3 ASX shares that’ll grow regardless of inflation or economy: expert

These small-cap stocks are structural winners that’ll don’t care about macroeconomic conditions, says one fund manager.

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Inflation and interest rates have completely dominated ASX share market discussions the past few months.

Is post-COVID inflation just a fad or will it stick around? Will central banks lose their nerve and raise interest rates earlier than they’ve flagged?

This uncertainty is causing some anxiety.

But Montgomery Investment Management chief investment officer Roger Montgomery reckons he’s picked out 3 small-cap ASX shares that will win regardless of macroeconomic conditions.

That is, these companies will enjoy growth because of structural reasons — their business models and the way they’re placed in their sectors makes them unique and valued.

Here are Montgomery’s picks:

Megaport Ltd (ASX: MP1)

Megaport allows computer networks to connect to cloud service providers.

According to Montgomery, the company currently facilitates access for 2,100 customers to reach 740 data centres globally.

Megaport shares closed Tuesday 1.22% higher at $18.20. They’ve gained almost 28% this year so far.

Montgomery reckons the next “catalyst” for a price spike will be the July quarterly update.

“We believe MP1 has a large growth opportunity in front of it, including from new products, an example being the recently launched Megaport Virtual Edge, which is being sold by the salesforce of Cisco Systems Inc (NASDAQ: CSCO),”  

“We expect the company to enjoy the tailwinds of rapid growth in cloud computing, which is a lowly penetrated market, offering multi-years of opportunity runway ahead.”

Alliance Aviation Services Ltd (ASX: AQZ)

Montgomery had already identified Alliance Aviation’s enviable market position back in April, but again reiterated the attractiveness of this ASX share.

Both the big players, Qantas Airways Limited (ASX: QAN) and Virgin Australia, wet lease planes from Alliance.

“Wet leases are agreements between 2 airlines, where the lessor agrees to provide an aircraft, crew, maintenance and insurance to the lessee in return for payment on the number of hours the aircraft is operated, irrespective of how many passengers are on the plane or the price they paid for their seat,” said Montgomery. 

“Wet leases offer the lessee everything needed to begin flights on an almost immediate basis.”

The company cleverly took advantage of the depressed aviation market last year, buying up 30 Embraer E190 planes for just $197 million.

“These prices are cents on the dollar of the original capital cost of the assets,” Montgomery said.

“This is AQZ’s key competitive advantage, great operational on-time performance from the lowest capital cost aircraft in the market.”

Alliance shares closed slightly lower on Tuesday at $4.34. That’s 13.02% up from the start of the year.

“We believe it is worth in excess of $5.00 per share.”

Aeris Resources Ltd (ASX: AIS)

Copper is a theme that Montgomery thinks has a lot of merit currently.

“There has been a long-identified dearth of global copper discoveries and projects coming online, with mined grades continuing to fall as the easiest to find and cheapest to mine copper gets accessed and depleted,” he said.

“Future supply growth for copper looks challenged, whilst the future demand — driven by incremental needs from decarbonising economies — looks strong.”

Among the local copper producers, his pick is Aeris Resources.

The company recently raised $50 million to fund more drilling, and extend the working life of its Queensland Cracow Gold Mine and NSW Tritton Copper Project.

“The exciting story is this influx of capital has funded increased drilling activity at targets close to existing infrastructure,” said Montgomery.

“High copper grades have been found near [the] surface, which could mean higher copper production, longer mine life, and cheaper extraction costs and potentially higher margins in a commodity that looks structurally attractive.”

Aeris shares closed flat for the day on Tuesday at 18.5 cents. The stocks are up a whopping 85% this year.

“We have been an investor in AIS from 3 cents per share and assuming continued strong drilling results, we think 30 cents is not out of the realm of possibility.”

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Motley Fool contributor Tony Yoo owns shares of Qantas Airways Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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