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3 top ASX growth shares to diversify your portfolio

Here are 3 top ASX growth shares that operate across very different industries, but have a number of things in common: all are high-quality companies with proven business models, and all 3 have a great future ahead of them over the next 5–10 years.

Given their industry diversity, if you happened to decide to purchase all 3 of these ASX growth shares, your portfolio would also benefit from very strong market diversification – one of the key pillars for any share portfolio, in my opinion.

A2 Milk Company Ltd (ASX: A2M)

a2 Milk has been growing at a very impressive rate since it was listed on the ASX over 4 years ago and that strong growth looks set to continue. The a2 Milk share price has performed well since last November, up by 29%, although its share price growth has been fairly flat during the last month.

Due to its well-established brand name and entrenched position in the Australian market, I feel a2 Milk is better placed for long-term growth than other infant formula providers such as Bubs Australia Ltd (ASX: BUB) and Nuchev Limited (ASX: NUC).

a2 Milk’s ability to continue to execute on its expansion strategy in the 2 massive markets of the United States (US) and China will be key to its success over the next 5 years, in my opinion. The company appears reasonably well placed to meet future targets, making it a good share to buy and hold for the long-term.

Bapcor Ltd (ASX: BAP)

Bapcor is the leading second-hand car parts distributor in Australia and New Zealand. It has been cleverly growing its local Australian and New Zealand presence through acquisitions and the expansion of its existing business chains. Bapcor is also expanding into Thailand, which hopefully will provide it with a great launching pad for further expansion into Asia, and perhaps other regions as well.

In Bapcor’s FY19 results, revenues increased by 4.8% to $1,297 million and earnings before interest, tax, depreciation and amortisation (EBITDA) were up 9.8% to $165 million, in line with company guidance.  Bapcor continues to generate solid same store sales growth and continues to increase its profit margin.

I believe that there is still a lot of room for it to grow over the next 3 years with a number of new store openings in the pipeline.

Cochlear Limited (ASX: COH)

Cochlear is in a great position to tap into the rising demand for hearing products and solutions over the next few decades.

It has 2 new revolutionary products which will soon be released to the market. One of them is the Osia 2 system, which bypasses the damaged areas of the natural hearing system. Cochlear intends to commence commercial rollout of Osia 2 in the US later in 2020. Cochlear is also well underway in constructing a new manufacturing facility in China. Both the US and China are massive markets for Cochlear to tap into.

Cochlear recently revealed that it expects to deliver a reported net profit of $290–300 million during FY20, which would be an increase of 9–13% if achieved.

Cochlear is currently trading with a price-to-earnings ratio of around 48.9, which is very reasonable for a high-quality growth share.

If you are not convinced on these 3 shares, here are 3 other top choices that you might want to consider.

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Phil Harpur owns shares of A2 Milk, Bapcor, and Cochlear Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST FPO and Cochlear 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.

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