The ASX200 (ASX: XJO) has been on a tear this year. Even with today’s steep decline, the ASX 200 is still up 15.3% which doesn’t even include the dividends.
However, the issues facing the ASX200 could soon see some of those returns reversed.
The trade war could see Chinese demand for commodities fall and hurt the share prices of BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).
Falling investor confidence could see people exit out of those really expensive ASX growth shares like WiseTech Global Ltd (ASX: WTC), Appen Ltd (ASX: APX) and Pro Medicus Limited (ASX: PME).
Indeed, we could see many of the popular shares this year underperform. So where are investors supposed to look? Well, cash and gold are often seen as safe havens, but gold doesn’t appeal to me and the returns of cash are minimal – the only attraction would be capital preservation.
I think the answer could be to invest in shares that can grow over the long-term that offer returns quite alternative to the general share market.
One of my main ideas along this line of thinking is Duxton Water Ltd (ASX: D2O), a company that purely owns water entitlements. The dry weather conditions have sent up water prices and Duxton Water’s net asset value (NAV) per share. Over the past year the combined performance of the NAV and dividend has been almost 22% from Duxton Water.
However, a sizeable discount to the underlying NAV has opened up. The current discount is 12% to the post-tax NAV and a 20% discount to the pre-tax NAV.
I’m always open to buying assets at an attractive discount. I also like that Duxton Water is targeting a growing dividend, as long as it’s supported by the cashflow of the business. It currently offers a forward grossed-up dividend yield of 5.7%.
Whilst a wet year would be the best time to buy shares, this is a fairly good time to buy shares in my opinion due to the growing discount to the underlying assets.
Other shares that could beat the ASX200 over the next 12 months and beyond are these leading defensive winners.
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Tristan Harrison owns shares of DUXTON FPO and WAMGLOBAL FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended DUXTON FPO. 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.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019