With 2020 just around the corner, many of our Foolish readers may make this the year they finally start investing for their future. With the benefit of a long investment horizon, many budding investors will be eagerly looking for tomorrow’s success stories. What are the young ASX companies that will soon grow into market darlings like Afterpay Limited (ASX: APT), WiseTech Global Limited (ASX: WTC) or healthcare behemoths like Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL)?
Ask around and you’ll soon find that everyone will a different opinion about where you should be investing your money. This is what makes growth investing so risky: a slight change to any one of a million different variables could spell success or ruin for a young company. And every investor thinks they’re Nostradamus when it comes to predicting how those variables will turn out.
And the market has been wrong before. In early 2016, overblown predictions about the global demand for lithium for electric cars pushed up the share prices of junior miners like Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) and Neometals Ltd (ASX: NMT). But since 2018 the share prices of all these companies have slid lower, and many are now actually valued lower than they were prior to 2016.
The moral of the story is: consult widely but take everyone’s recommendations (including mine), with a big grain of salt.
So, with all that being said, here are 5 ASX companies that I’m banking on to make it big over the next few years.
Carsales.Com Ltd (ASX: CAR)
Australian digital car classifieds business Carsales has had a great 2019. Revenues increased 11% to $418 million, with adjusted net profit after tax (NPAT) up 3% to $131 million. But what makes this company such a great investment for the future is the strong performance of its international operations. It is already the leading online classifieds business in South Korea and revenues from Brazil increased by 35% last financial year. With these sorts of growth figures, I can easily see Carsales soon becoming a blue-chip company like REA Group Limited (ASX: REA).
Pointsbet Holdings Ltd (ASX: PBH)
Corporate bookmaker Pointsbet also makes my list because of its international potential. As an early mover in the US, Pointsbet is well-positioned to take advantage of the fact that many states in America are now in the process of relaxing their legal restrictions against online sports betting. It is a risky investment though, as increased spending on sales and marketing caused its statutory loss for FY19 to balloon out to $41.9 million. However, according to its 2019 results presentation, Pointsbet currently has access to 10 US states with an estimated market size of US$4.6 billion, which gives it significant upside potential if its American strategy pays off.
Livetiles Ltd (ASX: LVT)
Small cap software company LiveTiles seems to have gone underappreciated by the market in 2019, particularly over the second half of the year. The Livetiles share price has declined close to 60% since hitting a 52-week high of $0.61 back in April. However, I like it because of its ability to lock in recurring revenues, which should help the young company with its cash flow management. For the September quarter, annualised recurring revenues increased by 131% against the same quarter last year, totalling $42.9 million. The company also brought in record cash receipts of $8.5 million.
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Rhys Brock owns shares of AFTERPAY T FPO, Cochlear Ltd., Galaxy Resources Limited, LIVETILES FPO, Neometals Ltd, Pilbara Minerals Limited, Pointsbet Holdings Ltd, carsales.com Limited, and WiseTech Global. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Cochlear Ltd., and CSL Ltd. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool Australia has recommended carsales.com Limited, Cochlear Ltd., LIVETILES FPO, and Pointsbet Holdings 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.