Despite the strong performance of the ASX share market and global stock market, I still there are some wonderful opportunities to invest in at good prices.
Some investments look like they're trading far too cheaply for their quality and the potential earnings they could provide investors.
While being underpriced doesn't necessarily mean they'll definitely perform strongly from here, I believe there's a good chance the two investments below have a lot to offer.
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GQG Partners Inc (ASX: GQG)
This business is a fund manager that offers a few different investment strategies, such as US shares, global shares, international shares excluding US shares and emerging market shares.
The investment team have taken a cautious approach with the portfolios because of the rampant valuations in some parts of the market, but this has led to short-term underperformance because the market has continued to deliver strong returns. Prior to this, GQG had a long track record of outperformance, so I think the significant decline of the GQG share price is an overreaction considering the funds under management (FUM) has been largely stable during the share price decline.
GQG recently announced its quarterly dividend. While it's not likely to be exactly the same over the next three quarters, it'd be an annualised dividend yield of more than 14%, at the time of writing.
That dividend represented 90% of the company's distributable earnings for the quarter, so it's trading at close to 6x its annualised quarterly earnings.
If the ASX share's fund investment performance rebounds, FUM outflows could turn into FUM inflows again and the GQG share price could bounce significantly. Even if it doesn't rise significantly, as long as FUM doesn't noticeably decline, the dividend yield is a significant return from the ASX share.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This exchange-traded fund (ETF) has been an effective investment over a long period of time thanks to two stages of its investment process.
First, the Morningstar analysts look for businesses that are believed to have wide economic moats. An economic moat describes how strong the competitive advantages a business has. That can come in many forms such as cost advantages, network effects, intellectual property, regulations, licenses and so on.
The 'wide' part of the economic moat is a suggestion of how long the competitor can keep out competitors to allow it to continue delivering stronger earnings. To earn a wide rating, Morningstar analysts must believe the business' moat will almost certainly endure for at least a decade and more likely than not endure for at least two decades.
After that, Morningstar has a list of high-quality businesses to consider. It only invests in these businesses when the analysts think the valuation is trading at an attractive price compared to what the analysts think it's worth. Therefore, the businesses in the portfolio are cheap compared to what analysts think they're worth.
I'm calling this an ASX share because we can buy it on the ASX and it's about shares.
Over the past 10 years, the MOAT ETF has returned an average of 15.5% per year, though past performance is not a guarantee of future returns.
