Reporting season is starting. It’s like Christmas but for share investors. There may be some lumps of coal in some reports this year. But I think there are some ASX shares that are worth buying for growth investor portfolios in August 2020.
Here are my three ASX share picks:
Share 1: Pushpay Holdings Ltd (ASX: PPH)
Pushpay is one of my preferred ASX growth share ideas at the moment.
I think it could be unwise to try to guess when some growth shares in COVID-19-affected industries will return to fast growth. At this stage I’d prefer to go for businesses that are seeing uninterrupted growth or faster growth through this difficult time.
Pushpay is one of those ASX shares that I think are seeing faster growth. It’s an electronic donation business which facilitates digital giving to large and medium US churches. But it’s not just a simple payments business. It offers churches a number of useful management tools – that’s why the Church Community Builder acquisition was a good move. One of the services Pushpay can offer is livestreaming the service. That’s very useful in the current world.
In FY20 the company achieved a higher gross margin and a higher earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin. It will be even more profitable as it grows its revenue.
In FY21 the company is aiming to at least double its EBITDAF. Over the long-term it’s aiming for US$1 billion of annual revenue just from the US church sector.
At the current Pushpay share price it’s trading at 29x FY23’s estimated earnings.
Share 2: WAM Microcap Limited (ASX: WMI)
WAM Microcap is a listed investment company (LIC) which targets small cap ASX growth shares. It normally does quite well during reporting season with its investment picks.
It can be hard to know which growth shares to go for yourself. I think Wilson Asset Management is one of the best investing teams at picking the right shares. Over the past 12 months its portfolio has returned 11.8% before expenses, fees and taxes. I think that’s a solid return during a year which included the COVID-19 selloff.
The LIC is building a reputation as a good ASX dividend share as well. It’s quite important for WAM Microcap to keep paying a dividend so that it doesn’t become too large, otherwise its performance may be affected.
At the current WAM Microcap share price it offers a grossed-up dividend yield of 6.2%.
Share 3: Bubs Australia Ltd (ASX: BUB)
I believe that Bubs is one of the most promising ASX shares with a market cap under $1 billion. Over the next decade I believe it could become one the ASX’s smaller blue chips.
Bubs sells a variety of products including infant formula, baby food and products for adults. It also owns its own Chinese-approved manufacturing facilities called Deloraine. Having a high level of control over your supply chain could be important to Bubs for exporting to China and to ensure product supply during the current difficult COVID-19 conditions.
I think there’s a lot to like about Bubs. It boasts of a steadily-rising gross profit margin. Infant formula has a margin of around 40%, so the more of total revenue that infant formula represents, the more profitable that Bubs will be.
In FY20 Bubs saw infant formula revenue increase by 69% during the year. The company is growing rapidly overseas, particularly in countries with large populations like China and Vietnam – I think Asia is a long growth runway for Bubs.
The ASX growth share also has a good revenue trajectory. It recently expanded its distribution network in Australia, adding Bubs products to hundreds of Woolworths Group Ltd (ASX: WOW), Coles Group Limited (ASX: COL) and Baby Bunting Group Ltd (ASX: BBN) stores.
I think each of these shares will produce very good total returns over the next five to ten years. At the current prices I think I’m drawn to Bubs and Pushpay the most, but WAM Microcap could be an excellent dividend share over the long-term.