After all the excitement for the ASX share market in 2022, I think there are some very compelling ASX growth shares that are at prices that could mean excellent returns in 2023.
It's understandable why asset prices have suffered since interest rates started rising. Warren Buffett, one of the world's greatest investors, once said:
The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature … its intrinsic valuation is 100% sensitive to interest rates.
With that in mind, I'm seeing very good opportunities for potential long-term returns. If I had $20,000 ready to go to invest, these are some of the ASX growth shares I'd want to choose:
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Xero Limited (ASX: XRO)
Xero is one of the world leaders when it comes to accounting software, which is cloud-based. The business has millions of subscribers around the world, in places such as New Zealand, Australia, the UK, the USA, Canada, South Africa, and Singapore.
The business continues to grow subscriber numbers, which is a useful boost for revenue. It's also seeing an increase in average revenue per user (ARPU), partly thanks to price increases.
The Xero share price is down around 30% over the past year, making it look much better value.
With the business now talking about increasing its profit margins, I think it could capture investor attention again when the profit starts flowing through the business and if ARPU keeps rising at a good pace.
I think the company's global growth runway is still long, which is why I'd invest $8,000 into this ASX share.
Pinnacle Investment Management Group Ltd (ASX: PNI)
Pinnacle is one of the most interesting and compelling S&P/ASX 200 Index (ASX: XJO) shares. Amid the market volatility since November 2021, the Pinnacle share price is down more than 40% from its former height.
It's logical there would be difficulties during a time of market decline because of the fact that it's a funds under management (FUM) business. While it doesn't run funds itself, it helps launch funds management businesses and then receives a cut of their earnings because it owns a stake. Pinnacle can offer services like legal, finance, fund administration, seed FUM and so on to allow the fund manager to focus on investing.
A number of the fund managers that Pinnacle is invested in regularly deliver outperformance, so fund inflows could resume once the interest rates stop going up and the share market seems less intimidating.
Pinnacle has been hit hard, but I think it's a contender for one of the strongest rebounds over the next 12 months.
It's exciting that the portfolio of managers continues to grow too. Pinnacle has recently expanded into Canada with a small-cap-focused manager.
I'd put $7,000 into this ASX share.
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is a fast-growing furniture and homewares online retail share. It has grown significantly since the start of COVID-19 and, despite lockdowns being over, is expecting to return to reporting good year-over-year sales growth by the end of FY23.
Over the past year, the Temple & Webster share price has fallen by 33%.
Households weren't likely to keep spending on the home as strongly forever. But, I think the heavy fall now represents good value with the business heavily focused on the long term. It has a goal of being the largest homewares retailer, online or offline.
It's investing heavily in growth areas such as marketing and technology. The business is able to offer customers an augmented reality (AR) service so that they can see the product in their space.
As the company grows in size, it can benefit from scale advantages, which could make it a much more profitable business in future years.
I would invest the final $5,000 into this exciting business.
