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Summary
- Diversification is crucial for maintaining a robust portfolio that offers decent returns while curbing the risk level, particularly during an economic downturn.
- Companies that diversify their core offerings according to the present scenario, or rapidly adapt to the changing business environment, manage to sail through volatile times.
- Adairs Limited’s focus on home decoration category, strategic acquisition of Mocha, and quick adaptation of online sales helped register a 39.7% EBIT growth.
- Lovisa Holdings focused on cost containment and exiting geographies where things weren’t going its way. The Company performed better in Australia and New Zealand though stores in Melbourne are now closed for a second time.
Portfolio diversification is essential to restrict potential losses at the time of a market crash. The reasoning behind diversification is straightforward. Investment portfolios comprising of various categories of investments, on an average, yield greater returns with low risk as compared to a portfolio with individual investment. In short, diversification aims to limit risk exposure while providing reasonable returns.
Diversification is crucial to maintain a robust portfolio balance, particularly during an economic slump. Furthermore, investors will face a lower risk by investing in different sectors in the equity market or different asset classes.
ALSO READ: Simple Ways to Build a Diversified Investment Portfolio
Distinguishing between desire and need of the consumers and formulating strategies based on the current scenario has played a critical role while the world is tackling against the impact of coronavirus. Companies offering essential services that are both a need and a want of the consumers, are performing well during this COVID-19 pandemic. Hence, a diversified investment that is investing in businesses from varied industries could be a beneficial decision in the current situation.
Let us now have a look at three ASX-listed stocks- ADH, AKP, LOV
Adairs’ EBIT soared 39.7% to A$60.7 million driven by strong sales
Melbourne-headquartered company Adairs Limited (ASX:ADH) is a retailer of home furnishings and home decoration products. The Company owns and operates two businesses in the category, Adairs and Mocka. Both businesses of Adairs’ are design-led, customer-focused, and sell quality in-house designed product direct to customers in Australia as well as New Zealand.
On 10 August 2020, Adairs released its unaudited FY20 results, highlighting outstanding financial and operational outcomes notwithstanding the challenges due to the pandemic. The Company announced the acquisition of Mocka in December 2019, which has continued to perform impressively under the ownership of Adairs.
FY20 Highlights from the financial front-
- Group Sales up by 12.9% at A$388.9 million with Adairs sales up 4.5%, Mocka sales climbing 50.2%, and Group online sales hitting ~A$124.2 million, 31.9% of group sales.
- Underlying Group EBIT stood at A$60.7 million, up by 39.7%.
- Statutory NPAT was reported to be A$35.3 million up by 19.0%.
Commenting on the results of FY20, Managing Director and CEO of Adairs, Mark Ronan, stated-
FY21 Outlook- For the first five weeks of the fiscal year 2021, Adairs recorded-
- Total group sales increased by ~32.3%.
- The online sales of Adairs soared by 103.2%.
- Stores sales up by 18.6% with LFL store sales increased by 15.8%
- Mocka sales rose by 46.8% for the first week FY21.
Moreover, the Company anticipates to open 3-5 net new stores and upsize 3-5 existing stores in the financial year 2021 in Australia/New Zealand.
The Board cannot provide FY21 guidance at this time due to COVID-19 uncertainties.
Stock Information: On 11 August 2020, ADH stock was trading at A$3.110 (at 12:16 PM AEST), climbing by 1.967% with a market cap of nearly A$515.69 million.
HAVE YOU READ: 5 Ways to Diversify Your Investment Portfolio
Audio Pixels Holdings aims to produce high-quality digital speakers
Audio Pixels Holdings Limited (ASX:AKP) is into the development of the technological platform for reproducing sound to make speakers. MEMS-based Digital Sound Reconstruction platform of the Company supports the market for audio speakers to follow the progression of the video display market from big, heavy analog tube built monitors to the digital flat panel displays of nowadays.
On 30 July 2020, Audio Pixels disclosed the activity statement for the Quarterly Cash Report to 30 June 2020. The Company emphasised that during the June quarter, it had progressed in its objective of producing superior quality digital speakers during the quarter ended September 2020.
Simultaneously, AKP completed the development of a highly advanced measurement tool facilitating precision measurement and subsequent algorithmic synchronisation to increase the devices acoustic output further.
Moreover, the testing capabilities of the Company have been partially restricted since the beginning of COVID-19 restrictions in Israel.
On 24 July 2020, Audio Pixels revealed a placement of ~397k new ordinary shares to institutional as well as sophisticated investors at A$17.32 to raise ~A$6.8 million.
ALSO READ: What's Hot: Kogan, Audio Pixels and Bellevue Gold at Record Highs
Stock Information: On 11 August 2020, AKP stock was trading at A$22.300 (at 12:16 PM AEST), down 0.491% with a market cap of nearly A$643.14 million.
Lovisa Holdings’ 30 Stores Across Melbourne Temporarily Closed
ASX-listed group Lovisa Holdings Limited (ASX:LOV) is engaged in fashion jewellery-related retailing and has its footprint more than 320 stores across Australia, Malaysia, New Zealand, Spain, France, the US, Singapore, and the UK.
On 6 August 2020, Lovisa Holdings provided a business update for August 2020; highlights are-
As a result of shifting to Stage 4 restrictions after the decision of the government in Melbourne for 6-weeks in response to the COVID-19 situation, thirty stores of Lovisa in Melbourne will temporarily shut down effective from 6 August 2020 until the lifting of these restrictions.
Furthermore, due to government closing orders, 19 of stores in California were temporarily closed since 14 July 2020. However, all other stores of the Company across the world remain open and trading, including its online stores globally.
Stock Information: On 11 August 2020, LOV stock was trading at A$7.010 (at 12:16 PM AEST), in line with the previous close with a market cap of nearly A$753.29 million.
