The ASX stocks I'm about to write about are compelling investments that can create strong investment returns, in my opinion. If I had $20,000, I'd invest in them.
I believe some businesses have the right characteristics to deliver outperformance in the market over the next five or ten years. That's down to the management teams they have, the valuations they're trading at and the industries they're operating in.
With that in mind, these are three names I'd put $20,000 into.
Universal Store Holdings Ltd (ASX: UNI)
Universal Store is a relatively small, but quickly growing ASX retail share. It owns a group of "premium youth fashion brands" which includes Universal Store, THRILLS and Perfect Stranger. It currently has more than 90 physical stores. Its goal is to grow its brands, through both retail stores and wholesale businesses.
If there is an economic downturn, I think younger Australians may be less affected by the higher interest rate environment.
The first half of FY23 saw strong growth for the business – total sales increased 34.5%, underlying earnings before interest and tax (EBIT) grew by 43.2% and statutory net profit after tax (NPAT) jumped 31.7%.
I think the business is trading at very attractive valuation metrics to deliver strong outperformance over time. Commsec numbers put the Universal Store share price at 11 times FY23's estimated earnings and 8 times FY25's estimated earnings. In FY25, it could pay a grossed-up dividend yield of 10.6%.
The ASX stock looks cheap, it's growing its store network, expanding its Perfect Stranger brand, benefiting from its increasing scale as well as from its new distribution centre.
Vaneck Morningstar Wide Moat ETF (ASX: MOAT)
This exchange-traded fund (ETF) is one of my favourites to invest in some shares. This ETF is offered by VanEck, with "a focus on quality US companies Morningstar believes possess sustainable competitive advantages, or 'wide economic moats'".
But, target companies need to be trading at attractive valuations, meaning they're at a good price relative to Morningstar's "estimate of fair value."
Past performance is not a reliable indicator of future performance, but over the past three years, the Vaneck Morningstar Wide Moat ETF has returned a total of an average of 16.7% per annum.
The portfolio is regularly changing, but on 24 April 2023, the five biggest positions were Meta Platforms, Salesforce.com, Amazon.com, Fortinet and Microsoft.
The Vaneck Morningstar Wide Moat ETF has a very reasonable annual management fee of 0.49%.
I think it can deliver solid long-term returns.
Brickworks Limited (ASX: BKW)
Brickworks is the largest brickmaker in Australia and one of the largest brickmakers in the northeast of the US. In Australia, Brickworks has a good position in pavers, masonry and stone, roofing and so on.
The ASX stock owns a large chunk of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, the investment house. This investment could deliver a good mixture of dividend growth and capital growth, as it has done in the past, thanks to its diversified and growing portfolio.
What I'm particularly excited by are Brickworks' industrial property assets. It has an interest in two property trusts, with a combined net asset value (NAV) of more than $2.2 billion. Brickworks has also noted that land held outside of the property trusts is held at "historical cost rather than current value".
The property trusts are benefiting from market trends and strong customer demand, which is helping support the asset values despite the higher interest rates. The strong demand is driving the potential rental income higher.
There is substantial development land within Brickworks and the industrial property trust that can provide "significant further growth".
