

There are numerous other names like Wesfarmers Ltd (ASX: WES), Beacon Lighting Group Ltd (ASX: BLX) and Temple & Webster Group Ltd (ASX: TPW) which have seen impressive growth over the last few months.

I think the announcement of jobkeeper’s extension is good news for the ASX shares I’ve named. Though some of them like JB Hi-Fi are probably priced with strong performance in mind.

What about banks?

A more interesting question will be for businesses like construction and banks. More jobkeeper money is an indirect benefit for shares like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ). However, the spread of the virus and new lockdowns is obviously a bad thing for the Victorian economy. Indeed, it’s bad for the whole country. 

There’s a reason why the OECD warned that the Australian economy would shrink 6.3% in 2020 if there was a return of widespread contagion and a return of lockdowns – only Victoria is being materially affected at the moment.

One of my favourite share ideas on the ASX

Brickworks Limited (ASX: BKW) is one of my favourite ideas to invest for the recovery of the economy.

Firstly, it owns a growing industrial property trust along with Goodman Group (ASX: GMG). The trust is pivoting towards the growth of ecommerce with the construction of two large distribution centres in Sydney for Amazon and Coles Group Limited (ASX: COL). Whether COVID-19 stays or (hopefully) goes away, the trust should see growing rent and a rising valuation over the next couple of years.

Brickworks also owns a large amount of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares. The investment conglomerate offers defensive earnings with ASX share holdings like TPG Telecom Ltd (ASX: TPG) and Clover Corporation Limited (ASX: CLV).

I think Brickworks is positioned defensively if things get worse. If the economy improves then hopefully its building product divisions start to see more activity as well. Construction is a somewhat cyclical sector. I strongly believe the best time to buy shares of construction businesses is when sentiment is low.

I believe Brickworks, at the current share price, could be the best ASX share to ride through the next 12 months. Whether things get better or worse.

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Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Clover Limited and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool Australia has recommended Temple & Webster Group 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.

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