I think plenty of ASX growth shares are looking attractive right now after a period of elevated ASX share market volatility.
Inflation and the expected interest rate rises have helped push down asset prices.
I think these two ASX shares look good, after their declines:
Vanguard Diversified High Growth Index ETF (ASX: VDHG)
This may be one of the most diversified investments on the ASX. It’s an exchange-traded fund (ETF) which is invested in several investment funds across shares and bonds. I think it has a lot of underlying diversification.
The name of the ETF refers to ‘high growth’, meaning that it’s mostly invested in shares. There are other diversified investment funds provided by Vanguard which have higher allocations to bonds.
At the latest disclosure, around 10% of the ASX growth share’s assets were invested in bonds – around 7% in global bonds and 3% in Australian bonds.
On the shares side of things, around 36% is invested in Australian shares, around 6% in global small shares, 5% in ‘emerging market’ shares, and the rest (approximately 43%) in international shares.
Taking a diversified approach could be a way to lower risks during this period of volatility. The ETF makes it easy to get diversification.
It comes with an annual management fee of just 0.27%, which I think is good for the diversification it provides. The VDHG ETF looks better value after dropping 10% since the start of 2022.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is a leading beauty product online retailer.
I think the company has an attractive future in a market that’s worth more than $10 billion and is steadily seeing a shift to e-commerce, which I think provides tailwinds for Adore Beauty.
Despite the impacts of COVID-19 receding (including the e-commerce boom), I think it’s a good sign that this ASX growth share’s revenue keeps rising.
In the three months to 31 March 2022, Adore Beauty reported its quarterly revenue rose by 9% to $42.7 million and active customers rose by 7% to 880,000.
I like that Adore Beauty is working on improving customer loyalty by connecting with customers with its podcasts and mobile app. The loyalty program is also getting traction, with loyalty members contributing more than 60% of revenue.
In the coming years, Adore Beauty can grow its margins by selling private label products. The first private label items are scheduled for launch in the fourth quarter of FY22.
The fact that the Adore Beauty share price has fallen by more than 60% in FY22 offers investors the chance to grab a piece of this growing business at a much cheaper price.
I think it can become quite profitable in the future as operating leverage builds as the business gets back and it isn’t investing such a high percentage of its revenue for growth.
The company won’t need to spend as much on advertising if it can connect through its owned marketing channels, which will also help longer-term profit margins.