Here's 3 shares to quickly diversify your portfolio

These 3 shares will provide good diversification for your portfolio.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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:

MFF Capital Investments Ltd (ASX: MFF)

MFF Capital is a listed investment company (LIC), which means it invests in other shares on your behalf.

There are three main reasons why I think it should be in your portfolio.

It invests in high quality overseas businesses, meaning that it would provide a very different portfolio to most of your current shares and indeed most other LICs on the ASX.

MFF Capital has produced really strong returns over the past five years due to a falling Australian dollar and a strong performance of its chosen US-listed shares.

Finally, I have a lot of confidence in Chris Mackay's ability to outperform the market by investing for a longer-term investment horizon compared to other managers, and the MFF Capital team also seem well aware of how business trends are changing the world – meaning which shares are opportunities and which should be avoided.

Propel Funeral Partners Ltd (ASX: PFP)

Propel is the second largest funeral operator on the ASX. It just gave its first quarter trading update today which was a record first quarter with higher revenue, more funerals and more revenue per funeral.

I believe its earnings could be boosted strongly over the next few years as it makes tactical acquisitions to grow its network. It's starting from a relatively small base, so each acquisition will make a material impact to its annualised profit.

Over the long-term it could be a market-beater due to the relentless growth of required funerals due to Australia's ageing population. 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.

Kogan.Com Ltd (ASX: KGN)

Kogan.Com is now one of Australia's leading online retailers. In-fact it sells a wide variety of products and services (not just TVs and fridges) like health insurance, phone plans, internet plans and more.

The network effects of this is powerful when it can sell more 'stuff' to more people. It means that repeat business can increase and margins are likely to keep going up. It's cheaper to win business from a current customer than through advertising to a new customer. However, it is winning a lot of new active customers too.

Kogan's share price has roughly halved in recent months, meaning that it's now trading with a price/earnings ratio in the low 30s. This seems like an attractive PEG ratio for a business that has doubled its profit in each of the last few years.

Whilst investors will need to be wary of the threat from Amazon, Kogan could win a lot of market share from bricks and mortar competitors in the medium-term.

Foolish takeaway

At the current prices I think all three look attractive. Out of the three I'm unsure of investing in MFF Capital at the moment because of the low Australian dollar and the likelihood of a US share market fall, which would affect the LIC. However, now could be a good time to invest in Kogan shares after its fall.

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd and Propel Funeral Partners Ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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.

More on Share Market News

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »