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2 ASX shares to buy now to get rich later

Whilst investing in what’s popular and has positive momentum can provide near term outperformance, this investment strategy can often require good timing and does not necessarily lead to above average performance in the long run.

For investors with a long term investment horizon there is arguably a better way to potentially outperform…

Value investors might not look right in the short term for owning out-of-favour stocks experiencing either a lack of positive momentum, but in the long term these types of stocks can prove to be very rewarding.

Here are two ASX shares which most investors are shunning at the moment, but which could be worth a lot more in the future.

Asaleo Care Ltd (ASX: AHY) – leading personal hygiene product manufacturer Asaleo has been a disappointment for shareholders who took part in the company’s initial public offering (IPO) in July 2014. The share price is currently trading at around $1.30, compared to a float price of $1.65 and a recent 52-week trading high of $2.33.

The recent share price crash has been in response to an ASX update which noted that preliminary results for the six months ending June 30 (the group operates on a calendar year basis) will show a decline in profits of around 17%.

Management also revised earnings guidance for the group’s full year results from flat year-on-year underlying profit to a decline of approximately 15%.

Based on the new guidance, earnings per share should come in at around 12.2 cents per share implying a price-to-earnings (PE) ratio of 10.7 times, which is arguably attractive for a leading brand name fast moving consumer goods business.

Metcash Limited (ASX: MTS) – while much of the attention surrounding the competitive pressure being applied by Aldi on the Australian supermarket sector has been centred on Woolworths Limited (ASX: WOW), arguably the main loser from Aldi’s market share gain has been grocery wholesaler and IGA banner owner Metcash.

The effect of a difficult operating environment has resulted in Metcash’s share price slumping by close to 50% over the past five years. The one-year return has been markedly different however with the stock price rallying by over 70%!

Despite the recent rally, Metcash today trades on a forecast PE ratio of just 11 times (source: Reuters) which would appear undemanding and could allow for further upside towards a market average multiple if the company can return to a reasonable level of earnings growth.

Knowing what to chuck out of your portfolio can be just as important than knowing what to put in!

3 Rotten Shares to Sell, and 1 to Buy Today

After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.

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