The share market is currently going through a little bit of a correction. I think there are some ASX shares worth buying during this period.
The S&P/ASX 200 Index (ASX: XJO) is down 4.5% over the past 10 days. The NASDAQ is down around 7.5% from 12 October 2020. The share market could get even more volatile during/after the US election.
I think there are some ASX shares that are worth buying over the next week:
Redbubble Ltd (ASX: RBL)
The Redbubble share price has fallen 23% since 20 October 2020. That’s despite Redbubble recently announcing that it had a really strong first quarter.
In the first quarter it saw marketplace revenue increase by 116% to $147.5 million, gross profit soared 149% to $64.5 million and it generated $22.1 million of earnings before interest and tax (EBIT). Redbubble made $27.1 million of operating cashflow.
The artist-produced marketplace business is delivering some very impressive growth numbers. It’s this type of business model that can deliver really strong network effects as an ASX share. Both economically and with its brand. The more sellers and products there are the more customers it will hopefully attract. The more customers there are, the more that potential artist sellers will want to join the platform.
Economically, Redbubble has already developed its website. So a rising portion of new revenue will fall to the net profit line.
BWX Ltd (ASX: BWX)
The BWX share price has fallen by 20% since 14 October 2020.
The natural beauty business had a really strong FY20 with net revenue rising by 26% to $187.7 million and statutory net profit soaring 59% to $15.2 million. The multi-brand strategy is helping BWX grow its product footprint across the world.
Sukin is growing well, with exciting potential in North America. Meanwhile, Andalou Naturals and Mineral Fusion are now expanding outside of the US. I think BWX has exciting growth potential globally.
The ASX share is looking to build a new manufacturing hub in Melbourne which would make a big difference for its margins. But BWX is already seeing growth of its margins – in FY20 its gross profit margin improved to 58%.
In FY21 BWX is looking to grow its revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) by at least 10%.
At the current BWX share price it’s valued at 18x FY23’s estimated earnings.
Australian Ethical Investment Limited (ASX: AEF)
Australian Ethical’s share price is down 11% since 16 October 2020. That means it’s now down 54% since 19 June 2020.
I think the ASX share is definitely worth considering because of its long-term growth prospects. The funds under management (FUM) continues to rise each quarter. In the first quarter of FY21 it saw its FUM go up by 6.5% to $4.32 billion.
It’s benefiting from two trends. It’s being helped by the trend of people wanting to be invested ‘ethically’. Mandatory superannuation contributions are also helping steadily grow Australian Ethical’s superannuation FUM. Its managed funds’ FUM is also going up too.
Its underlying revenue and net profit went up 15% in FY20. I believe its net profit could steadily compound over the coming years as FUM keeps going up.
Fund management businesses are pretty scalable. The same team can manage $4 billion almost as easily as $4.3 billion. This will allow Australian Ethical to reduce its investment fees, which will make the investment proposition for potential members to be more attractive.
I think each of these ASX shares have really good long-term growth potential, particularly Redbubble. I believe market selloffs are a good time to take advantage of lower share prices for the same businesses. That’s why I’m looking to invest today and over the next few weeks.
Where to invest $1,000 right now
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Australian Ethical Investment 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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