There are some ASX shares which may be able to make at least decent investment returns over the longer term.
Here are two ASX shares that could be worth looking at:
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This investment is invested entirely in businesses listed in the US. The Australian dollar has been getting stronger compared to the US dollar, so it’s getting cheaper for Aussies to buy exposure to US businesses like the ones in this ETF’s portfolio.
VanEck Vectors Morningstar Wide Moat ETF gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.
Morningstar’s rigorous equity research process is used to calculate an estimate of fair value. Then the idea is to find companies that are trading at attractive prices compared to that estimate of fair value.
Looking at VanEck Vectors Morningstar Wide Moat ETF’s top holdings at 13 January 2021, its biggest 15 exposures were: Charles Schwab, Corteva, John Wiley and Sons, Wells Fargo, Bank of America, US Bancorp, Cheniere Energy, Constellation Brands, Zimmer Biomet Holdings, Intel, Aspen Technology, Medtronic, Yum! Brands, Raytheon Technologies and Berkshire Hathaway.
Looking at the diversification of the portfolio, there are five sectors that have a weighting of more than 10%: health care (18.8%), financials (17.6%), information technology (17.5%), industrials (12.2%) and consumer staples (10.8%).
The ASX share has an annual management fee of 0.49%, which is higher than some other internationally-focused ETFs but it hasn’t stopped the ETF from generating compelling long-term returns.
Over the past five years the ETF has generated net returns of 16.6% per annum, which was a stronger return than the S&P 500. Over the past 10 years the index that the ETF tracks has returned almost 19% per annum, beating the S&P 500’s return of 17.4% per annum.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an electronic donation payments business which helps large and medium US churches receive donations from their congregations.
The ASX share is gaining market share as it wins over more churches and more people use the service, particularly during the COVID-19 pandemic.
In the FY21 half-year result Pushpay reported that its total processing volume went up 48% to US$3.2 billion and the operating revenue grew by 53% to US$85.6 million.
Despite the growth that Pushpay has already achieved, it’s expecting a lot more growth.
Fund manager Ben Griffiths from Eley Griffiths said about the ASX share: “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.”
On the revenue and market share side, Pushpay’s management thinks that it can reach a market share of approximately 50% which could translate into annual revenue of US$1 billion.
With its profit margins, Pushpay expects significant operating leverage to accrue as operating revenue continues to increase, whilst growth in total operating expenses remains low. Those thoughts about operating leverage growth are despite the gross profit margin already increasing by another three percentage points from 65% to 68% and the earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin jumping from 17% to 31%.
According to Commsec, the Pushpay share price is values the ASX share at 22x FY23’s estimated earnings.