I think these 2 ASX shares are buys in this volatility

It’s been tough day for ASX shares but I think there are some attractive buying opportunities in sectors such as video gaming.

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Key points

  • Plus-size clothing and video gaming could be two attractive areas for long-term growth
  • City Chic is a fast-growing ASX retail share with a global presence
  • VanEck Video Gaming and Esports ETF gives investors exposure to the fast-growing e-sports sector

The ASX share market saw a lot of pain on Tuesday. The S&P/ASX 200 Index (ASX: XJO), representing the biggest companies on the ASX, slumped 3.55%. However, I believe there are some good opportunities in this period.

Investors are focused on risk factors such as inflation and rising interest rates. In theory, when interest rates go up, it pulls down the value of asset prices. Investors are certainly putting that theory to the test in the real world at the moment.

But, in my opinion, these lower prices just represent better buying opportunities. There are plenty of ASX shares that I think could make good long-term buys. Here are two of them.

City Chic Collective Ltd (ASX: CCX)

City Chic is a fast-growing business in the apparel and footwear industry. The ASX retail share specialises in selling items to plus-size women.

It sells through a variety of brands in different countries including City Chic, CCX, Evans, Avenue, Hips & Curves, and Fox & Royal.

For me, it’s the global growth potential that is one of the key attractions of City Chic shares. Australia doesn’t have a big population, but City Chic is now generating revenue in North America, the UK, and mainland Europe.

This ASX share may have a solid tailwind behind it. Using Credence Research as its source, City Chic says the plus-size market is forecast to grow by approximately 7% per annum in the coming years.

The retailer also noted that the average annual spend in the plus-size category is currently “materially” less than the rest of the women’s apparel market. City Chic also noted increasing rates of plus-size women globally.

I think the ASX share is doing a good job of achieving growth, particularly online. In the first half of FY22, it made $178 million in global sales. The company said that 77% of the prior 12 months of sales were made online.

In the 17 trading weeks from 27 December 2021 to 24 April 2022, it saw “strong” total sales growth of 25% year on year.

Unlike some other smaller ASX shares, City Chic is making a profit, while also growing in size quickly. In HY22 it made $14 million of underlying net profit after tax (NPAT). I think that’s a positive about the business – it’s not making losses. This can provide valuation support.

Since the start of 2022, the City Chic share price is down by 66%. It looks good value for the long term to me.

VanEck Video Gaming and Esports ETF (ASX: ESPO)

This is an exchange-traded fund (ETF) that gives investors exposure to the video gaming sector.

As a group of businesses, I think the sector this ETF represents has attractive growth potential, particularly after the 23% decline so far in 2022.

VanEck points out that video gaming has achieved average annual growth since 2015 of 12%. E-sports is growing even quicker, partly due to the fact that it has created new potential revenue streams such as game publisher fees, media rights, merchandise, ticket sales, and advertising.

E-sports revenue has grown by an average of 28% per annum since 2015.

The competitive video gaming audience is expected to reach 646 million people globally, partly because of the rising population of ‘digital natives’, according to VanEck.

With the revenue growth for the sector, I think names like Nvidia, Netease, Advanced Micro Devices, Take-Two Interactive Software, Electronic Arts, and Nintendo can deliver long-term earnings growth and this can help shareholder returns.

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 Nvidia. The Motley Fool Australia has recommended Nvidia and VanEck Vectors ETF Trust - VanEck Vectors Video Gaming and eSports ETF. 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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