There are some ASX shares that fund managers believe are opportunities to buy.
Here are three of those opportunities:
Reject Shop Ltd (ASX: TRS)
Eley Griffiths Group is a fund manager that likes Reject Shop as an opportunity. The Eley Griffiths fund that invests in ASX shares has outperformed the S&P/ASX Small Ordinaries Accumulation Index by more than 10% per annum in recent years.
The fund manager believes that the global economy is now in a recovery phase, starting in China and spreading outwards.
Regarding Reject Shop, Eley Griffiths said in an ASX release of Future Generation Investment Company Ltd (ASX: FGX): "the ASX share sits at the early stages of a planned multi-year turnaround. New management have a reset balance sheet, strong brand and an operating model awaiting refinement. We have identified several levers where value for shareholders should be unlocked."
Despite COVID-19, Reject Shop actually reported growth in FY20 with total sales growth of 3.4% and comparable sales growth of 3.5%. Before AASB 16, FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 30.1% to $23.7 million. It also generated $61.6 million of free cashflow, up from a $1.9 million outflow in the prior corresponding period.
Reject Shop is now focused on earnings before interest and tax (EBIT) growth with business simplification and operational efficiency.
Sonic Healthcare Limited (ASX: SHL)
Sonic Healthcare is a global pathology business which is one of the main businesses involved in diagnosing COVID-19 cases in the countries that it operates in.
This business is liked by fund manager Clime Capital Ltd (ASX: CAM). Sonic actually reported that it had achieved positive growth in the base laboratory business compared to last year, apart from the US and the UK. The large numbers of COVID-19 tests are extra growth on top of that. Sonic recently announced that in the first quarter of FY21 for the three months to 30 September 2020 it achieved total revenue growth of 29%. By cutting costs Sonic was able to achieve EBITDA growth of 71% for the quarter.
Clime thinks that COVID-19 testing is likely to remain particularly strong during the winter for the US and European countries.
Sonic also has one of the longest consecutive dividend growth streaks on the ASX.
Bapcor Ltd (ASX: BAP)
Bapcor is the largest auto parts business in Australia and New Zealand.
It has its trade division, which includes Burson Auto Parts. The ASX share has a retail division which includes Autobarn. Bapcor has a service business which owns Midas and ABS. The auto parts business owns various specialist wholesale businesses and it also added a commercial truck parts group too. Finally, it has a small but growing Burson network in Thailand.
Bapcor is a favourite share idea of Wilson Asset Management (WAM) at the moment, with it being a holding across more than one of the listed investment companies (LICs).
WAM Research Limited's (ASX: WAX) investment team pointed out that in the quarter for the three months to 30 September 2020 Bapcor grew revenue by 27% compared to the prior corresponding period, with retail revenue rising 47% and specialist wholesale revenue going up 45%.
Bapcor has benefited from an increase in domestic travel, reduced usage of public transport and increased second-hand car sales according to WAM. The fund manager said that Bapcor has a strong balance sheet and believes it's well placed to make earnings accretive acquisitions.
In the recent trading update, Bapcor CEO Darryl Abotomey spoke of the company's defensive qualities: "The automotive market is a resilient industry and historically has performed strongly in difficult economic circumstances. Recent trading is another example of its resilience assisted by the increase in sales on second hand cars, reduction in use of public and shared transport modes as well as government stimulus."
