Long-term investing is usually the best way to make good returns, in my eyes. I like choosing companies that could become much bigger in the coming years. I've been putting some money to work in ASX shares in the last few months, and I'm going to talk about why I chose some of the names I did.
We can't control what share prices do in the shorter term. But, they're more likely to be higher if the business is growing in size.
It helps to buy these growing businesses at a time when the share price is lower because we're making our money stretch further. It was during this time of weaker valuations that I jumped on the following names, and I still like them for the long term.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is a retailer of affordable jewellery for younger shoppers. It doesn't cost Lovisa much for that jewellery, so it's quite cost-effective for the company to expand its store network with new stores with the associated stock. It also earns good margins on its revenue (for a retailer).
In FY23, the ASX share added 172 new stores, reaching a total of 801 globally. The business has only just entered a number of markets like Canada, Mexico, Spain, Hong Kong, Taiwan, mainland China and Vietnam. I think it can double its global store count to 1,600 over the next five years, which could give strong support for the Lovisa share price and net profit.
I think its larger store count can help improve profit margins thanks to scale benefits as it grows.
According to Commsec, it's valued at 25 times FY25's estimated earnings.
Johns Lyng Group Ltd (ASX: JLG)
Johns Lyng is a business that specialises in repairing and restoring properties, with clients like governments and insurance businesses. Its main earnings come from insurable events like storms, floods, fires and so on.
It's seeing strong financial growth from providing services to governments following catastrophe events.
I like that the ASX share is aiming to expand internationally, which is opening up more potential growth. The US and New Zealand are important markets, and the business is thinking about expanding to other countries.
I'm also excited by the company's expansion into areas like electrical testing and compliance, as well as strata services, which could mean appealing synergies with the core business.
Close The Loop Ltd (ASX: CLG)
This ASX share is involved in making the world a more sustainable place. It makes money by collecting various products and then turning them into consumer goods. What can't be re-manufactured or refurbished is recycled. Its promise is "zero waste to landfill."
Over time, I think the business can become much bigger with organic growth and potential acquisitions to offer more services.
It recently gave an update at its AGM that it's tracking ahead of its FY24 earnings before interest, tax, depreciation and amortisation (EBITDA) guidance so far and it is reducing its debt levels. It's currently trading at around 11 times FY25's estimated earnings.
