The ASX share market is offering investors, of all ages, plenty of opportunities to buy businesses. If someone is reading this aged 35 but with no investments, I don't think that's worth worrying about.
A number of ASX shares are a lot cheaper right now than they have been over most of the last two and a half years. Certainly, inflation and higher interest rates have hurt business valuations. But I think it's a great time to start investing because it's better to buy an investment when the sticker price is lower.
Compounding can really help grow wealth
Long-term compounding can make a big difference to an investor's portfolio over time.
At 35, investors still have three decades before reaching retirement age. I'll show how that can play out when investors put money to work for a long time, using the Moneysmart compound calculator.
Historically, the share market has returned an average of around 10% per annum. That's just an average, sometimes it's a big rise in a year; other times it can fall.
If a 35-year-old can invest $500 a month and earn 10% per year then they'd have $987,000 after three decades.
Investing $1,000 a month would turn into $1.97 million.
Which ASX shares are cheap?
Investors don't need to go for the cheapest ASX shares or the ones that fall hard. We just need to find investments that have compelling plans and are growing over time.
I think the following three businesses look like solid contenders for at least the rest of this decade.
Nick Scali Limited (ASX: NCK)
Nick Scali may be best known as a business that sells furniture, but I think it has a number of attributes that are attractive.
For starters, it's currently run by managing director Anthony Scali. I think he's a talented operator and he's very aligned with regular shareholders because he owns millions of Nick Scali shares.
The ASX share recently bought the business Plush, which adds to its scale. Not only does it create compelling synergies, but the combined business has a strong store rollout plan with an eye on growing online sales as well.
Nick Scali typically pays investors a sizeable dividend. The Nick Scali share price has dropped almost 40% in 2022. According to estimates on CMC Markets, it could pay a grossed-up dividend yield of 9.7% in FY24 and 10.8% in FY23 (the current financial year).
Wesfarmers Ltd (ASX: WES)
Wesfarmers is the parent company behind many iconic Australian businesses such as Bunnings, Kmart, and Officeworks. Other businesses in its portfolio of names include Priceline, Target, Catch, and Clear Skincare Clinics.
Despite having this quality collection of names, the Wesfarmers share price has dropped around 25% since the start of the year. I think this is a good time to get some exposure to this ASX share.
I like how the management can, and do, alter the names in the portfolio so that it's more future-focused. For example, it has recently started a healthcare division. I think this has an attractive future because of the ageing demographics of Australia. Plus, it's working on a lithium mining project which could diversify and grow the company's earnings.
Brickworks Limited (ASX: BKW)
I also think that the Brickworks share price is looking cheap at the moment.
While it has only declined 12% in 2022 at the time of writing, I think the underlying assets look undervalued.
It owns a large chunk of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, which is an investment business that is growing its portfolio of investments and steadily increasing its dividend to Brickworks (and other shareholders).
Brickworks is the biggest brickmaker in Australia, which includes the business Austral Bricks. It also gives exposure to other building products through names like Austral Masonry and Bristle Roofing.
After making some acquisitions a few years ago, it's also the largest brickmaker in the northeast of the US, which is a promising, large market for the company.
Finally, Brickworks has a joint venture with Goodman Group (ASX: GMG). The two businesses are building a growing portfolio of industrial properties within a property trust. Completing the buildings is growing the underlying value of Brickworks, generating profits, and also leading to stronger rental income.
I think the Brickworks share price looks attractively cheaper than the combined value of all of the above assets I mentioned. At 31 July 2022, the inferred asset backing was over $33 per share, according to Brickworks.
At the time of writing, Brickworks shares are going for $21.80 apiece.
