Change is afoot.
In fact, change is sprinting at a pace Australians have rarely seen before.
While rapid change can be disconcerting, it also opens the doors to a myriad of new ASX investment opportunities.
That's not to say you should junk your existing investments. Far from it. Though it's worth reviewing your share holdings every few months to make sure they're still aligned with your original investment goals.
With a rapidly changing share market, it can also be tempting to try to time your entries and exits.
Hold onto the shares you're happy with
But as Perpetual's Thomas Rice explains, for most people — including himself — attempting to time the market is a mistake.
Rice manages the Perpetual Global Innovation Share Fund, which has returned 27.7% net of fees for the three years to 30 September, including dividends.
When it comes to trying to time the share market's rapid decline and rebound, Rice says (as quoted by the Australian Financial Review (AFR)):
The recovery was a lot faster than I expected, but that kind of shows why I don't try to time the market because I think I'd do a worse job. There are very few people that time the decline – and the recovery. So for me it's all about keeping fully invested, but making sure I'm happy to own everything I own at current prices.
So if he doesn't jump in and out of shares trying to time the highs and lows, how has his fund managed such market thrashing returns? Rice says:
Everything that actually matters in investing is in the future. Any stock is going to be based on its future cash flows. It's not observable. It's entirely theoretical. So it's all about coming up with theories about how businesses develop, what creates a competitive advantage and why it's not competed away.
Getting a grip on what the future is likely to look like, and which shares are likely to see their cash flows ramp up, isn't always straightforward. And, of course, there are no guarantees things will play out as forecast.
But when you get it right, the returns can be highly rewarding.
A $50 billion niche market
One area that's rapidly evolving in Australia is the banking space.
As the big banks tighten their lending to higher risk assets, this is opening up new opportunities for some smaller players in the commercial real estate debt markets.
According to consultancy Plan1 co-founder Richard Jenkins (quoted by the AFR):
I expect that the four major Australian banks will continue to reweight their commercial real estate debt portfolios in the wake of the pandemic and lower their exposure to the tourism and retail sectors in coming years… They will focus on funding prime assets at low-leverage levels given the impending increased capital requirements to be implemented by APRA.
Jenkins expects non-bank lenders' share of commercial real estate lending will balloon to more than $50 billion by 2024.
In case you're not familiar, non-banks function similarly to traditional banks, providing real estate and car loans at competitive rates. However, they do not take deposits and they're not held to the same capital requirements as traditional banks like Westpac Banking Corp (ASX: WBC) or Commonwealth Bank of Australia (ASX: CBA).
If you're looking for a loan outside of the traditional banks, there are a number of non-banks to choose from. However, many of these are private companies.
If you're looking to own shares in one of the non-banks which could capture a growing slice of Australia's commercial real estate loan market, I suggest you investigate Resimac Group Ltd (ASX: RMC).
Resimac has a market capitalisation of $599 million and has an annual dividend yield of 2.0%, fully franked. It operates in Australia and New Zealand, claiming a distribution network of more than 12,000 mortgage brokers.
The company had a stellar year in 2019, with the Resimac share price gaining 236% over 12 months.
Then COVID-19 angst rippled across the economy and share markets. The Resimac share price was hit particularly hard, falling a stomach churning 76% from 26 February through to 23 March.
The rebound, though, was even more spectacular. Investors lucky enough to have bought shares on 23 March would be sitting on a gain of 245% today (at the time of writing). That rebound sees the Resimac share price up 1.33% year to date.
The CBA share price, by comparison, is still down nearly 18% for the year. And the Westpac share price is down nearly 29%.
While the big banks are likely to see their share prices recover as new government stimulus measures roll through the economy, it's some of the smaller players, like Resimac, which could offer investors the biggest gains.
