The recent share market pullback has improved the valuations for a number of shares on the ASX.
Some of those shares many genuinely face difficulty if they have high levels of debt on their balance sheets with rising interest rates, which could increase the interest burden.
However, for some businesses it’s simply the case that the valuations have been reduced. That’s why I think these shares are well worth buying today:
Costa Group Holdings Ltd (ASX: CGC) – $3,000
Costa is one of Australia’s largest food businesses, it has seen its share price fall 12% since the start of the month and 28% since reporting season.
I think now could be an opportune time to buy shares of the grower of berries, tomatoes, mushrooms, citrus fruit and avocadoes. The company has predicted underlying profit growth of at least 10% in the short-term. Profit can compound nicely when it’s increasing at double digits.
Food prices could rise in the future due to a growing global population plus Asian middle class foot habits. Costa is expanding its plantations in Australia, China and North Africa as well as making bolt-on acquisitions.
I think it’s good value at 22x FY19’s estimated earnings.
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) – $2,000
Rising interest rates and the Chinese tariff troubles with the US is having a negative effect on the Asian share market. Over the past six months this exchange-traded fund (ETF) has fallen in value by 10%.
The Chinese and Indian economies are huge and still growing at a good rate each year. Over time this will keep flowing through to their citizens and should increase demand for ‘middle class businesses’ like telecommunications, banks, insurance, travel and so on.
Vanguard is a global leader in low-cost index funds and this broad ETF has almost 850 holdings which will hopefully capture the growing strength of the Asian region. As a bonus, it has a 2.6% dividend yield.
WAM Microcap Limited (ASX: WMI) – $2,000
The small cap area of the market is likely to become more volatile in the coming years, however that shouldn’t put you off this section of the market because it could produce the biggest returns over the long-term.
I’m happy to outsource the investing decisions to an investment team that specialises in that field. WAM Microcap is one of the very best on the ASX – over the past year its portfolio has returned 28.1% before fees and expenses.
It trades at a much lower premium to some of the other WAM listed investment companies (LICs) yet has the potential to produce the biggest returns.
WAM Microcap also aims to pay a growing dividend over time, it currently has an ordinary grossed-up dividend yield of 4%.
Paragon Care Ltd (ASX: PGC) – $3,000
Healthcare businesses supposedly have attractive long-term tailwinds thanks to Australia’s ageing demographics. The number of people over the age of 65 is expected to grow by 40% over the next 10 years. More old people should result in more demand for healthcare products.
Paragon Care supplies medical equipment, devices and beds to clients like aged care facilities and hospitals.
Yet despite an attractive business model and a good track record of acquisition integration to date, it’s trading at under 11x FY19’s estimated earnings with a grossed-up dividend yield of 6.4%.
In my opinion, all four of these shares have a good chance of beating the ASX Index over the next five years. I think Costa is a good, high-quality business whilst Paragon’s cheap valuation may be too good to ignore for a medium-to-long-term investment.
I will likely buy shares of some or all of the above ideas over the next few months if they stay at the current prices, or fall.
If I had another $2,000 to invest then I’d heavily consider investing in this top growth share.
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Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO, Paragon Care Limited, and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended Paragon Care 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.