These niche ASX real estate shares have been labelled resilient, essential, valuable, and profitable. Now investors are taking note.
The post Extreme levels of demand AND future growth prospects. Are you invested in these niche ASX shares? appeared first on Motley Fool Australia. –
ASX technology, e-commerce and biotech shares have dominated the financial headlines in the wake of the global pandemic. And for good reason.
With demand for their goods and services soaring as people work, shop and socialise from home – and with the world holding its breath for a COVID vaccine– the well-placed companies in these industries have seen their share prices soar.
But there’s been another, more subtle shift happening that’s drawn far less media attention.
The pandemic, and subsequent lockdowns and social distancing, exposed unforeseen weaknesses in brick and mortar retailers and office towers. This continues to put pressure on the share prices of these businesses, and their landlords.
The call of the outback
Primewest Group Ltd (ASX: PWG) holds assets in both of these sectors, as well as industrial and tourist facilities.
But in June 2020, Primewest expanded its reach when it acquired the asset management of Vitalharvest Freehold Trust (ASX: VTH). The Australian real estate investment trust (REIT) offers investors exposure to Australian agricultural property assets. It owns Australia’s largest collection of berry and citrus farms, 100% leased to Costa Group Holdings Ltd (ASX: CGC).
Year to date, the Vitalharvest share price is up 2% and the Costa Group share price is up 46%. That compares to a 6% loss for the All Ordinaries Index (ASX: XAO).
As the Australian Financial Review (AFR) reports, Primewest Managing Director, David Schwartz, is bullish on Australia’s agricultural outlook, saying:
People are worried about COVID and its impact on office and retail property, and who will come back into these properties, but everyone has to eat… We are finding there is plenty of appetite for the right farms. Investors have been a little hesitant to take on the farming risk. But you can eliminate that risk with water rights or access to water. We invest in properties where that risk is reduced.
Steve Jarrott, portfolio manager of Warakirri’s diversified agricultural fund is equally optimistic:
In our view, an increasing global demand for food, particularly in Asia, provides an opportunity for Australian agriculture to capitalise on its competitive advantages and future growth prospects… The pandemic has shone a greater spotlight on the ag industry, highlighting the fact that ag is a resilient, essential service/industry and a valuable, profitable asset class.
Then there’s Elders Ltd (ASX: ELD), which the AFR notes has sold more than $1 billion worth of farmland for four years running.
According to Tom Russo, general manager for real estate at Elders:
In the farmland space, we are continuing to witness extreme levels of demand on the buy side during a period where listings are constrained. We may well see some commodity price volatility as a result of COVID-19 impacts and international trade issues. However my observation is that investors continue to remain confident in the strong long-term fundamentals of farmland investment.
The Elders share price fell less than 12% during the COVID market panic. Year to date, it’s up a remarkable 78%.
We’ll round the list off with Rural Funds Group (ASX: RFF), which owns a diversified portfolio of quality Australian agricultural assets including cattle ranches and macadamia farms.
Rural Funds has a great history of long-term share price growth going back to 2014. Year to date, the Rural Funds share price is up 23%.
No matter your ASX investment choices, remember…
Whether you’re investing in the growth story of ASX technology shares, the rebound of beaten down travel and leisure shares, or straightforward index tracking exchange-traded funds (ETFs), remember, ‘time in the market beats timing the market.’
Yes, it’s a cliché.
And yes, you’ll hear the odd story of the fund manager who shorted the market on 21 February before going long on 23 March. But that kind of successful market timing is the extreme exception to the rule. And, to my knowledge, one that nobody has ever repeated consistently over the long haul.
Many investors trying to time market cycles earlier this year, for example, would have held on until share prices dropped 20% or more before selling. And then they would have sat on the sidelines and waited until share prices had rebounded 10% before buying back in. In other words, losing money even as they lost sleep.
If you’ve paid off any high interest debts, earn a sustainable income and have at least three months of emergency cash set aside (depending on your individual circumstances), history shows you’re almost always better off holding on tight through the dips and peaks rather than trying to jump in and out of your share holdings. Assuming, of course, that your investment horizon is at least five years.
A question of when, not if
It’s the same story with the multi-trillion-dollar fiscal stimulus package still being debated in the United States.
Lindsey Bell is the chief investment strategist at Ally Invest, based in North Carolina. Discussing recent share price moves she said (as quoted by the AFR):
This has been a stimulus-driven market for several weeks – today is more evidence of that. The market believes we are getting a stimulus. But it wants to know when it’s going to pass because it’s going to take time for the money to flow out.
Bell’s assessment of the market is spot on.
For me, the real takeaway here is that she points out investors believe stimulus is coming but they want to know when the spending package is going to pass. Why? Because they’re hoping to time their entries and exits with the idea of maximising their gains. An endeavour the majority will likely fail at.
As I’ve been writing for the past weeks of this stimulus-driven market, the US government stimulus package will come. As will oodles more stimulus spending from developed nations across the world to keep their economies ticking through the pandemic slowdowns.
Since, in my opinion, it’s not a question of if but one of when the next big stimulus packages are announced, I’ll be holding onto the shares I already own that I believe are well positioned over the long-term. And adding to those shareholdings when I’m able, without worrying about getting the timing down perfectly.
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and RURALFUNDS STAPLED. The Motley Fool Australia has recommended Elders 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.