Here’s why I think buying the unloved shares of Telstra Corporation Ltd (ASX:TLS) and Lendlease Group (ASX:LLC) could be a smart idea…
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While some shares have smashed the market in 2020, not all of them have fared so well.
Two ASX shares that have significantly underperformed the market this year are listed below.
Here’s why I would think these unloved shares could now be in the buy zone:
Lendlease Group (ASX: LLC)
The Lendlease share price is down a disappointing 42% from its 52-week high. I think this has left the international property and infrastructure company’s shares trading at a very attractive level for investors. Especially now the worst is arguably behind the company following the divestment of its engineering business.
Another big positive is Lendlease’s recent strategy announcement. As I mentioned here last week, this strategy is shifting both its earnings mix and business model towards that of industrial property giant Goodman Group (ASX: GMG). Given the exceptional success of Goodman over the last decade, this can only be a good thing. Furthermore, it could support a re-rating of its shares in the near future if its earnings growth becomes more consistent. This could make it a great option for patient investors.
Telstra Corporation Ltd (ASX: TLS)
Another ASX share which has fallen out of favour this year is this telco giant. The Telstra share price is down 27% from its 52-week high and hovering just above its 52-week low. This decline has been driven by concerns that another dividend cut is coming in FY 2021 after its guidance fell short of expectations due to the pandemic. However, I’m optimistic that a dividend cut can be avoided if Telstra shifts its dividend policy to a free cash flow-based one.
In light of this, I think investors should focus more on the long term, which is becoming increasingly positive. This is thanks to rational competition in the industry, its cost cutting, the easing NBN headwind, and the arrival of 5G. Combined, I believe a return to growth might not be far away, which could make Telstra an unloved share to buy.
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- 2 ASX dividend shares with yields over 8%
- Why the Telstra (ASX:TLS) share price could be under pressure in 2021
- Where to invest your Telstra (ASX:TLS) dividends
- Is Lendlease (ASX:LLC) the new Goodman Group (ASX:GMG)?
- Forget term deposits and buy Coles (ASX:COL) and this ASX dividend share
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.