Why I'd buy these 2 excellent ASX shares exposed to megatrends

I think these two ASX shares look like opportunities.

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Key points
  • These ASX shares have exposure to specific underlying megatrends which may provide a much-needed boost 
  • The Betashares Global Cybersecurity ETF provides exposure to the growth of cybersecurity to stop cybercrime 
  • Australian Ethical is a fund manager exposed to the rise of ethical investing (and growth of superannuation assets) 

Some intriguing ASX shares exposed to useful 'megatrends' right now are worth investigating, in my opinion, as an excellent way to diversify and strengthen your investment portfolio.

Megatrends (a fancy word for trends on steroids) and other tailwinds can help boost revenue and earnings over the coming years. But they don't automatically mean that an investment is going to perform well.

I believe that the two ASX shares below look compelling for the long-term based on their specific megatrend tailwinds — particularly at their current prices. Let's take a look.

Business man at desk looking out window with his arms behind his head at a view of the city and stock trends overlay.

Image source: Getty Images

Betashares Global Cybersecurity ETF (ASX: HACK)

This is an exchange-traded fund (ETF) that is focused on the global cybersecurity sector.

Sadly, cybercrime is on the rise. For example, over the 2021 financial year, the ACSC (Australian Cyber Security Service) received more than 67,500 cybercrime reports, an increase of nearly 13% from the previous financial year. The ACSC said:

The increasing frequency of cybercriminal activity is compounded by the increased complexity and sophistication of their operations.

The accessibility of cybercrime services – such as ransomware-as-a-service (RaaS) – via the dark web increasingly opens the market to a growing number of malicious actors without significant technical expertise and without significant financial investment.

On the good side of the cyber fight are cybersecurity businesses. Some of those names include Palo Alto Networks, Cisco Systems, Crowdstrike, Zscaler, Mandiant, Booz Allen Hamilton and VMware.

Organisations and individuals will continue to want their data, digital assets and so on protected, so I think the HACK ETF is a pretty defensive idea as well.

In my opinion, it looks like a more attractive opportunity after a 20% drop of the valuation since the start of the year.

Australian Ethical Investment Limited (ASX: AEF)

The second ASX share with a megatrend behind it is Australian Ethical. This is a fund manager that provides investors with exposure to investments that align with their ethical viewpoint.

The company's investment strategy involves avoiding some sectors, such as coal, and focusing on opportunities in areas like healthcare where it finds good ideas.

Australian Ethical is benefiting from the growing demand of investors wanting compelling investments that tick the environmental, social and governance (ESG) box.

It benefits from regular contributions of the superannuation guarantee from members, as well as balance transfers from new members.

In its latest quarterly update for the three months to 31 March 2022, the fund manager said that it experienced positive net inflows of $240 million and a 4% increase in customers.

The ASX share ended the last quarter with funds under management (FUM) of $6.83 billion. In the nine months to March 2022, Australian Ethical saw a rise of 13% of FUM.

I believe the Australian federal election was another example of how climate change is becoming increasingly important in some people's minds. So it's not much of a surprise to see funds flowing Australian Ethical's way.

Over the long-term, I think Australian Ethical can continue to achieve growing FUM, good investment returns and offer more investment options that attract more funds. I also believe that as Australian Ethical lowers its management fees, it can attract more customers for whom the management cost is a sticking point.

And finally, I think the Australian Ethical share price looks much better value after a 61% fall this year.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Australian Ethical Investment Ltd., BETA CYBER ETF UNITS, Cisco Systems, and CrowdStrike Holdings, Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended VMware. The Motley Fool Australia has positions in and has recommended BETA CYBER ETF UNITS. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. and CrowdStrike Holdings, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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