It may no longer be Christmas in July, but if you need to buy a gift for a loved one, why not buy them some S&P/ASX 200 Index (ASX: XJO) shares. It’s a gift that can pique interest in investing for beginners or be highly valued by the investment nerd in your life.
With the ASX 200 still down around 17% since 20 February, now could be the perfect time to gift this top retail ASX 200 share to your friends or family members.
Wesfarmers Ltd (ASX: WES) – The retail conglomerate
Wesfarmers may have multiple subsidiaries in diverse sectors such as industrials and chemicals, but for the most part, the business is driven by a host of top retails brands like Bunnings, Officeworks and Kmart.
The Wesfarmers share price has beaten the market since the February highs, sitting nearly flat at $46.20 at the time of writing. I think that the Wesfarmers share price can continue to be a market beater over the long term due to management’s strong track record of efficient capital allocation.
Capital allocation is key
As a conglomerate, Wesfarmers buys, holds and sells businesses based on its own, in-house investment analysis. Given the current climate, the most notable example of a recent Wesfarmers acquisition is catch.com.au. Although no-one could have foreseen COVID-19 and the acceleration of eCommerce, Wesfarmers identified a growing trend and moved into the online-only retail market. I think this is a smart hedge against the company’s current bricks-and-mortar retail operations and also provides some synergies and cross-selling opportunities with its other brands.
What to watch in full year earnings
I also expect continued strength from the Bunnings group, when Wesfarmers releases its 2020 full year results on 20 August 2020. Bunnings has been a significant driver of both revenue and profit growth over a number of years. With lockdowns across the country, I expect the number of DIY projects to have risen, providing strong demand for Bunnings products.
Wesfarmers share price valuation
The Wesfarmers share price currently trades on a trailing price-to-earning (P/E) ratio of around 24 x earnings and a dividend yield of 3.3% or 4.7% grossed-up for franking credits.
I think this is a fair price to pay for investors looking for a stable, long-term dividend payer. Over the last 20 years, Wesfarmers has produced an annualised total return of 10.7% per annum.
Foolish bottom line
With so much bad news in the world, and social restrictions back in place in some states, share some cheer with your friends and family by buying them this quality retail ASX 200 share.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Lloyd Prout has no position in any of the stocks mentioned and expresses his own opinion. The Motley Fool Australia owns shares of Wesfarmers 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.