I’m always on the lookout for ways to diversify my portfolio whilst maintaining strong returns. If you can mitigate risk whilst also beating the market then that’s a powerful combination.
Diversification usually means investing into different industries and perhaps businesses that offer geographical diversification away from Australia.
Here are three shares that I think would offer good diversification:
Magellan Global Trust (ASX: MGG)
This trust is run by Magellan Financial Group Ltd (ASX: MFG), a leading internationally-focused manager. Most Australians are far too heavily invested in the domestic market and have little exposure to overseas shares.
The Magellan Trust could be a good way to get that diversification as its top holdings are global giants like Facebook, Alphabet (Google), Lowe’s, Starbucks and Apple.
It has outperformed its benchmark, the MSCI World Net Total Return Index, after fees by 0.1% since inception. Any outperformance is outperformance.
BWX Limited (ASX: BWX)
BWX is Australia’s leading natural beauty business with its Sukin range. The company has recently acquired US businesses to expand geographically into the USA, plus the US brands can be sold into the Australia and other markets.
The natural beauty sector is growing at a faster rate than the general beauty industry, consumers increasingly want products that are better for themselves and the environment.
Some investors are more negative on BWX because it seems to be suffering acquisition indigestion. However, if BWX management can integrate the acquired businesses well then it could turn things around and the share price could quickly recover.
BWX is currently trading at 18x FY19’s estimated earnings.
Propel Funeral Partners Ltd (ASX: PFP)
Propel is Australia’s second largest funeral operator with a market share of around 4.1% in Australia and 6.7% in New Zealand.
Funerals are very morbid, but sadly a certain number of people die each year, giving Propel a defensive set of earnings.
Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050. This should provide a slow-and-steady tailwind for Propel over the coming years.
I like all three shares, that’s why they’re already in my portfolio. The current prices are attractive for the potential growth on offer, particularly with BWX. Magellan Global Trust would also be a good option because it’s trading below its NTA.
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Motley Fool contributor Tristan Harrison owns shares of BWX Limited, MAGLOBTRST UNITS, and Propel Funeral Partners Ltd. The Motley Fool Australia owns shares of and has recommended BWX 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.