The ASX share market has a wide variety of potential investments to choose from – ASX growth shares, ASX mining shares, defensive ASX shares and so on.
If my portfolio disappeared but I had $10,000 to start again, I'd want to invest for a mix of dividends and growth.
I like that the ASX can provide us with a pleasing source of passive income, supplementing our main job earnings.
The compounding potential of capital growth is also strong in my view, particularly over several years.
But, in all of my potential starter investments, I'm looking for profit growth to drive increased value in time.
I'll start with two ASX growth share ideas I'd add to my portfolio, then outline two ASX dividend shares.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This is my favourite exchange-traded fund (ETF) on the ASX. The idea is that it provides investors with "exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar's equity research team."
Its portfolio is usually full of some of the most compellingly-valued US shares. At the moment, some of its biggest holdings include Boeing, Biogen, Emerson Electric, Adobe, Zimmer Biomet and Etsy.
I think the investment style of this ETF can lead to good returns, though nothing is guaranteed and past returns are not a guarantee of future returns. Over the past five years, it has returned an average of 14.7% to 30 November 2022.
Airtasker Ltd (ASX: ART)
Airtasker provides a platform for people to advertise that they need help with a particular task, such as furniture assembly, removalists, tradesperson work and so on. Taskers can offer to do the work for the proposed fee.
One of the most attractive things about this ASX share is the incredibly high gross profit margin of over 90%. Almost all of the new revenue can be invested back into the business for more growth with product development, marketing or improving the business in some other way.
In the first quarter of FY23, Airtasker's organic revenue (excluding the acquired Oneflare) rose by 36% to $8 million. This included UK gross marketplace volume (GMV) going up by 68% year over year to an annualised £4.2 million.
With the business expanding in the UK and US, I think it's a compelling business to consider for long-term growth.
Adairs Ltd (ASX: ADH)
Adairs is a retailer that sells homewares and furniture through three different brands – Adairs, Mocka and Focus on Furniture.
The ASX share is working on a plan to expand its store network for both Adairs and Focus while upsizing some Adairs store locations (which are more profitable). Plus, the company wants to sell Mocka furniture in-store – at the moment it's just an online-only brand.
The company's new national distribution centre will help it with stock efficiencies, as well as costs.
With the Adairs share price down 46% this year, it now looks very cheap in my opinion. According to Commsec, the company is valued at under 8 times FY23's estimated earnings. It could pay a grossed-up dividend yield of 11.75% in FY23 and 13.5% in FY24.
Metcash Ltd (ASX: MTS)
Metcash may be best known for supplying the IGA supermarkets around Australia, giving it a pleasing source of defensive earnings.
The ASX share's liquor earnings are also noteworthy. It supplies a large number of independent liquor stores around the country including Cellarbrations, The Bottle-O, IGA Liquor, Thirsty Camel, Big Bargain Bottleshop, Duncans and Porters Liquor.
Finally, it has a hardware division with a number of brands including Mitre 10, Home Timber & Hardware and Total Tools. This division is generating the most profit growth at the moment.
I think the business is demonstrating a pleasing mixture of sales growth, investing for long-term improvement, and net profit after tax (NPAT) growth, which is helping fund higher dividends.
According to Commsec, it's expected to pay an FY23 grossed-up dividend yield of 7.8%.
