October is going to be an interesting month on the ASX. Anyone wondering which shares to buy now will need to consider a few things.
First, the Government is starting to wind back wage subsidies, insolvency laws, and tenancy protections. Second, laws are changing in relation to helping companies trade out of bankruptcy, and reducing responsible lending constraints. Third, Victoria is starting to emerge from lockdown and state borders are slowly reopening.
Personally, I think the best shares to buy now is a mix of under priced value shares, as well as a number of high opportunity growth shares.
Values shares to buy now
My preference in volatile markets is to try to find good companies, selling at a bargain price, and then hold them as the price increases. This reduces the risk of losing money. I would spend $7,500 in equal parts on the three ASX shares below.
Stockland Corporation Ltd (ASX: SGP) has been oversold during the year due to impacts from the coronavirus lockdown. I think it is cheap right now and also has a trailing 12-month (TTM) dividend yield of 6.24%. Stockland has a development pipeline of 76,000 lots of residential real estate. It estimates this has an end market value of $21.4 billion.
Resimac Group Ltd (ASX: RMC) is a small cap non-bank lender worth around $600 million. While this lender definitely has medium term growth potential, I think it will be consistent and conservative. The company saw its share price rise by an average of 10.3% per year from 2010 to 2020. At this rate you will double your original investment within 7 years. Resimac will be a beneficiary of any loosening of lending criteria.
Boral Limited (ASX: BLD) saw its share price leap up by 5.83% on Monday. The company has been performing very badly over the past several years. However, under new management there are strong signs of a turnaround, making this a great share to buy now. Boral is selling at a high price to earnings (P/E) ratio due entirely to impacts from the pandemic lockdown.
The company has a new CEO and is working through a review of all elements of the business. It also counts Kerry Stokes' company, Seven Group Holdings Ltd (ASX: SVW) as a substantial shareholder, recently taking two board seats at Boral.
Growth shares
There is an art to selecting which growth shares to buy now. First, they need to be solid companies with a proven business model. Second, there needs to be a large and growing addressable market. Third, and most importantly, the company needs to have solid barriers to entry, or a moat as Warren Buffet calls it. My preferred moat is intellectual property.
A company that meets all of these criteria, in my view, is DroneShield Ltd (ASX: DRO). The company manufactures non-ballistic weapons for detecting and disabling drones. It has clients in the defence forces and airports globally. Major customers include the Australian Defence Forces and the US Department of Defence. In addition, the company has announced a string of new contracts. Most of which will lead to additional work.
The DroneShield share price has risen by 50% in the past month. I think this is a good share to buy now before it gets much more expensive. I would invest $2,500 directly into shares of this growth company.
