I think there are always ASX share opportunities to buy for our portfolios, you just have to buy them when they’re good value. I know where I’d invest if I had $20,000 to allocate.
The share market has proven to be a good wealth builder for decades. I think that’s going to continue for many years to come.
With $20,000, I’d buy these ASX shares for the long-term:
Pushpay Holdings Ltd (ASX: PPH) – $6,000
Pushpay is my highest-conviction individual share idea at the moment. The ASX share facilitates digital donations to organisations like large and medium US churches.
The company was growing pleasingly before COVID-19 hit, but the pandemic has caused Pushpay’s adoption to be brought forward as more people stay home, avoid groups and change to giving electronically rather than giving cash. A big benefit of Pushpay’s offering is that it also has a livestreaming option so that churches and congregations can stay connected.
In FY20 the ASX grew its revenue by around a third. In FY21 it’s expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF). Those are good growth numbers.
The company is aiming for US$1 billion of revenue from the US church sector over the long-term. There are plenty of other ‘donation markets’ that Pushpay can expand into over the coming years.
One of the main things that attracts me to Pushpay is how scalable it appears to be. In FY20 alone it increased its gross profit margin by five percentage points from 60% to 65%.
At the current Pushpay share price it’s trading at 34x FY21’s estimated earnings.
WAM Microcap Limited (ASX: WMI) – $4,000
WAM Microcap is my preferred listed investment company (LIC). I think investors can generate strong outperformance by focusing on small caps, if you know what you’re doing. The LIC targets ASX shares with market capitalisations under $300 million. The WAM team are very good at this.
Past performance is not a guarantee of future performance at all. However, it must be said that WAM Microcap has done a good job of producing strong performance over the long-term with average gross portfolio returns of 21.7% per annum since inception in June 2017 (before fees, expenses and taxes). Over the past year it has done well too, with a gross return of 25.4%. I don’t think you can expect future returns to be as good as that, but it could keep doing well.
WAM Microcap offers an ordinary grossed-up dividend yield of 5.6%. It also seems to be trading close to its pre-tax net tangible assets (NTA) per share at 31 August 2020. So it’s a fair price to buy shares.
Bubs Australia Ltd (ASX: BUB) – $3,000
Bubs is my preferred high-risk, high-reward idea at the moment. I think the goat milk infant formula producer has very good potential if it can capture market share in Asian markets like China and Vietnam.
So far it’s working really well. In FY20 Bubs grew total revenue by 32% to $62 million. Chinese direct sales went up 32% to $13 million. That’s good growth from the ASX share.
What particularly excites me is that export revenue outside of China increased five-fold and represented 10% of total revenue in FY20. It’s this area of the business that particularly excites me because of the size of the total addressable market.
Bubs has a variety of products that can all continue to grow strongly over the coming years and lead to rising profit margins for the ASX share.
The Bubs share price has fallen 13% over the past month. I think it represents very attractive value for how much potential growth there is outside of China. Of course, there are China risks but I think the company is doing the right things to grow market share there with its localised production strategy.
Future Generation Global Invstmnt Co Ltd (ASX: FGG) – $7,000
Future Generation Global is another good LIC in my opinion. It invests in the funds of Australian fund managers who invest in overseas shares. It has money with top managers like Magellan Financial Group Ltd (ASX: MFG), Cooper Investors, Caledonia and Marsico.
However, these fund managers work for free so that Future Generation Global can donate 1% of its net assets each year to youth mental health charities. It’s a great initiative, particularly during these times.
The great thing about Future Generation Global is that it offers very good diversification because it’s invested in a number of portfolios, not just individual businesses.
Its gross portfolio performance has been better than the MSCI AC World Index (AUD) over both the short-term and the long-term.
Outperformance and diversification are the main reasons I’m willing to invest so much of my theoretical $20,000 into it.
At the current Future Generation Global share price it’s priced at a 17% discount to the NTA at 31 August 2020. That’s a very nice discount in my opinion.
I think all four of these ASX shares could be good buys to beat the market over the long-term. Pushpay is the one I’d be most likely to buy, however I’d happily buy shares of them all for my portfolio.
Tristan Harrison owns shares of Future Generational Global Investment Company Limited and WAM MICRO FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO and PUSHPAY FPO NZX. The Motley Fool Australia has recommended BUBS AUST FPO and PUSHPAY FPO NZX. 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.
- ASX 200 was mixed today, ends down 0.2% – October 26, 2020 4:41pm
- 3 ASX dividend shares to buy with yields over 7.5% – October 26, 2020 3:14pm
- I think the A2 Milk (ASX:A2M) share price is strong buy – October 26, 2020 12:02pm