5 ways to beat the market over a decade (including my best ASX stock pick for each)

These are some of the names I'd choose to try to beat the market.

| More on:
Young boy in business suit punches the air as he finishes ahead of another boy in a box car race.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ASX stock market gives us plenty of opportunities to invest in good businesses at good prices.

We'd all love to invest in the next Pro Medicus Ltd (ASX: PME) or Altium Limited (ASX: ALU) at an early stage of the growth journey, but there are plenty of ways to outperform.

McKinsey and Company recently released an article about how different groups of businesses had managed to deliver outperformance because of different factors.

The past is interesting, though it doesn't necessarily tell us which ASX shares are going to outperform going forward. I'm going to briefly mention an ASX stock that could fit into each category and deliver long-term outperformance in total shareholder return (TSR) terms from here.

High-growth market

Temple & Webster Group Ltd (ASX: TPW) is a business that I believe is in a high-growth market. It's an e-commerce business for furniture, homewares and home improvement.

Since FY19, the ASX stock has grown revenue significantly as more and more people shop online, and return more often. In FY23, revenue per active customer grew 6% year over year. In FY24 to 13 August 2023, revenue had increased 16%.

The company has a three-to-five-year annual sales target of at least $1 billion, which would be a compound annual growth rate (CAGR) of between 20% to 36%. It's expecting to grow its profit margins as it becomes bigger, which would help net profit growth accelerate and could excite investors.

New or enhanced products

RPMGlobal Holdings Ltd (ASX: RUL) is an ASX tech share that provides software for miners around the world, helping them maximise the lifecycle of the deposit. It's doing an excellent job at changing its customers to software as a service (SaaS). The ASX stock is also steadily building its environmental offering for customers.

Plenty of software businesses have proven that they can deliver good returns thanks to good margins and revenue growth, and this business could be another potential winner.

Refreshing the portfolio

Wesfarmers Ltd (ASX: WES) is a leading business in Australia with brands like Bunnings and Kmart. The company has done a wonderful job at changing the portfolio over the years, such as divesting its coal assets, the Kmart Tyres and Auto business, and Coles Group Ltd (ASX: COL).

In recent times, the ASX stock has entered into the healthcare sector and lithium industry with acquisitions. I think these are the sorts of areas that have long-term growth potential and could also do well during a downturn if there is one. The existing businesses like Bunnings could continue to perform strongly over the long term.

Achieving a successful turnaround

Reject Shop Ltd (ASX: TRS) is a discount retailer that has previously suffered through some hard times.

But, since the start of 2023, the Reject Shop has risen around 33%, as we can see on the chart below.

The ASX stock has been working hard with its new merchandise strategy, focused on offering customers low prices on branded household essentials, as well as "more newness and greater variety" across general merchandise and seasonal offerings.

FY23 saw the business grow sales by 3.5%, increase earnings before interest and tax (EBIT) by 35.7% and grow net profit after tax (NPAT) by 63.4%. Rising profit margins is a good sign.

The company has been enacting a share buyback and declared a final ordinary dividend of 6.5 cents and a special dividend of 9.5 cents.

In the first seven weeks of FY24, total sales were up 6.4% and it's targeting to improve its profit margin in the current financial year.

Managing your business better

GQG Partners Inc (ASX: GQG) is a US-based fund manager that provides a variety of investment strategies that have been effective at outperforming their respective benchmarks. The ASX stock has done incredibly well at attracting inflows during a time when plenty of managers are seeing outflows. The fact that a vast majority of its revenue comes from management fees rather than performance fees provides consistency for shareholders. The quarterly dividend is attractive too.

Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Pro Medicus, RPMGlobal, Temple & Webster Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Coles Group and Wesfarmers. The Motley Fool Australia has recommended Pro Medicus, RPMGlobal, and Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

A businessman hugs his computer and smiles.

2 outstanding ASX 200 shares to buy and hold for a decade

I think these ASX 200 shares will continue to reward investors for years to come.

Read more »

A group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.

Down 40% in under 3 years, is the Lynas share price due a bounce?

Is there any hope for Lynas shares?

Read more »

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Share Market News

Is there any chance of an interest rate cut in Australia next week?

Here's what the experts think will happen.

Read more »

Happy woman holding $50 Australian notes

2 ASX shares with strong cash flows

These ASX shares boast excellent cash flows and are inexpensive to buy, in my view.

Read more »

A photo of a young couple who are purchasing fruits and vegetables at a market shop.
Consumer Staples & Discretionary Shares

Buying Coles shares? Here are key metrics you'll want to know

Grab a coffee and join me in this fun financial analysis exercise for Coles.

Read more »

woman consoles robot

Is this ASX small-cap stock an overlooked beneficiary of the AI boom?

Some industry experts anticipate power shortages. Can this ASX company benefit from this trend?

Read more »

Invest written on a notepad with Australian dollar notes and piggybank.
How to invest

3 lower-risk ASX shares for beginner investors

I would happily recommend these three shares to a beginner today.

Read more »

Woman smiling with her hands behind her back on her couch, symbolising passive income.

Down 9% in a year, is it time to buy this ASX 200 dividend stock?

Now may be a good opportunity to add this dividend stock to your portfolio, in my view.

Read more »