Get your FANGs stuck into the BETA NASDAQ ETF

The Australian share market is great for dividend seekers with plenty of companies that offer big yields often on a fully franked basis, which means the income you receive is pretty much tax free for many investors.

That’s great if you’re a retiree looking to get paid today, but if you have an investment horizon of 5-to-10 years you should really aim for capital growth to make up the most substantial component of your investment returns.

The ASX has a few high-quality growth companies, but it’s not exactly awash with them which means they tend to be pretty popular and therefore on heady valuations.

Just take a look at the whopping valuations of the likes of Aconex Ltd (ASX: ACX), Nextdc Ltd (ASX: NXT), Freelancer Ltd (ASX: FLN), XERO FPO NZ (ASX: XRO) or pizza franchisor Domino’s Pizza Enterprises Ltd (ASX: DMP) and you’ll see investors in Australia are often expected to pay sky-high multiples for businesses that are growing at sometimes moderate rates.

Other popular digital stocks like REA Group Limited (ASX: REA) trade on trailing earnings multiples of 36x profits, while SEEK Limited (ASX: SEK) trades on 29x trailing profits, despite it being expected to deliver minimal profit growth in FY 2017. Elsewhere the ASX has plenty of low-quality businesses trading on expensive valuations that investors should avoid altogether.

Given the often high valuations of ASX growth stocks investors would do well to look to the U.S. to buy the world’s best growth and technology businesses that actually trade on cheaper valuations than many tech shares on the ASX.

For example companies like Amazon Inc., Facebook, Apple, Microsoft and Google can be bought for trailing earnings multiples between 14x to 28x, with many of these companies also paying a dividend or buying back their own shares to boost investors’ returns.

I’d also wager a large sum of money that these tech leaders will still be growing strongly in 5 years from now which makes their valuations even more attractive compared to many listed-Australian companies that could be disrupted or competed out of existence over the long term.

If you don’t have an international brokerage account, or don’t fancy buying any of these world tech leaders directly you could buy the ASX-listed NASDAQ exchange traded fund BETANASDAQ ETF UNITS (ASX: NDQ). It tracks the performance of the leading 100 companies on the tech-heavy NASDAQ index and has climbed 21% over the past year.

I would suggest any Australian share market investors focused on growth and the long term look to get exposure to theses U.S. tech leaders while they still trade on relatively attractive valuations, with unbeatable outlooks.

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Motley Fool contributor Tom Richardson owns shares of REA Group Limited, SEEK Limited, Facebook, Apple, Google and Xero.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of ACONEX FPO and Xero. 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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