I’m always on the lookout for ASX shares that I think could comfortably beat the returns over the share market over the next three to five years.
I believe you need to take the medium-to-long-term approach to give yourself a better chance of delivering strong returns.
If you try to invest for the next 12 months alone, then you may just be guessing about what the share price will do. But if you give your thesis time to play out then you can hold onto some very promising ASX shares, like these two:
BetaShares Asia Technology Tigers ETF (ASX: ASIA)
Exchange-traded funds (ETFs) may be the best for us to access some growth ideas whilst still doing it in a diversified way. Asia is home to many exciting technology shares that are growing just as rapidly as the ones in the western world.
This ETF gives us exposure to 50 of the largest tech businesses in Asia such as Taiwan Semiconductor Manufacturing, Samsung, Alibaba, Tencent and JD.com. These are all giants in their respective industries.
There are plenty of sectors represented by the ETF including semiconductors, internet & direct marketing retail, interactive media & services, technology hardware, storage & peripherals, IT consulting & other services and so on.
The ETF has annual management costs of 0.67%, which isn’t bad at all for an Asian-focused diversified investment.
Trump’s trade war is having a negative effect on Asian share prices, but the long-term profit growth outlook looks good for most of the ETF’s holdings. Over the past five years the underlying index that this ETF tracks has returned an average of 13.74% per annum.
Webjet Limited (ASX: WEB)
Webjet is having a tough time in the second half of the 2019 calendar year. Since the middle of May the Webjet share price is down around 35%. That is despite a strong FY19 result showing revenue growth of 26% and earnings per share (EPS) growth of 30%.
The Thomas Cook problems are certainly going to cause a dent in the FY20 profit with both the loss of total transactional value (TTV) and potentially unpaid debts to Webjet.
However, Webjet is still expecting WebBeds to deliver very strong growth in FY20 aside from Thomas Cook. In the first 10 weeks of FY20 WebBeds TTV was up more than 50% over the prior corresponding period.
If you look ahead to FY21 and beyond, I think today’s share price could look very cheap, particularly if its operating profit margins can creep towards 50%. It’s trading at 23x FY19’s earnings.
I think both of these investments have the potential to soundly outperform the ASX over the next five years. At the current prices I think Webjet looks very good value if you’re willing to look further than the next 18 months.
5 stocks under $5
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended Webjet Ltd. 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.