I have long been a fan of buying ASX shares at good prices. This month seems a very useful time to be investing because of how low some valuations have gone.
Inflation and higher interest rates seem to have really spooked the market.
When you look at the long-term performance of the share market on a graph, there are a few periods of time that stick out as good times to buy such as the GFC and the COVID crash in 2020.
Past crashes seem like major opportunities. But the current one we're going through (whether it's this one or another) seems dangerous. I don't think that shares are magically going to fall by themselves, there needs to be a genuine problem to cause the drop.
The situation of rapidly rising interest rates (from a very low base) is a rare problem. But, whether ASX shares bounce back quickly or not, I believe the prices we're seeing are too good to ignore for the long term. With that in mind, I've picked out some interesting ideas that I could see myself investing $5,000 into:
Temple & Webster Group Ltd (ASX: TPW)
This business is a leading e-commerce business, selling a wide range of furniture pieces and homewares.
I think the 50% fall in the Temple & Webster share price offers a much cheaper entry point to an ASX share that's doing the right things to grow for the long term.
Firstly, I'll acknowledge that a retailer will see bumps – it's unlikely to deliver continuous growth every year. But I think the long term looks promising with a growing uptake of online shopping by consumers.
The company is investing in technology, such as an AI interior design start-up based in Israel. Another example is the company's augmented reality service that enables customers to 'see' a piece of furniture in their room.
It's also investing in efficiencies, which will help the company's unit economics and long-term profitability.
I think that Temple & Webster's revenue can continue to grow at a solid pace over this decade, particularly if the revenue per active customer keeps growing.
Sandfire Resources Ltd (ASX: SFR)
I'm not typically an investor in resources or commodity businesses. However, I would definitely consider a business that is involved in a commodity that has a compelling long-term future. A buying opportunity could be when that commodity falls in price which also affects the business valuation.
That seems to have happened with this copper miner. The Sandfire Resources share price has dropped by 43% this year.
I think copper is a good commodity to have exposure to because it's important for the electrification and decarbonisation of the world. As the world aims for net zero, copper demand could rise.
The ASX share is currently focused on developing projects, such as the Motheo copper project in Botswana, which could eventually reach copper production of around 55kt per annum.
I'm not expecting a quick rebound of copper prices, but I think Sandfire is one of the most interesting 'value' ASX mining shares to consider for the long term at this low price.
Nick Scali Limited (ASX: NCK)
A business that sells furniture may not sound like a compelling ASX share.
But I think there are a number of things to like about this company. For starters, the Nick Scali share price has dropped 38% this year.
I believe the boss – Anthony Scali – is one of the best retailing leaders in Australia. He also has a lot of skin in the game because he owns millions of shares, so he should be very motivated to do well for the ordinary shareholder.
Individual store sales will probably suffer downturns. But, Nick Scali had 62 stores at June 2022 and has a long-term target of 86 across Australia and New Zealand. Opening new stores can offset some same-store sales pain.
It recently acquired another furniture business, Plush, and plans to grow that store network from 46 to between 90 to 100 in the coming years.
Between Nick Scali and Plush, the scale benefits of an enlarged business can help margins.
The online segment of Nick Scali is small but very profitable, in my opinion. Written sales order growth was 35.8% in the second half of FY22. The full e-commerce offering was launched in Australia by the ASX share in May 2022, which drove growth in June and July 2022.
Cycling against lockdowns, Nick Scali reported total written sales order growth of 64.1% for July 2022, the first month of FY23. Plush's earnings are a boost to Nick Scali, seeing as it didn't own the business in the prior corresponding period. On its own, Nick Scali's total written sales orders were up 28.8% in July 2022.
Finally, Nick Scali pays an attractive dividend. It could be lower in FY23 or FY24 (compared to COVID years). But, the FY24 estimate on CMC Markets puts the annual dividend at 64.5 cents per share, which translates into a grossed-up dividend yield of around 9.5%.
