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How I’d invest $10,000 today into ASX shares

With ASX share prices changing everyday it can be hard to know where to invest.

That’s why I think it’s important to have a watchlist so that you know what shares you’d buy if the market decides to offer us an attractive price.

These four ASX shares look like good long-term opportunities to me:

Paragon Care Ltd (ASX: PGC) – $3,000

It’s quite rare to find ASX businesses with single digit price/earnings ratios. Paragon is trading at 8x FY19’s estimated earnings if it can achieve earnings per share (EPS) of 7 cents (or more) this year.

Paragon has a very useful tailwind with the number of elderly people in Australia’s projected to increase significantly over the coming years and decades. More old people should mean higher demand for healthcare items like hospital beds and surgery equipment, which is precisely where Paragon operates.

With Paragon achieving organic growth of 7% in the first four months of FY19 and a grossed-up dividend yield of 7.7%, I think its valuation looks attractive.

Challenger Ltd (ASX: CGF) – $3,000

The recent fall in share price was disappointing but it gives us an opportunity to buy Challenger shares at a much cheaper price. But, further share market falls could hurt the assets under management (AUM) and management fees in the short-term.

However, annuity sales are likely to grow significantly over the long-term with the number of people in retirement age expected to grow by 40% over the next decade and additional government rules likely to encourage more people into an annuity in the coming years.

Retirement income is going to be an increasingly important industry and I think Challenger is the best way to play this theme.

Bapcor Ltd (ASX: BAP) – $2,000

Bapcor is Australasia’s leading auto parts business and is trading at an attractive 20x FY18’s earnings. I think it’s attractive because EPS is likely to grow by at least 10% this year alone, with a solid store roll-out plan of Bursons and Autobarns over the next five years along with decent same store sales growth.

If Burson is able to make its foray into Asia profitable that could create a very attractive growth runway for the next five to ten years.

I’ve allocated a little less to Bapcor because there are worries about what electric vehicles may do to earnings over the long-term, but Bapcor plans to grow its electrical parts division. If the Asian expansion turns out well, electric vehicles may not be a problem to earnings for a long time.

WAM Microcap Limited (ASX: WMI) – $2,000

Over the long-term it’s small cap managers that have the biggest advantage as investors because they are dealing with the smallest businesses, which have the largest growth potential. Identifying winners before most other investors means those targets are likely trading at a cheaper valuation than their bigger counterparts as well.

Over the past four months the WAM Microcap share price has fallen 16%, showing how hard small cap shares were hit during recent volatility. There could be more pain to come this year, but you have to be brave to pick up shares at a discounted price.

WAM Microcap currently has a grossed-up ordinary dividend yield of 4.5%.

Foolish takeaway

All of these ASX shares have exciting market-beating potential over the next year considering they have all fallen in recent months. At the current share prices Paragon and Challenger look particularly good to me for long-term buys.

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Motley Fool contributor Tristan Harrison owns shares of Bapcor, Challenger Limited, Paragon Care Limited, and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended Bapcor and Challenger Limited. 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.

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