Some of the country's top fund managers have revealed some great ASX share picks for 2021.
There was a huge amount of disruption in 2020 due to the COVID-19 pandemic.
These businesses have been identified by fundies as among the best opportunities for 2021:
Downer EDI Limited (ASX: DOW)
Downer is the choice of fund manager Matthew Kidman from Centennial Asset Management.
The ASX share boasts that it has a history dating back over 150 years. It designs, builds and sustains assets, infrastructure and facilities and it's the leading provider of integrated services in Australia and New Zealand.
Downer is currently in the process of restructuring its business and it's selling assets. A recent sale was a mining business. Mr Kidman said that it's selling its lumpy, heavy capital intensive components, and going into a much more capital-light service-based business with a lot of long-term government contracts.
The fund manager said that Downer is really unloved by the market but it's making progress in fixing the business with a good balance sheet and its business divisions.
Mr Kidman believes the company will get a re-rate by the market after it divests some of the lower-returning businesses and focuses on better-returning businesses. He thinks it can trade on a higher earnings multiple and the business can also increase its earnings. The fundie believes the share price could reach at least $7 in 2021 as the story unfolds.
Mortgage Choice Limited (ASX: MOC)
Mortgage Choice is the ASX share pick for 2021 of Matthew Booker, from Spheria Asset Management. Spheria is actually the largest shareholder of Mortgage Choice at the moment.
Spheria believes the outlook for the mortgage broking industry looks "fantastic" for the next five or ten years. He said that the financial services royal commission was hell and at one point it looked like the industry may get shut down. But now, Mr Booker believes, the mortgage broker industry is actually going to proliferate.
The fundie believes that mortgage brokers will gain increasing market share of the mortgages market, and he thinks that Mortgage Choice can achieve a rising market share of the broker industry.
Tyro Payments Ltd (ASX: TYR)
The ASX share choice of Ben Clark from TMS Capital is Tyro Payments. Mr Clark thinks that the business has got a really good long-term structural growth story.
The fundie thinks Tyro is a recovery play because as the economy reopens and relaxation starts to come back in, Tyro could benefit from the amount of hospitality merchants it services and there could be "some pretty strong growth."
There are four catalysts that TMS Capital sees for the ASX share. First, the fund manager sees the volume of transactions accelerating through the network. Between 1 December and 11 December, Tyro saw 29% growth compared to the prior corresponding period.
Second, Mr Clark thinks the ASX share will gain more of the market share and potentially enter into new verticals.
Third, he's excited by the launch of TyroConnect. This is the integration hub that Tyro has build around it point of sale (POS) system, which TMS thinks will create more customer loyalty.
The final point was that the lending part of the business, which froze during the COVID-19 period, will rise again. It could turn into a good profit centre.
However, Tyro recently announced that it has experienced terminal connectivity issues for some of its EFTPOS terminals. An issue caused some terminals to lose connectivity, so they couldn't transact or be updated remotely.
To fix this, Tyro has been collecting, repairing and returning impacted terminals to merchants as quickly as possible.
On 13 January 2021, about 70% of merchants were unaffected, a further 11% of Tyro's merchants have multiple terminals with at least one functioning unit allowing them to continue to process payments. It's the remaining 29% that are fully impacted and are the focus of the recovery effort. Approximately 2,000 terminals a day are now being collected. Tyro expects the majority of impacted merchants to be back to normal operations by the end of the week, with the rest sorted in the following week.
