Volatility has continued as the market has clawed its way back from its low on 23 March. Uncertainty around the spread of coronavirus and measures taken to combat it has given investors the jitters.
While it’s unclear when or how coronavirus will be decisively beaten, there are reasons for optimism. Central Banks and Governments have taken decisive action to soften the economic impacts of the virus which should ameliorate undue economic damage.
For every bear market the ASX has weathered, there has been a bull market chasing up the rear. These bull markets have historically erased bear market losses and then added gains on top. When the market falls, smart investors take the opportunity to add to their holdings at discounted prices.
If you have a spare $5,000 (i.e. money you don’t need to pay bills or cover emergencies) now is the time to invest like Warren Buffett and put your capital to work.
Here are 4 ASX shares that could give you big returns over the long-term.
Premier Investments Limited (ASX: PMV)
ASX retail shares are definitely out of favour at the moment with stores shut and an anticipated recession looming. But Premier Investments is led by retail genius Solomon Lew and has a diversified portfolio of brands including Smiggle, Peter Alexander, Just Jeans, Portmans, and Dotti.
Stores are temporarily closed until 22 April, but Lew is playing hardball with landlords, which could result in significant rent savings. The retailer also has a strong balance sheet with cash on hand of nearly $200 million that will enable it to weather the current crisis.
Premier Investments is likely to bounce back following the current downturn. In the first half, the group delivered a record result despite Brexit uncertainty in the UK, protests in Hong Kong, and the devastating bushfires in Australia. Record sales of $732.1 million were recorded, up 7.6% on 1H19. Online sales grew 28.4% and will no doubt grow more in the current environment.
All 7 of Premier Investment’s brands delivered positive like-for-like growth during the first half, resulting in record earnings before interest and tax (EBIT) of $126.1 million, a 10.7% increase over 1H19. Premier Investments also has a significant stake in Breville Group Ltd (ASX: BRG), which is likely to recover strongly from any economic downturn.
Xero Limited (ASX: XRO)
Xero provides accounting software to small and medium businesses. The software-as-a-service (SaaS) company has been punished by investors in the current downturn due to fears about the impacts on its customers. But small and medium businesses generally bounce back reasonably quickly after recessions.
Xero could make a rewarding long-term investment as it is well placed to deliver strong earnings growth. The company has a high quality and sticky product plus strong pricing power. Xero currently has more than 2 million subscribers, but its potential total market is many, many times that.
It took more than a decade for Xero to reach its first million subscribers, but just two and a half years to add the next million, demonstrating the pace of its adoption across key markets. Subscriber numbers grew by 30% in 1H20.
During the first half, Xero grew operating revenue by 32% to NZ$338.7 million and grew annualised monthly recurring revenue by 30% to NZ$764.1 million. The company maintains a preference for reinvesting cash generated to drive long-term shareholder value.
PolyNovo Ltd (ASX: PNV)
PolyNovo produces NovoSorb, a range of bio-resorbable polymers that can be produced in many formats including film, fibre, foam, and coatings. The company’s premier product, NovoSorb BTM, is a dermal scaffold for the regeneration of dermis lost through extensive surgery or burns.
Earlier this week, PolyNovo released the results of a study into the use of NovoSorb BTM which showed the product delivered superior results when used to treat burn wounds. CEO David Williams said, “the excellent results, while expected, will strengthen our marketing to surgeons worldwide.”
Directors of PolyNovo have taken advantage of the current market meltdown to top up their holdings in the company, with four directors purchasing an aggregate of more than 800,000 shares in the company in March.
In PolyNovo’s half-year results, the company reported a 129% increase in revenue from sales of its NovoSorb BTM product. Strong sales performance was reported in the US with growing account penetration. In December, NovoSorb BTM received CE Mark approval allowing for full Western European market entry.
PolyNovo is building a factory in Port Melbourne to produce hernia products utilising the NovoSorb technology. The product will be used for doing abdominal wall repairs with US market entry scheduled for June 2021. According to PolyNovo, the hernia market is worth some $2 billion and is growing at over 7% a year. PolyNovo is also working on a design for a breast product, with that market worth some $2.5 billion to $3 billion.
Whispir Ltd (ASX: WSP)
Whispir provides a SaaS communications workflow platform which automates interactions between businesses and people. Used by more than 500 enterprise customers, the platform is now being used by Victoria’s Department of Health and Human Services (DHHS) to interact with Victorians as part of its coronavirus containment plan.
CEO Jeromy Wells said, “while the Victorian DHHS is the first Australian health authority to utilise our platform state-wide for its COVID-19 communications we have the ability to scale this service nationally for all Australians.”
The Whispir platform is also used by Qantas Airways Limited (ASX: QAN) to manage critical incidents, and by Telstra Corporation Ltd (ASX: TLS) to communicate rapidly with customers and staff. New Zealand police use the platform to communicate with the hearing impaired community.
The Whispir platform allows for real-time data-driven communications and provides users with rapid insights. The more accurate data provided by the platform enables users to quickly make informed decisions about the optimisation of services. Support for the platform continues to build with annualised recurring revenue increasing 22% in the first half and average recurring revenue per customer up 17%.
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Motley Fool contributor Kate O’Brien owns shares of POLYNOVO FPO. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Telstra Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Whispir 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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