3 ASX shares to buy that fund managers love

The 3 ASX shares in this article are businesses that fund managers love and could be worth buying. One of those ideas is Bapcor (ASX:BAP).

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There are some ASX shares that fund managers love the look of. They may be able to generate good returns in 2021 for investors.

In this article is an auto parts business, an IT telecommunications provider and a business involved in digital payments.

Here they those ideas:

Bapcor Ltd (ASX: BAP)

Bapcor is an auto parts business. It’s an ASX share that fund manager Wilson Asset Management likes.

Almost a month ago the company gave a trading update which said that in FY21, to the end of November, revenue was up 26% and net profit after tax (NPAT) benefited from operating leverage from lower expenses in areas such as travel and other areas of discretionary expenditure as well as lower interest rates and the contribution from Truckline, which wasn’t included in the prior corresponding period.

For the first half of FY21, Bapcor thinks revenue growth will be at least 25% and net profit after tax growth will be at least 50%.

WAM said that the ASX share has benefited from an increase in domestic travel, reduced usage of public transport and increased second hand car sales. The fund manager also said that Bapcor has a strong balance sheet and WAM believes it’s well placed to make earnings accretive acquisitions.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic donation business. It mainly facilitates electronic donations to large and medium churches in the United States.

Fund manager Ben Griffiths from Eley Griffiths said: “Over the last 12 months it has become clear Pushpay is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX: IRE)). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash.”

Just today the ASX share updated the market to say that it was increasing its FY21 guidance again. The earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) range is now expected to be between US$56 million to US$60 million, up from a guidance range of US$54 million to US$58 million.

Pushpay also announced that it had appointed a CEO from within its ranks. Molly Matthews will take the reins in a couple of months.

Over The Wire Holdings Ltd (ASX: OTW)

Over The Wire is an IT telecommunications provider. It has a market capitalisation of approximately $214 million according to the ASX. The Over The Wire share price has fallen by almost 20% over the last two months.

This ASX share is a holding of NAOS Small Cap Opportunities Company Ltd (ASX: NSC), which is run by Naos Asset Management.

Over The Wire has various segments including a national voice network, public cloud, cyber security services and on-demand cloud connectivity. The company also recently acquired Digital Sense, which mostly provides services to large and government clients. Over 90% of Digital Sense’s revenue is recurring in nature.

Naos believes that Over The Wire will be able to win over clients with its broad array of services, it can help potential clients with complex needs.

One of the main reasons that Naos is bullish about the ASX share is that it has made two acquisitions which could increase the EBITDA by $14 million over the next two years.

The fundie thinks the ASX share could have a normalised EBITDA annual run rate of more than $35 million in FY22 which could result in significant free cash flow generation and could see Over The Wire command a premium EBITDA multiple.

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*Returns as of January 12th 2022

Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia has recommended IRESS Limited, Over The Wire Holdings Ltd, and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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