I believe the best investment strategy is to buy growth shares and hold them for the next decade.
There aren’t that many great growth shares on the ASX. Luckily, plenty of the investment money in Australia is focused on shares like BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA). Oh well, that means there’s more growth opportunities left for us as growth investors.
Here are three of my favourite ASX growth ideas to hold for the next decade:
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is definitely one to keep an eye on in the 2020s. It’s a payment business which facilitates electronic donations to not-for-profits. It’s particularly focused on large and medium churches in the US at the moment.
It recently announced the acquisition of Church Community Builder which creates a larger customer base, bolt-on features for Pushpay’s offering, stronger capabilities and R&D resources and hopefully leads to stronger organic growth.
In Pushpay’s half-year result the company announced revenue growth of 30%, gross margin improvement from 57% to 65% and operating expenses decline of 2%. This led to earnings before interest, tax, depreciation, amortisation and foreign exchange (EBITDAF) of US$9.6 million, an improvement of US$12.7 million.
If Pushpay’s revenue keeps growing by double digits for many more years, it will lead to strong earnings growth and hopefully good shareholder returns.
A2 Milk Company Ltd (ASX: A2M)
I get excited as soon as an ASX business starts expanding overseas. To me, it seems quite clear that a business wouldn’t just stick to one or two countries when it expands internationally. There are plenty of huge markets that A2 Milk can target.
The company is already doing excellent work in the US and China, which are many times larger economies than Australia and New Zealand. Canada, other Asian countries and Europe are obvious future targets eventually.
A2 Milk isn’t going to double its profit every 12 month period for the next few years, but it isn’t priced to do that and it doesn’t need to achieve crazy growth – if it can just keep growing profit at a double-digit pace each year for the rest of the decade then it can achieve very pleasing compound profit growth.
At only 27x FY21’s estimated earnings I think A2 Milk looks like a compelling long-term buy today.
Magellan Global Trust (ASX: MGG)
Some of the best growth shares are listed outside of Australia. The ASX has plenty of good quality mid caps, but global blue chips actually have some of the best growth prospects.
Microsoft has excellent growth potential from cloud competing, Alphabet has several strong growth avenues including online video and automated cars, Visa & MasterCard are enormous beneficiaries from the rise of eCommerce and LVMH is winning from the rapidly growing affluent class in China.
I’d be very happy to own every business in the Magellan Global Trust portfolio, which is why I think it’s such a good investment to own for exposure to the best businesses in the world for the long-term. If one of the shares loses its way, the investment team can replace it (like Wells Fargo) with another high-quality pick.
Magellan Global Trust’s net performance after all fees has been consistently impressive. The target 4% distribution yield is a positive bonus.
I think all three of these shares will comfortably beat the ASX 200 (ASX: XJO) return over the next decade because of the international growth. I think Pushpay could produce the biggest return over the next few years because it’s just reaching profitability and is rapidly growing its margins, but A2 Milk could be a strong performer for the rest of the decade.
Some other shares that are definitely worth holding for the long-term are these top-quality growth stocks.
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Tristan Harrison owns shares of MAGLOBTRST UNITS. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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.