Many ASX shares are flying high at the moment. The March 2020 COVID-19 crash seems like a distant memory.
If you bought during the crash then you're probably sitting on pleasing gains. But what happens if it crashes again? There are a few things that could cause a crash like the upcoming the US election, disappointing vaccine news or perhaps a geopolitical event relating to China.
Uncertainty is part of investing in ASX shares. But volatility can be exciting for investors, it creates opportunities to buy shares at cheaper prices.
These are three ASX shares I'd buy if the ASX were to crash again:
Share 1: Altium Limited (ASX: ALU)
I think Altium is one of the highest-quality businesses on the ASX. The Altium share price has risen by 48% since 23 March 2020. That's a pretty strong recovery.
However, COVID-19 conditions have impacted Altium's short-term and longer-term earnings. It temporarily lowered prices to attract more customers. In FY20 revenue only grew by 10% and 'normalised' earnings per share (EPS) only grew by 5%.
It's now trading at 56x FY22's estimated earnings. I like this ASX share, it's one of my preferred long-term investment ideas. However, the buying price is very important with investing. I'd be interested in buying Altium shares were around 20% cheaper at approximately $30 (or lower).
Altium is still aiming for revenue of US$500 million by 2025, but it could take six to twelve months longer to reach. I'm comfortable waiting for a cheaper price before buying more shares. Perhaps the US election will throw up the best chance to buy at a price of around $30.
Share 2: Magellan Global Trust (ASX: MGG)
I think the best global businesses are worth owning in any portfolio. But the problem is that they're not ASX shares, they're listed overseas.
A good way to buy them could be to get indirect exposure with a listed investment trust (LIT) like Magellan Global Trust which is run by Magellan Financial Group Ltd (ASX: MFG).
Magellan likes to stick to the highest-quality ideas that it can find. It owns positions in names like Microsoft, Facebook, Alibaba, Alphabet, Tencent, Reckitt Benckiser, Atmos Energy, Visa, Eversource Energy, Mastercard, Xcel Energy and Crown Castle International.
During the last selloff we saw that not only did the Magellan Global Trust net asset value (NAV) fall, but the share price dropped even further. This offered an attractive discount to buy shares. I'd be happy to buy shares again with a NAV discount of around 10%.
Share 3: WAM Microcap Limited (ASX: WMI)
WAM Microcap is a listed investment company (LIC) which invests in small ASX shares. It targets businesses with market capitalisations under $300 million at the time of purchase.
The high-performing LIC is run by the team at Wilson Asset Management (WAM). It has been a very strong performer since inception, with gross portfolio returns of 17.8% per annum – that's before fees, expenses and taxes.
During the COVID-19 crash, WAM Microcap's share price plunged from $1.58 to $0.85. It has since recovered to $1.48.
If another crash occurred and WAM Microcap's share price were to suffer heavily again, I think that would be a really good buying opportunity, particularly for income investors because WAM Microcap is paying out a large dividend each year.
At the current WAM Microcap share price it offers an ordinary grossed-up dividend yield of 5.8%. That yield doesn't include the regular special dividends that it has paid in each of the last three financial years.
Foolish takeaway
I really like each of the above ASX shares. At the current prices I'm not eager to buy any of them, though a crash could create good buying opportunities for all of them. Due to WAM Microcap's impressive returns, it would probably be the one that I'd be drawn to the most during another crash.
