Rising interest rates make it a tricky investing environment. However, with the prices of many potential investments now substantially lower, I think they’re long-term opportunities.
Businesses continue to operate, even if the share price is up 5% or down 10% in one week. They’re still trying to grow and succeed. I think the lower prices mean it’s a good time to pounce on ideas. Here are two I’d happily buy during today’s trading with $2,000.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is a leading e-commerce platform business for beauty products. It now sells around 11,700 products from more than 270 brands.
I think the Adore Beauty share price looks very good value after its 70% decline this year. It’s also down almost 80% since November.
While the valuation has suffered, the company continues to grow in operational size, which I think is a positive sign for the future. In the three months to 31 March 2022, revenue rose by 9% year on year to $42.7 million, and active customers increased by 7% to 880,000.
I believe the company is doing a good job at retaining many of the customers that it attracted during the COVID-hit years of 2020 and 2021. The number of returning customers increased by 47% year on year – this was driven by strategic initiatives to improve retention.
Those initiatives include things such as growing its own marketing channels like podcasts and the company’s YouTube channel. The business also notes that successful partnerships with Temple & Webster Group Ltd (ASX: TPW) and 7-Eleven have also supported its strategic focus on increasing brand awareness.
I think increasing operating leverage will help increase the ASX growth share’s profitability over the long term and also help revitalise investor sentiment about the business over time.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This is one of my favourite exchange-traded funds (ETFs) on the ASX.
The ETF has not fallen as much as other investments this year — it’s only down by 9%. Even so, I think it represents a better buying opportunity after its decline.
As VanEck says, this investment is about giving investors “exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team”.
The idea of sustainable competitive advantages is that these companies can continue generating outsized profitability for at least a decade and, more likely than not, for two decades. Competitive advantages can come in different forms such as intellectual property or brand power.
But, the competitively advantaged companies are just a starting point, a watchlist. Businesses are only chosen for the portfolio if they are “trading at attractive prices relative to Morningstar’s estimate of fair value”. In other words, they need to be cheaper than what Morningstar analysts think the businesses are actually worth.
This combination of attributes makes the MOAT ETF an attractive ASX growth share, in my opinion.
On 7 June 2022, these were the biggest five positions: Merck & Co, Philip Morris, Kellogg, Campbell Soup, and Constellation Brands. It’s a diverse portfolio of around 50 names.
I think both of these potential investments have a good long-term future. The lower prices represent attractive entry points. I believe Adore Beauty looks particularly good value considering it is still growing revenue, yet its share price is down heavily.