We're now into FY21. I think it's a good time to be thinking about what ASX shares will generate the best returns over the next 12 months. Broker Bell Potter from parent company Bell Financial Group Ltd (ASX: BFG) has released a list of shares that it thinks will do well this financial year.
I've already written about 10 of those ideas here. In this article I'm going to cover the other 10 that caught my eye:
Retail
Share 1: Temple & Webster Group Ltd (ASX: TPW)
Why it's a pick: As Australia's largest online-only furniture and homewares retailer, it could be one of the biggest beneficiaries from the shift to online shopping due to COVID-19. Bell Potter likes the capital light nature of the business as well as the growth initiatives the company is making.
My view: The Temple & Webster share price has been a very strong performer since March 2020. But I think the ASX share still has an exciting future ahead with lower costs and growing brand awareness among potential customers. I'd be a happy long-term holder if I owned shares.
Share 2: City Chic Collective Ltd (ASX: CCX)
Why it's a pick: City Chic sells around two thirds of its plus-size women's products online. It was, and is, well positioned to handle the current COVID-19 retail environment. With minimal debt, low costs and solid trading, City Chic is one of Bell Potter's top picks.
My view: I think City Chic is one of the most promising small caps on the ASX. I really like the growing diversification of earnings. City Chic is steadily turning into a sizeable international player in the plus-size space. However, it has been a strong performer in recent months, I'd only start with a small parcel at the current City Chic share price.
Industrials
Share 3: Corporate Travel Management Ltd (ASX: CTD)
Why it's a pick: Bell Potter still likes Corporate Travel Management despite the COVID-19 problems. The broker thinks the ASX share can increase its market share and generate profit even from a low volume.
My view: I think travel will make a comeback over the next couple of years, but I'm not sure personally about a full recovery for the corporate travel space. Online video conference calling may be a permanent shift for many. So, I'm not sure if the Corporate Travel Management share price is a buy, when there are other travel shares when may be better buys.
Share 4: Emeco Holdings Limited (ASX: EHL)
Why it's a pick: The broker likes this ASX share which is a leading provider of rental earthmoving equipment and maintenance services. Mining has remained resilient in the face of COVID-19, which is reflected in the company's guidance. Bell Potter estimated Emeco is trading at under 9x FY21's earnings.
My view: Mining related businesses are not my strong point. It does seem cheap if the FY21 estimate is close to reality, it's even cheaper with the Emeco share price falling on Friday. But mining can be unpredictable.
Share 5: Johns Lyng Group Ltd (ASX: JLG)
Why it's a pick: This ASX share is an integrated building services group. Bell Potter expects a strong FY20 result with insurance panel wins, increased volumes and acquisitions. It should have a solid FY21 because it provides essential services (which are unaffected by COVID-19 restrictions) and it has a full order book.
My view: I don't know enough the company or the industry to know how much (longer-term) growth potential the company has. But this company does seem to have a good combination of defensive earnings and growth.
Resources
Share 6: Nickel Mines Ltd (ASX: NIC)
Why it's a pick: The nickel miner has a strong balance sheet, it's cheap compared to its peers and the broker likes the ASX share for its pure nickel exposure as that's one of Bell Potter's preferred base metals.
My view: I'm not a big fan of investing in commodity shares because they don't have much control over the commodity price, which also means there isn't a lot of control of profit year to year. The Nickel Mines share price has recovered back to the level where it was at 21 February 2020, so it's not a beaten-up opportunity any more.
Share 7: Regis Resources Limited (ASX: RRL)
Why it's a pick: Regis Resources is a gold miner with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 50% – this is at least as good as its peers, if not better. Bell Potter also likes the dividend paid by the gold miner.
My view: I don't think you can look at gold miners as consistent compound growers because of how volatile the gold price is. The Regis Resources share price is close to its 2020 high, so I wouldn't be too eager to load up on shares right now unless the gold price keeps rising.
Healthcare
Share 8: Volpara Health Technologies Ltd (ASX: VHT)
Why it's a pick: This ASX share is helping detect breast cancer with its screening technology. Bell Potter likes the software as a service (SaaS) model. The broker also likes that the company now has a suite of products to improve the offering to clients.
My view: Volpara is one of the promising small cap healthcare ASX shares. I like that it's rapidly growing revenue and market share. There's a good chance it can increase its revenue per user with its growing product base.
Emerging companies
Share 9: Pointsbet Holdings Ltd (ASX: PBH)
Why it's a pick: The resumption of the NRL and AFL should be beneficial for the gambling business. There's also the prospect of US sports like the NBA, MLB and NHL coming back this month too.
My view: The Pointsbet share price has been a strong performer since the March 2020 low of the COVID-19 selloff. Just on Friday the company announced a deal with a US MLB team, the first of its kind. I think it could be one to watch if it keeps winning deals with in the US sport betting sector.
Professional services
Share 10: IPH Ltd (ASX: IPH)
Why it's a pick: The intellectual property (IP) ASX share is a pick because it has proven to be resilient through previous economic downturns, it makes good cashflow, it has growing exposure to the high growth Asian IP market, there are benefits to the recent acquisitions and it's expanding into other IP markets.
My view: There are plenty of positives to IPH. It seems like the type of business that could keep performing well through FY21 whether the market improves or worsens from here. It's also a decent dividend share. At the IPH current price it offers a grossed-up dividend yield of 4.9%.
