I think the current ASX share market could prove to be a long-term buying opportunity. Volatility is elevated and lots of ASX shares have seen their share prices fall.
Looking at compelling businesses right now could make a lot of sense because of the uncertainty that exists in the market. Lower prices could be better value for investors.
With that in mind, I think these two ASX shares could be compelling ideas if I were investing $1,000:
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is one of the more exciting opportunities in the ASX retail sector, in my opinion. It has a global store network that sells affordable jewellery, focused on younger shoppers.
The company earns a good amount of profit from each new store it opens. Lovisa is steadily opening more locations in the countries it’s operating in, and it’s also considering opening in new markets.
Lovisa’s number of stores in Australia grew from 153 in FY21 to 158 in HY22. The number of US stores increased from 63 to 81. Middle East stores went up from 36 to 44. The ASX share is also working on its digital offering, which it thinks is in its “infancy stage”.
In HY22, revenue grew by 48.3% to $217.8 million. Net profit after tax (NPAT) jumped 70.3%, demonstrating the operating leverage of the business.
The ASX share continues to see more growth, which can help drive profit higher. Trading in the first eight weeks of the second half of FY22 saw comparable store growth of 12.1%, with total sales up 61.7%.
I think the business can keep growing its store network, particularly in untapped markets. It’s also paying a nice dividend. In HY22 it grew its dividend to 37 cents per share, up from 20 cents per share. Lovisa offers a trailing partially franked dividend yield of 3.5%.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This is an exchange-traded fund (ETF) that is designed to own a portfolio of high-quality businesses that are valued at attractive prices.
What’s the ASX share about? The idea of a ‘wide moat’ is referring to a business’ competitive advantages. The stronger the competitive advantage, the wider the economic moat is. The moat analogy is about how difficult it is for a competitor to ‘invade’.
For Morningstar analysts, which are the people that decide the businesses that go into the MOAT ETF, they are looking for businesses where the economic moat is very likely to persist for at least the next decade and has a good chance of lasting at least two decades.
Once Morningstar has identified those businesses with strong, long-term economic moats, shares are only bought for the MOAT ETF if they are trading at attractive prices relative to Morningstar’s estimate of fair value.
At the latest disclosure from 13 May 2022, these are the investments that have a weighting of at least 2.5% in the ASX share’s portfolio: Campbell Soup, Merck & Co, Kellogg, Philip Morris, Constellation Brands, Polaris, Medtronic, Western Union, Gilead Sciences and Zimmer Biomet.
The VanEck Morningstar Wide Moat ETF has an annual management fee of around 0.49%, which I think is reasonable for what it does.