The ASX share market has been through loads of volatility over the last couple of years. But, this could be a great time to invest in ASX growth shares in my opinion.
We want to be able to buy good businesses at the lowest possible price. But, those prices don't usually stick around for long, so if we want to try to beat the market then I think it's important to jump on the opportunities while they're still there.
Why I think it's time to buy ASX growth shares
The share market went through uncertainty as interest rates shot higher and inflation caused widespread impacts.
Many ASX growth shares got smashed during 2022, such as Xero Limited (ASX: XRO), Johns Lyng Group Ltd (ASX: JLG), ARB Corporation Ltd (ASX: ARB), Pinnacle Investment Management Group Ltd (ASX: PNI), Australian Ethical Investment Ltd (ASX: AEF) and Seek Ltd (ASX: SEK).
All of those business valuations are still lower than they were 18 to 24 months ago.
Warren Buffett, one of the world's greatest and wisest investors, once said:
Be fearful when others are greedy and greedy when others are fearful.
He also said in 2001:
To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
Plenty of businesses are facing uncertain shorter-term conditions. There's higher wages, higher materials costs, higher financing costs and so on.
But, I don't believe this will be the situation forever. Inflation may well have peaked in places like Australia and the US, which is what the central banks want to see. But, the next question is how long it will take for inflation to return to 3% or lower. I'll point out that there are warning signs that inflation could continue at a higher-than-desired level. But, that's not enough to stop me from investing.
I think that many of the ASX growth shares that I've mentioned, and plenty I haven't named, are good long-term opportunities.
Despite the uncertainties, businesses are continuing to invest and many of them are continuing to grow revenue and hopefully grow earnings.
Economic conditions may worsen during this year as interest rate rises impact households and perhaps consumer-facing businesses. But share prices and GDP don't necessarily move together.
Which opportunities I'd buy
If I had to narrow the list of names that I mentioned down to three, I'd choose Xero, Pinnacle and Johns Lyng.
I like that Xero is now choosing to become more profitable and focus a bit more on displaying its operating leverage.
Australian Ethical's funds under management (FUM) have suffered amid the market turmoil. But, an end to asset declines and the benefit of the Christian Superannuation members joining could be a longer-term boost for FUM. In the latest quarterly update, for the three months to March 2023 saw an increase of FUM by $400 million.
Johns Lyng is achieving a lot of profit growth and could benefit from the increasing number of expensively damaging natural hazard events.
But, I'm also optimistic about some other businesses that are heavily involved with using technology in their offering, such as Temple & Webster Group Ltd (ASX: TPW) and Volpara Health Technologies Ltd (ASX: VHT).
