Four ASX shares that are rising more than most today are listed below. Here's why they are jumping:

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is up 11% to 27.2 cents. This is despite there being no news out of the lithium miner. However, it is worth noting that the lithium industry is on fire today. It seems that the prospect of interest rates falling next year has given this side of the market a major lift. Investors may believe lower rates will support electric vehicle sales and boost lithium demand.

Regis Resources Ltd (ASX: RRL)

The Regis Resources share price is up 9% to $2.07. This morning, this gold miner released its bi-annual exploration update. A number of growth opportunities have been found following its exploration. In addition, the gold price stormed higher overnight on the belief that there will be three interest rate cuts in the United States next year.

Spartan Resources Ltd (ASX: SPR)

The Spartan Resources share price is up 7% to 46.5 cents. This morning, this gold explorer released an updated mineral resource estimate for the Dalgaranga Gold Project. That update revealed a 43% increase in Dalgaranga Project Resource ounces, a 13% uplift in grade, and 27% more tonnes. Management stated that it believes this is "an exceptional result for our shareholders." Spartan was previously known as Gascoyne Resources.

Volpara Health Technologies Ltd (ASX: VHT)

The Volpara share price is up 40% to $1.09. This follows news that the health imaging technology company has received and accepted a takeover offer. Lunit Inc. has offered to acquire all of Volpara's stock at a price of $1.15 per share in cash. This represents a 48% premium to where its shares last traded and values its equity at $295.7 million.

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In morning trade, the healthcare stock is up 43% to a 52-week high of $1.11.

Why is ASX healthcare stock Volpara rocketing?

Investors have been fighting to get hold of the health imaging technology company's shares this morning after it confirmed that it has received and accepted a takeover offer.

According to the release, Volpara has entered into a scheme implementation agreement with Lunit Inc. under which Lunit will acquire all of Volpara's stock at a price of $1.15 per share in cash.

This represents a sizeable 48% premium to where its shares last traded and values its equity at $295.7 million. Though, shareholders who have been holding onto its shares since 2019 or 2020 might feel a little aggrieved. During those years Volpara's stock was trading as high as $2.00 and $1.70, respectively.

However, management believes the deal will be a win for humanity. It notes that the transaction is expected to accelerate Volpara's ability to serve its purpose of saving families from cancer.

It also highlights that with the support of Lunit's in-house radiologists and complementary technologies, Volpara's repository of more than 100 million images will be strategically augmented by additional AI expertise and solutions.

Offer is in the 'best interests' of shareholders

The Volpara board is unanimous in its view that this transaction is in the "best interests" of Volpara shareholders. Cornerstone shareholders, which hold or control in aggregate 25.92% of Volpara's stock, also intend to vote in favour of the proposed scheme.

Though, it remains subject to approval from shareholders, the courts, and the New Zealand Overseas Investment Office.

Volpara Chair, Paul Reid, explained why the board believes this is a good deal for shareholders. He said:

Volpara's Board has assessed the proposed Scheme as providing compelling, risk-adjusted value and certainty for shareholders and unanimously support the proposed transaction. In considering options for Volpara, including continuing to implement the Company's growth strategy as a publicly listed company, the Board adopted a long-term view of the risks and rewards of various alternatives. The proposed transaction would accelerate the return of capital to shareholders and mitigate the risks that would otherwise be involved in delivering the opportunities from executing Volpara's strategic plan over time.

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That said, certain investments may work better for some investors than others, depending on their age bracket.

I'm going to outline which type of ASX stocks I'd buy for each life stage, though there's one investment that could work for everyone.

School-leaver

Starting in the financial world can be daunting because of the array of different investment options.

A beginner investor doesn't need to go for the riskiest ASX stocks out there. It pays to note that good companies can deliver compelling compounding returns over the long term. I believe it's better to think of the ASX stock market as the ASX business market, because there are real companies behind each ticker code.

School leavers may be interested in companies that are committed to doing good in the world while still able to deliver capital growth.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI) is an exchange-traded fund (ETF) that provides exposure to a global portfolio of companies that rank well on environmental, social and governance (ESG) factors.

Similarly, Betashares Climate Change Innovation ETF (ASX: ERTH) is an ETF invested in a portfolio of companies looking to help the world reduce energy and water usage, create circular economies (such as better recycling), or innovate for better transportation.

For an individual ASX stock, I like Volpara Health Technologies Ltd (ASX: VHT) an ESG B Corp-certified company that provides breast screening software and risk analysis for patients globally.

Full-time work

Once people enter full-time work earning regular income, they usually also enter a higher tax bracket. At this stage, I wouldn't suggest high-yield ASX dividend shares. As an alternative, I'd want to find investments that can deliver solid returns while also having lower dividend yields.

Betashares Nasdaq 100 ETF (ASX: NDQ) is an ASX ETF that invests in 100 of the biggest companies listed on the US NASDAQ with a demonstrated record of long-term capital growth. The fund is invested in names like Microsoft and Alphabet (Google).

Another ASX stock I particularly like is Johns Lyng Group Ltd (ASX: JLG). The company provides repair and restoration services after insurable events. It's seeing huge growth in its catastrophe division and I also like its expansion into strata services and home compliance (such as smoke alarm and electrical testing).

Mortgage, married, kids

At this age bracket, household income may be strong but expenditure is also high. I think it could make sense to invest in companies that are growing earnings over the long term, but also offer a solid (and growing) dividend that could help with household cash flow.

Wesfarmers Ltd (ASX: WES) is the company that owns Bunnings, Kmart, Officeworks, and more. It's also investing in areas like lithium and healthcare and offers investors a solid grossed-up dividend yield of 5.2%.

Another share I like is Lovisa Holdings Ltd (ASX: LOV), an affordable jewellery company that is expanding its store network globally and is regularly entering new countries. It has a trailing grossed-up dividend yield of 4.9%.

Retiree

Once someone has retired, they're in a much lower tax bracket and that means higher yield options and/or defensive shares make sense.

Charter Hall Long WALE REIT (ASX: CLW) is a real estate investment trust (REIT) that owns commercial property across Australia. It owns assets such as Bunnings Warehouse properties, service stations, industrial and logistics properties, and so on. According to the company's guidance, Charter Hall will pay a distribution yield of 7.8% in FY24 and has a weighted average lease expiry (WALE) of 11 years.

Sonic Healthcare Ltd (ASX: SHL) is an ASX healthcare share that provides pathology services in a number of countries. It's benefiting from Australia's growing and ageing population. Sonic has grown or maintained its dividend every year for decades (though there's no guarantee this will continue), and it has a grossed-up dividend yield of 5.1%.

One ASX stock for everyone

There's one name that could be good for everyone – the investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Its portfolio is diversified, defensive, growing, and the company has increased its annual ordinary dividend every year since 2000. It currently offers a trailing grossed-up dividend yield of 3.7%.

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In fact, I recently invested in two of them for my own portfolio so, be assured, I've backed the stocks I'm about to outline with my own money.  

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is an ASX healthcare share that provides software used in breast screening for cancer. After screening, it also analyses the images, provides risk analysis for patients, and includes software for healthcare professionals to work more efficiently.

The company has a great product which is resonating with customers. More than a third of US women who have a breast screen have at least one of Volpara's software modules used on their images.

Revenue and profitability are increasing at very strong rates. In the FY24 first half, the company saw revenue rise by 17% to NZ$19.8 million, while the normalised earnings before interest, tax, depreciation and amortisation (EBITDA) improved 68% to a loss of NZ$1.4 million.

Despite that loss, the company is in a cash flow positive position, which is a significantly positive step. Its high gross profit margin of 91.6% suggests most of the new revenue it generates can turn into gross profit. Certainly, scaling is very beneficial for the company.

In five years, I think this ASX share could be a much more profitable company.  

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is an online-only retailer of homewares and furniture. It has the goal of being the number one player in the space compared to both traditional retail and online competitors.

In the first few weeks of FY24, it registered revenue growth of 16%. This is an impressive rate considering the economic challenges plenty of households are facing.

I like that the company is trying to expand into both home improvement products and with commercial customers because these are both large categories that a digital retailer could do well by disrupting.

Over the long term, I believe more people are going to shop online more often. It helps that the most digital-savvy generations are entering the workforce and approaching the higher-spending ages.

As the company scales, the ASX share is expecting to grow margins. Growth can help lower its fixed costs as a percentage of revenue, but it's also investing in areas that can help margins such as an AI-powered chatbot. It's also working on an AI interior design service.

In five years, I think the business will be generating much more annual revenue – it's aiming for at least $1 billion of annual sales in three to five years.

Johns Lyng Group Ltd (ASX: JLG)

This company specialises in providing repairs and restoration services after properties and contents are damaged by insured events including impact, weather, and fire events. Its core markets are Australia and the US, though it has recently expanded into New Zealand as well.

Its client base includes major insurance companies, commercial enterprises, local and state governments, body corporates and owners' corporations, and retail customers.

The ASX share is significantly expanding in the catastrophe recovery industry. This division saw revenue growth of 125.3% to $371.3 million.

Its strata services division is promising because, as management has said, there is "immense opportunity for both cross-selling and restoration works and consolidation within the highly fragmented sector". Acquisitions could significantly increase its scale here. Its market share is currently less than 4%.

Plus, it has another growth avenue called "essential home services" after the acquisitions of Smoke Alarms Australia and Lifefire Services. There are an increasing number of regulatory mandates of "essential prevention and monitoring services" delivered by "reputable and registered service providers", according to the company.

The essential home services and strata services offer the company growth and defensive potential.

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The only time when share prices become particularly attractive is when there's something to be genuinely concerned about, nationally or globally. High interest rates are certainly causing investors to be cautious.

I think it's periods like this that can set the foundations for strong returns. Yes, there may be further volatility in the next 12 months. But I believe in three to five years, investors could make solid returns.  

In my opinion, it's sold-off areas like ASX retail shares and ASX healthcare shares where there could be opportunities.

I've written about where I have been investing. But I also believe the below stocks look like quality cheap ASX shares.

Volpara Health Technologies Ltd (ASX: VHT)

Despite the company's rapidly improving bottom line, Volpara is still down 30% from mid-July 2023 and it has fallen 65% from November 2019.

The FY24 first-half result showed a number of positives – annual recurring revenue (ARR) rose 18% year over year to US$22.5 million, the gross profit margin remained very high at 91.6%, and the underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 68% year over year to a loss of $1.4 million. Operating expenses fell 4%.

Its HY24 net revenue retention was 112%, meaning it's getting more revenue from the same customers. Net operating cash flow improved 121% to a net inflow of NZ$1.3 million, compared to a net outflow of NZ$6 million in HY23.

It's expecting more revenue growth and to remain cash flow positive from here onwards. I think it could do very well over the next five years.

Adairs Ltd (ASX: ADH)

The Adairs share price has fallen around 50% since the start of February 2023, as we can see on the chart below.

Adairs sells homewares and furniture through its own brand name, as well as Mocka and Focus on Furniture. I fully expect that retail sales are going to suffer in the next 12 months as the pain of interest rates and a higher cost of living bite further into household finances.

I'd hold off buying before the AGM (on 24 November 2023) just in case there's a nasty surprise. But, after that, I think it's possible the Adairs share price could see a good recovery in three years (or less) once retail conditions normalise.

Australia's rapidly growing population could provide a useful boost in demand in future years. The company also has a number of initiatives to grow its revenue and profit in the future, such as an expansion of its floor retail space, more (paid) members, and the planned efficiencies of its new national distribution centre.

Is this a cheap ASX share? Forecasts are not guaranteed, but the Adairs share price is currently valued at under seven times FY25's estimated earnings, based on Commsec projections.

Premier Investments Limited (ASX: PMV)

Premier Investments is a retailer that owns a number of different brands including Peter Alexander, Smiggle, Just Jeans, Jay Jays, Dotti, and so on. It also has substantial investments in Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).

As we can see on the chart below, the Premier Investments share price is down 25% from November 2021.

I think the international growth plans of Smiggle and Peter Alexander are very compelling, particularly with the world now on a better path after the end of widespread COVID-19 impacts, such as schools being open.

The long-term growth of its digital sales is appealing because it comes with stronger margins.

I also like the look of the forward price/earnings (P/E) ratio. According to the projections on Commsec, the Premier Investments share price is valued at 15 times FY24's estimated earnings, which includes a forecast of lower profit.

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In afternoon trade, the health technology company's shares are up 13% to 72.5 cents.

Why is the Volpara share price rocketing?

Investors have been buying the company's shares today after responding very positively to its quarterly update.

According to the release, for the three months ended 30 September, Volpara reported record cash receipts of NZ$11.5 million. This was up 32% over the prior corresponding period.

In addition, the company finished the period with contracted annual recurring revenue (CARR) of ~US$28.4 million (~NZ$46.3 million), which is up over US$1.2 million since the end of June.

Also growing was Volpara's annual recurring revenue (ARR), which is now ~US$22.5 million (~NZ$36.6 million). This is up from US$21.5 million in the prior quarter.

But arguably the most important number on this release, and the one giving the Volpara share price the biggest lift, was its cash flow.

The company reported positive net operating cash flow of NZ$1.2 million for the quarter. This is the fourth consecutive quarter of positive net operating cash flow. Impressively, this means Volpara achieved its cash flow target 18 months ahead of plan.

In light of this achievement, the company is no longer required to provide Appendix 4C quarterly reporting updates. However, management advised that it remains committed to providing regular operational and financial updates to shareholders and will therefore release business updates periodically.

A milestone quarter

Volpara CEO's and Managing Director, Teri Thomas, appeared to be rightfully pleased with the quarter. Thomas said:

What a milestone quarter for us! I'm delighted to see current customers, happy with our software, expand their use of Volpara to save even more families from cancer. We had a record number of contracts up for renewal and customers have chosen to expand and extended their contracts with us for longer, with more software than ever before. Our record cash receipts reflect the positive impact we have on families, as happy customers pay their bills.

Our growth and financial strength, approaching US$100M TCV, allows us to turn increasingly to growth endeavours like a brand-new product, called Quiver, due out next year. Leveraging our Analytics platform, this new product provides administrative simplification for mammography centres so they can spend more time with patients. We do good and we do it well and that is reflected in this positive quarter.

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It's certainly possible although I wouldn't recommend investors go for the riskiest, most speculative businesses on the ASX. Yes, there may be success stories of small businesses becoming huge, such as Pilbara Minerals Ltd (ASX: PLS), Northern Star Resources Ltd (ASX: NST), and Pro Medicus Ltd (ASX: PME). But they're very rare. There are plenty of companies that don't go anywhere.

Compounding is going to be key for helping with growing the portfolio while the returns and timeframe are key to how quickly we can build up wealth.

Using a compound interest calculator, a starting value of $50,000 can grow into $500,000 through an average of 10% per annum in just over 23 years. Over the ultra-long term, the ASX share market has delivered an average of 10% per annum.

Someone who is 40 years old with $50,000 could reach the $500,000 target before turning 65.

However, if I were looking to grow my ASX wealth potentially quicker than that, I think there could be a better way.

Strong ETFs

I believe there are some exchange-traded funds (ETFs) that can perform better than 10% per annum.

There are some ASX ETFs that are based on quality metrics, whether that's qualitative or quantitative.

For example, the Vaneck Morningstar Wide Moat ETF (ASX: MOAT) is focused on businesses that have competitive advantages that analysts expect to (probably) endure for at least 20 years. Businesses only enter the MOAT ETF portfolio if they're seen as good value.

Since the MOAT ETF started in June 2015, it has delivered net returns of 16% per annum. If it kept that up, which isn't guaranteed at all, it could turn $50,000 into $500,000 after less than 15 years.

Another example is the VanEck MSCI International Quality ETF (ASX: QUAL), which is invested in a global portfolio of 300 names that have a high return on equity (ROE), stable year-over-year earnings growth, and low financial leverage.

Since the QUAL ETF was started in October 2014, it has delivered an average return per annum of 15.6%. If it kept making returns at that pace, it would turn $50,000 into $500,000 in just over 15 years.

ASX growth shares

Historically, there have been plenty of examples of businesses that have delivered capital growth of more than 10% per annum. But now that they're bigger, there's no guarantee that names like WiseTech Global Ltd (ASX: WTC), Altium Limited (ASX: ALU), and Xero Limited (ASX: XRO) can continue to generate strong capital growth from their current high valuations.

However, I think there are always opportunities to make wealth with smaller ASX shares that have the potential to grow substantially from here.

I like to regularly write about compelling businesses at appealing prices. Some of the ones I've covered recently include Lovisa Holdings Ltd (ASX: LOV), Johns Lyng Group Ltd (ASX: JLG), and Volpara Health Technologies Ltd (ASX: VHT). These are the sorts of businesses with an element of international growth that I think could outperform the S&P/ASX 200 Index (ASX: XJO) over the next five years if things keep going well.

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Nvidia has gone on an incredible run, up more than 210% this year and around 300% from mid-October. There aren't many shares that have made those sorts of returns in less than a year, let alone by a business that's now worth over US$1 trillion.

There's a lot of hype surrounding artificial intelligence (AI), and while Nvidia seems on course to benefit from the large demand, its current valuation has a lot of growth factored into the market capitalisation.

I believe the two ASX growth shares that I'm going to write about are more compelling and don't have global attention.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara describes itself as a business that makes software to save families from cancer. The technology is used to "better understand cancer risk, empower patients in personal care decision, improve and maintain quality, and guide recommendations about additional imaging, genetic testing, and other interventions."

The idea is that AI-powered image analysis enables radiologists to quantify breast tissue with precision. Volpara notes that one of its selling points is that in an industry facing increasing staff shortages, its software helps streamline operations.

Since February 2021, the Volpara share price has fallen over 50%, yet the ASX growth share has made a lot of progress. In FY23, it generated 34% revenue growth to NZ$35 million, while gross profit increased 36% to NZ$32.4 million. This implies a very high gross profit margin, which I love to see for businesses that are growing revenue.

When a business has a high gross profit margin it means that a lot of the new revenue can turn into usable profit and then be used for more growth or to increase the profit margin. Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 57% to a loss of NZ$6.1 million.

I think there is a lot of potential for the business to grow revenue with more of its software being utilised by healthcare professionals and geographic expansion in places like Europe.

Johns Lyng Group Ltd (ASX: JLG)

Johns Lyng describes itself as an integrated building service, specialising in rebuilding and restoring a variety of properties and contents after damage by insured events, including impact, weather and fire events.

There seems to be a disappointing trend that there are more damaging and expensive weather events, which can be a tailwind for the level of the company's work and earnings.

FY23 saw the ASX growth share's total revenue rise 43.2% to $1.28 billion, while overall net profit after tax (NPAT) jumped 64.3%. The catastrophe-related segment saw revenue soar 125.3% to $371.3 million.

In FY24, the company is expecting its 'business as usual' revenue to increase by another 18.5%, while the 'business as usual' EBITDA is predicted to increase by 20.1% to $113 million.

I like that the business is looking to grow in different areas as well, including its move into strata/body corporate services, as well as 'essential home services', such as smoke alarm, electrical, gas compliance, testing and maintenance services. There are a lot of revenue synergies that could be created between Johns Lyng's businesses, as well as providing plenty of acquisition opportunities.

According to Commsec, the Johns Lyng share price is valued at 26 times FY25's estimated earnings.

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Businesses that are smaller and earlier on in their growth journey can be very compelling investments.

Some of the biggest technology companies on the ASX and around the world were once unprofitable, but business growth led to scale benefits for profitability.

With that in mind, I'm going to talk about two ASX growth shares that I think have plenty of growth possibilities.

Airtasker Ltd (ASX: ART)

Airtasker describes itself as Australia's leading online marketplace for local services, connecting people and businesses who need work done with people who want to work.

It had a good 2023 financial year, with revenue rising 40% to $44.2 million and gross marketplace volume (GMV) increasing 34% to $253.5 million. Group earnings before interest, tax, depreciation and amortisation (EBITDA) improved 53.1% to a loss of $8 million, while the net cash outflow improved by 24%.

The ASX growth share is expected to be positive free cash flow in FY24, which I believe would be very helpful for the sustainability of the business, as well as possibly improving investor confidence.

Airtasker achieved a gross profit margin of more than 94% in FY23, so any additional revenue should be beneficial for future EBITDA and other profitability levels.

I like the company's international growth potential. The United Kingdom and United States markets, where it has very small operations, are much bigger than Australia and can enable it to grow much bigger than it is today. In FY23, UK GMV grew by 35% to £3.7 million, and posted tasks in the US went up 158% to 64,000.

In five years, I think Airtasker can become a lot bigger, particularly if its revenue keeps rising by double-digits and it becomes (and stays) free cash flow positive.

Volpara Health Technologies Ltd (ASX: VHT)

This company provides technology in the healthcare space for breast screening, analysis and practice operations.

Volpara offers an important service that provides patients and healthcare professionals with more (and new) tools to assess risk. This is enabling the business to grow its average revenue per user (ARPU).

The ASX growth share continues to see impressive strong growth. In the FY24 first quarter, cash receipts increased by 27% to more than NZ$11 million. Volpara also advised it was "heading towards being net operating cash flow positive in FY24", which is ahead of previous guidance.

Volpara's profitability is rapidly improving. In FY23, its operating expenses increased by only 0.9% in constant currency.

The company's gross profit margin improved by 122 basis points (1.22%) to 92.5% in FY23, meaning that a lot of new revenue turns into gross profit. This can then be used for spending on more growth or increasing other profit levels. The net loss improved 40% to NZ$9.8 million in FY23.

In the future, the company anticipates growth from geographic expansion, ARPU improvements, growth with software beyond its core offering (including lung screening), more healthcare initiatives by governments, and increasing usage of artificial intelligence (AI).

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A business that is growing its revenue/profit at over 10% per annum has a much better chance of delivering market-beating returns, in my view. Scaling up with operating leverage can make a big difference to the net profit after tax (NPAT) over time, which is usually what many investors are focused on.

If I had $1,500 to invest in ASX growth shares today, I'd likely pick one of these three.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is an ASX healthcare share that specialises in providing software for breast screening and analysing those images to better understand the patient's risk.

The company is doing an excellent job of growing quickly. In the FY24 first quarter, the business reported that cash receipts were up 27% to NZ$11 million. It's expecting to be operating cash flow positive in FY24, a year ahead of guidance.

When we combine the strong revenue growth with the fact that the gross profit margin was 92.5% in FY23, it's clear that the company's gross profit can rapidly accelerate, with potential for other profit margin measures to be elevated in the future.

In the longer term, growth in Europe and expansion of its lung cancer unit could be very promising in my opinion.

Frontier Digital Ventures Ltd (ASX: FDV)

This ASX growth share has investments in leading online emerging marketplaces (such as South America, Asia etc). Two key areas where its marketplaces operate are property and vehicles.

I think that digital marketplaces have strong revenue growth potential in the countries where it operates because of the level of future e-commerce adoption.

The ASX growth share is now demonstrating positive profitability as well.

In the first three months of FY23, it reported its first quarter of operative cash flow of $0.6 million. There was also a 190% increase in portfolio earnings before interest, tax, depreciation and amortisation (EBITDA) to $2 million, with 12 of the 15 operating companies seeing an EBITDA improvement year over year.

The operating leverage of the online marketplace model is compelling to me.

In three to five years, I believe the Frontier Digital Ventures share price could be much higher. Indeed, if it just gets back to where it was a year ago, it'd rise around 90%. It's down heavily despite being the most profitable it has ever been.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is an ASX growth share that sells affordable jewellery to younger shoppers. Its biggest presence was in Australia (163 stores) at the end of the FY23 first half, but the USA is rapidly catching up where there's a much bigger population – during HY23 the US store count grew by 37 to 155.

Total global stores rose by 86 during the FY23 first half, finishing at 715. If Lovisa's store count keeps growing at this pace (or faster) every six months over the next five years, it could become a much bigger company and achieve much stronger profit.

One of the added bonuses of this company is that it has been steadily increasing its dividend since 2020.

Commsec earnings estimates put the Lovisa share price at under 20 times FY25's estimated earnings, with a possible grossed-up dividend yield of around 6%.

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The term blue chip describes the largest, most well-known and most financially secure businesses. In Australia, we're talking about companies like National Australia Bank Ltd (ASX: NAB), Coles Group Ltd (ASX: COL), Telstra Group Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP).

Small caps are companies with a market capitalisation of less than $2 billion, though some people may say it's when they're smaller than $1 billion.

I'll go through the two main reasons why I think ASX small-cap shares are more attractive to me.

Scalability

Smaller businesses typically have a much longer growth runway than larger companies because they are earlier on in their expansion.

It's much easier for a business with a $500 million market cap to double it to $1 billion than it would be for a $50 billion company to grow to $100 billion.

Think about McDonald's as an example. It would have been much easier to grow from 50 locations to 100 than it would have been to double from 5,000 to 10,000 locations. McDonald's currently has over 38,000 locations – just adding another 5,000 outlets would be a mammoth task.

The amount of new loans that Commonwealth of Australia (ASX: CBA) would need to write to double in size is unfeasible in the medium term.

I think there are plenty of small-cap ASX shares that have demonstrated the potential for revenue and profit growth, such as Volpara Health Technologies Ltd (ASX: VHT) and Temple & Webster Group Ltd (ASX: TPW).

I'd rather most of my portfolio be invested in companies with good earnings and capital growth potential.

International diversification

Australia is a great place to do business. However, it's only a small part of the global economy and has a relatively small population. There's a big world of opportunity out there.

When we think about many of the big ASX blue chips, most earn a large amount of their revenue from Australia.

They're missing out on great global opportunities to reach a bigger target audience, in my opinion.

Also, I believe it's more likely that we can find businesses expanding overseas when we look at ASX small-cap shares. Names like Volpara, Siteminder Ltd (ASX: SDR), Life360 Inc (ASX: 360) and Frontier Digital Ventures Ltd (ASX: FDV) are all growing internationally.

Foolish takeaway

Of course, blue chip ASX shares may be able to provide more stability and peace of mind for some investors in a bear market. But, I believe that ASX small-cap shares will generate the strongest returns over the long term because of their small size advantage.

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A change in valuation, whether that move is up or down doesn't necessarily tell me whether a business is worth buying today. But, there are a few things that I want to look for.

Increasing profit potential for the ASX stock

When I'm looking for opportunities, I want to see a future where a business could be much more profitable than it is today (or expected to be in FY24 as there may be some profit declines due to the economic challenges).

I think seeing that good potential for the future is important because profit growth is what is likely to drive the share price higher. Stronger profits could also lead to bigger dividends in upcoming financial years.

Revenue growth in most years is an essential thing I look for because it helps profit growth, though revenue doesn't need to rise every single year.

Improving profit margins can also help grow profit at an appealing pace. I like to focus on businesses that are looking to increase their scale, open more locations, create a new growth avenue or do something that will help earnings. Being exposed to a useful tailwind is also attractive, such as Australia's ageing demographics.

Undervalued for what it might achieve

It seems obvious to say, but I'd only choose to add businesses to a 'best ASX stocks to buy' list if it seems the market isn't appreciating how much potential a business has.

The undervaluation could be apparent in a few different ways. An ASX stock could be trading at a double-digit discount to its net asset value (NAV). It might be trading on a lower-than-expected price/earnings (P/E) ratio. Or, the share price could have fallen noticeably even though revenue/profit continues to grow.

I recently wrote an article that mentioned one ASX share for each of those possible undervalued factors.

Increasing market strength

I prefer to look at ASX stocks that have a good market position but have the ability to increase their market share, or at least improve their standing with the current customers that they have.

There is quite a lot of competition in a number of sectors, so I'm looking for businesses that are working on providing a better service (such as offering new or improved modules) like Altium Limited (ASX: ALU) and Volpara Health Technologies Ltd (ASX: VHT) are doing.

Some companies might be working on strengthening their supply chain, stock flow and availability with new advanced warehouses such as Coles Group Ltd (ASX: COL) and Metcash Ltd (ASX: MTS).

Offering customers better and/or faster delivery options could also be a good improvement, such as the Wesfarmers Ltd (ASX: WES) OnePass initiative.

The post How I'd build a 'best ASX stocks to buy right now' list appeared first on The Motley Fool Australia.

Companies that are able to grow the revenue and profit margin can grow their bottom line at a pleasingly fast rate, which can be a good thing for shareholder returns.

Businesses don't necessarily need to be classified as an ASX tech share to use AI. I'm going to tell you about three ASX shares that are looking to utilise AI to boost profit.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is an ASX retail share that sells all of its 200,000 products online. It has a large array of furniture and homewares on its website, as well as a growing home improvement range and products for home improvement.

The company recently gave a business update which included an AI update.

It said that ChatGPT now powers all pre-sale product enquiry live chats (which accounts for 25% of customer enquiries. This led to an "increase in live chat customer satisfaction, an increase in customers adding products to their carts, and an increase in conversion rates from this channel."

The ASX share has increased its investment in Renovai, an Israeli start-up that is disrupting how customers shop. At the moment, this powers product recommendation mood boards on the site which have shown a "significant increase in conversion rate for customers who interact with this tool."

Finally, it has used AI to generate "enhanced product descriptions across all 200,000 products on the site, a task not possible to do at scale efficiently with a human team." Company testing has shown this has led to an increase in the conversion rate, add to carts and revenue per visit.

Sonic Healthcare Ltd (ASX: SHL)

Sonic is a global pathology business, but it's involved in AI in a couple of different ways.

The ASX healthcare share has a 20% stake in AI business Harrison.ai which has an existing joint venture called Annalise.ai, which is seen as a market leader in radiology AI.

Sonic's joint venture with Harrison.ai is called Franklin.ai which aims to "develop best-in-class AI diagnostic tools for pathology. Sonic will use Franklin products in-house to "enhance efficiency and quality in its global operations."

Franklin's strategy is to sell AI solutions to the global market. The ASX share's management believes there are "powerful synergies between Sonic (medical) and Franklin (AI) teams."

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is an ASX healthcare share that provides software for medical professionals to carry out breast screening and analysis to help them analyse a patient's risk and help inform them on the next steps.

The company says that its "focus on customer value" means that its "AI-powered image analysis enables radiologists to quantify breast tissue with precision and helps technologists produce mammograms with optimal image quality."

Volpara says that it has a "substantial growth outlook" which includes leveraging AI to create new models for image analysis and interpretation, as well as new applications of research data.

The ASX share has also revealed that Volpara's AI team is working with Microsoft on software to identify heart disease.

The post 3 ASX shares using AI to help supercharge profits appeared first on The Motley Fool Australia.

A bit of weekly volatility is normal on the ASX, but large falls over an extended period of time could signal a chance for investors to buy.

Near the end of last year was a great opportunity to buy large technology businesses in the US and Australia. There has been a big recovery since then, with the Betashares Nasdaq 100 ETF (ASX: NDQ) up 37% in the year to date.

Why I think there are opportunities

The share market is made up of a huge number of different investors. Collectively, the investment world can sometimes become far too optimistic about businesses, without factoring in the potential for things going wrong. There are also times when the share market is far too pessimistic.

A share price is meant to reflect the long-term outlook and potential of a business. It shouldn't necessarily swing wildly every time the ASX share releases a trading update. But sometimes it does.

We shouldn't invest with a contrarian mindset just for the sake of it, but I believe we can take advantage of negative short-term thinking by other investors and make good long-term returns.

At the moment the financial conversation is being dominated by inflation and higher interest rates. Business valuations that have suffered heavily during this period may bounce back in two or three years when this period subsides. Keep in mind I said "years", not months for these potentially cheap ASX shares. It could still take some time for the economic picture to normalise.

Short-term pain for long-term gain?

Share prices often move ahead before the official numbers are reported and confirm the situation.

It's understandable that household budgets are suffering with everything that's going on. Investors are expecting pain for names like Adairs Ltd (ASX: ADH), Universal Store Holdings Ltd (ASX: UNI), Nick Scali Limited (ASX: NCK), Accent Group Ltd (ASX: AX1) and Lovisa Holdings Ltd (ASX: LOV). They could be cheap ASX shares.

COVID-19 boom times aren't going to return for retailers any time soon, but I think the current valuations represent excellent buying on a three-year(-ish) view. The outlook should improve at some point in the medium term when inflation has reduced, though I'm not trying to predict precisely when. Don't forget, Australia's population continues to increase, which should help long-term underlying demand for retailers.

ASX retail share returns could be boosted by good dividend yields as payouts recover in the medium term.

Another area to possibly find cheap ASX shares is smaller tech stocks which have not seen the same rebound as their large counterparts. In this area, I'm seeing much lower prices than the peak, yet promising underlying growth for the businesses like Bailador Technology Investments Ltd (ASX: BTI), Siteminder Ltd (ASX: SDR), Frontier Digital Ventures Ltd (ASX: FDV) and healthcare tech name Volpara Health Technologies Ltd (ASX: VHT).

The third area, which is a bit of a dark horse, is the real estate sector. Higher interest rate costs do hurt property valuations on paper, and it also increases the cost of debt. However, industrial properties are seeing low vacancy rates and strong rental growth, so Centuria Industrial REIT (ASX: CIP) and Goodman Group (ASX: GMG) are interesting opportunities.

Real estate fund managers have fallen hard, yet they continue to generate a lot of management fees and have significant asset backing on their balance sheets, so Centuria Capital Group (ASX: CNI) and DEXUS Property Group (ASX: DXS) could be interesting ideas.

The post How I'm aiming to find under-the-radar cheap ASX shares right now appeared first on The Motley Fool Australia.

Our Motley Fool writers have come up with their favoured stocks trading for under $3 for investors looking to add to their portfolios in the new financial year.

So drink up and check out the selection below.

5 top ASX shares under $3 to buy in July (smallest to largest)

• Dusk Group Ltd (ASX: DSK), $69.74 million
• LGI Ltd (ASX: LGI), $218.97 million
• Volpara Health Technologies (ASX: VHT), $222.56 million
• Westgold Resources Ltd, (ASX: WGX), $755.43 million
• Accent Group Ltd (ASX: AX1), $930.90 million

(Market capitalisations as of market close on 6 July 2023)

Dusk Group Ltd

What it does: Dusk is an ASX retail share that specialises in candles, fragrances, diffusers, and similar homewares. It has a significant physical store network, as well as a growing online presence.

By Sebastian Bowen: Dusk is an ASX share that has been through the wars lately. Today, its share price languishes at $1.15, down more than 70% from the highs of more than $4 a share that we saw in 2021.

Sure, Dusk has experienced a bit of a sales slump since the days of lockdowns. But I think investors have punished this company harshly, with Dusk now sporting a price-to-earnings (P/E) ratio under 4 and a trailing dividend yield of more than 14%.

If the company can stabilise its sales and earnings, the current share price could prove to be laughably cheap. As such, this is definitely one cheap ASX share to check out this July.

Motley Fool contributor Sebastian Bowen owns shares of Dusk Group Ltd.

LGI Ltd

What it does: A small but profitable company, LGI specialises in providing carbon abatement solutions. The team's expertise spans the design, construction, operation, maintenance, and monitoring of biogas extraction systems. LGI operates 27 projects across Queensland, New South Wales, and Victoria.

By Mitchell Lawler: At a market capitalisation of around $220 million, LGI is still a relatively small company. However, since its founding in 2009, it has quickly established a significant presence in a niche that continues to grow in importance. 

Most of LGI's customers are local governments and councils seeking to reduce landfill emissions. While that may seem like a small niche, the company estimates there are around 200 landfill sites suitable for its systems. 

Over the last trailing 12-month period, LGI generated $5.8 million in net earnings from $31.7 million in revenue. In June, the company guided earnings before interest, taxes, depreciation, and amortisation (EBITDA) above its prospectus forecasts – instilling confidence in investors for more growth ahead.

Motley Fool contributor Mitchell Lawler does not own shares in LGI Ltd.

Volpara Health Technologies Ltd

What it does: Volpara is an ASX healthcare share that provides software to healthcare professionals for breast screening. It enables practitioners to analyse the images and better understand the cancer risk of individual patients, and helps to decide if any action is needed. Volpara's software can also help healthcare professionals be more efficient, which is useful during this period of staff shortages.  

By Tristan Harrison: The company has two attributes that I love to see. Its gross profit margin of 92.5% is incredibly high. This means a vast majority of new revenue is turning into gross profit, which can be used to fund further growth. And revenue is growing quickly. In FY23, subscription revenue rose 35% to NZ$33.6 million.

The ASX share is already at breakeven on a cash flow basis, which I think can enable it to invest for further growth in places like Europe.

Numerous tailwinds could boost average revenue per user (ARPU) in the United States, such as mandatory density reporting in the US and the fact that more women are moving into the 'screening age', according to Volpara.

Motley Fool contributor Tristan Harrison does not own shares of Volpara Health Technologies Ltd.

Westgold Resources Ltd

What it does: Westgold Resources is a small-cap Aussie gold miner and explorer active in the Murchison region of Western Australia. It operates open pit mines, underground mines, and three processing plants in the state.

By Bernd Struben: Westgold Resources shares have rocketed 74% year to date. And I believe there's more growth potential ahead.

With global uncertainty and geopolitical turmoil unlikely to fade anytime soon, gold could hit new all-time highs in 2024.

Atop that, Westgold's Bluebird gold mine has hit a series of monthly production records. In May, Bluebird produced 6,300 ounces of gold, up 8% from April. Westgold also reported a new high-grade intercept outside the mine's current Mineral Resource footprint.

And Westgold's Great Fingall gold deposit recently saw a 49% increase in its reportable Mineral Resource Estimate (MRE). At its Q3 update, the miner reported closing cash and liquid assets of $168 million, up $9 million from the prior quarter.

Motley Fool contributor Bernd Struben does not own shares in Westgold Resources Ltd.

Accent Group Ltd

What it does: Accent is a footwear and fashion retailer with more than 800 stores and 35 online platforms across 34 brands. These include Hype DC, The Athlete's Foot, Glue Store, Platypus, and Nude Lucy.

By James Mickleboro: Due to significant share price weakness over the last three months, I think Accent would be a great ASX share to buy in July. And while trading conditions are likely to remain tough in the retail sector in the near term, I believe this is more than reflected in its share price.

For example, Bell Potter estimates that Accent will deliver earnings per share of 15.6 cents in FY 2024. This means Accent shares are trading at a lowly ~11x forward earnings, which is well below the market average.

In addition, with Accent focused on younger consumers that are less impacted by rising interest rates, I see potential for its sales to be far more resilient than other retail categories. All in all, I think this creates a compelling risk/reward for investors.

Motley Fool contributor James Mickleboro does not own shares of Accent Group Ltd.

The post Top ASX shares under $3 to buy in July 2023 appeared first on The Motley Fool Australia.

I love the look of a business that's growing quickly and re-investing for more success. If they have a large addressable market, then there's a large growth runway.

In five years' time, I believe the below three businesses could become much, much larger.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is an ASX retail share that sells affordable jewellery in many countries around the world.

In Australia, a country with less than 30 million people, it had 163 stores at the end of the FY23 first half. In almost all the countries that it's currently in, I think there's room for a larger store network. For example, at the end of HY23, in the UK it had 42 stores, in Italy it had four stores, in the USA it had 155 stores, in Canada it had one store, in Mexico it had two stores and in South America, it had one store.

I think it can easily grow its store network to over 2,000 stores in the next several years, particularly if it expands into India and mainland China. Lovisa has already started opening stores in Hong Kong.

In the FY23 half-year result the ASX growth share saw net profit after tax (NPAT) growth of 31.9%. An expanding global store network could enable a much bigger profit and dividend. It's quite cheap to expand the store network with how cheap the actual products are.

Once it reaches 1,500 stores, I think its operating leverage will really be shining through.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a fast-growing ASX healthcare share that provides software that helps identify breast cancer, analyse a patient's risk and suggest follow-up actions.

It's growing at a very fast pace, in FY23 it achieved total revenue growth of 34% to NZ$35 million, while the gross profit increased 36%. Operating expenses only grew by 7% year over year, demonstrating the operating leverage of its operations, and it could suggest that profit margins are about to soar if it keeps expense growth low.

The ASX growth share is still quite a small business, but I think it's going to become much larger if it can be successful at growing its average revenue per user (ARPU) in the US and expanding geographically in Europe. It seems to be doing well in Australia.

Volpara's increasing usage of analytics and AI could help the ASX share provide an even stronger service, worthy of higher subscription fees from subscribers.

The fact that it is operating cash flow breakeven is a good sign in my eyes that it can invest most of the new revenue heavily without hurting the balance sheet.

Temple & Webster Group Ltd (ASX: TPW)

This ASX share is another one where I'm expecting significant profit margin improvement.

The retailer of furniture and homewares could see a lot of growth in e-commerce adoption. In 2021, online penetration in Australia for homewares and furniture was between 15% to 17%, while it was between 28% to 30% in the UK. This implies that just to reach the previous UK market share level, there's significant growth potential for the ASX growth share.

In FY22, the company saw an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 3.8%. In the longer term, it's aiming for an EBITDA margin of over 15%. I think this implies a lot of profit growth considering the revenue is likely to increase as well.

Temple & Webster said on 17 May 2023 that revenue in the prior four weeks was up 10% compared to the prior corresponding period.

The company has noted that its conversion rate with customers has improved when they use the AI interior design process. There has also been an increase in products being added to carts, conversion and revenue thanks to ChatGPT powering all pre-sale product enquiry live chats, as well as enhancing product descriptions across the ASX share's 200,000 products for sale.

With technology's help, I think the company's profit can soar over the next few years (and beyond).

The post 3 ASX growth shares I think are monsters in the making appeared first on The Motley Fool Australia.

Buoyed by a business update released this morning, the healthcare technology company's shares are tracking 7% above their previous close at 82 cents apiece. In contrast, the S&P/ASX 200 Health Care Index (ASX: XHJ) is down 0.4% today.

The move adds to what has already been a triumphant year for the Volpara share price. Before today, shares were up 40% since ticking over into 2023. This latest update has nudged the year-to-date returns up to 50%.

A positive sign for financial health

Since listing, Volpara Health has been cash flow negative — paying out more in expenses than generating in revenue. For this reason, the company has relied upon capital raises and credit facilities to help fund its operations.

A revolving credit facility was obtained in May last year, providing Volpara with NZ$10 million of cash as required. Today, the company has informed the market that it has decided to reduce this form of credit as it 'is no longer considered necessary'.

The decision was made following staffing changes last year, allowing the business to operate on a roughly free cash flow breakeven basis.

Furthermore, management stated that 'repeatable operating cash flow positivity [is] in sight', a statement that is possibly helping give the Volpara share price a bump today.

For context, the company posted $6.42 million in negative free cash flow for the 12 months ending 31 March 2023. Likewise, operating cash came to $3.85 million in net outflow. Hence, investors are excited by the prospects of positive flows in the future.

Reducing its revolving credit facility will strip out NZ$112,500 in finance expenses annually. According to the announcement, management will review its cash position over the next six months to determine whether further reductions to the facility can be made.

What else is driving the Volpara share price higher?

Sweetening the day for Volpara investors, the company also announced it had won the award for Microsoft's global Healthcare & Life Sciences partner of the year. The award considered more than 4,200 nominations from across the world.

Commenting on the achievement, Volpara CEO and managing director Teri Thomas said:

From a business perspective we are proud to be named Microsoft Partner of the Year in the global Healthcare & Life Sciences category. Microsoft is a great partner with an aligned philosophy that technology should be a force for global good, driving ongoing collaboration to develop new methods of disease detection, enhance our security stance, and reach new markets, which in the end are all meant to improve people's lives.

The next milestone for Volpara shareholders will be the company's first-quarter results for FY2024. These are expected to be posted on Friday 21 July 2023.

The post Here's why the Volpara Health share price is leaping 7% today appeared first on The Motley Fool Australia.

I really like the look of businesses that have impressive gross profit margins because that usually means that revenue growth will translate into appealing gross profit growth. This can then be utilised for more growth expenditure and/or enabling stronger profit generation.

With how well things are going for the two names below, I'd rate them as strong contenders to perform nicely over the next 12 months and beyond.

Siteminder Ltd (ASX: SDR)

Siteminder describes itself as the "world's leading open hotel commerce platform" where it has earned "the trust of tens of thousands of hotels, across 150 countries to sell, market, manage, and grow their business[es]".

Siteminder understandably took a hit during the COVID-19 pandemic but now that travel conditions have returned to normal, things are going very well for the business. In the three months to 31 March 2023, revenue increased 28.7% to $37.3 million while annualised recurring revenue (ARR) went up 28.5% year over year to $150.3 million.

One of the most pleasing elements of the ASX growth share's latest update was that not only is revenue rising strongly, but net subscriber additions were faster in the FY23 third quarter than in FY23's first and second quarters. This could suggest revenue will continue to grow quickly as these new users come on board.

Siteminder is still reporting cash outflows but that's rapidly improving and I think when it reaches breakeven status, it will give investors a lot more confidence. The recent improvement in its cash outflow reflects the scalability of the business and how it has been cutting costs, though it's still investing for growth.

It had $56.9 million of cash at the end of the first quarter, meaning it's well funded to reach breakeven.

The ASX growth share expects to be free cash flow neutral by the end of FY24 on a quarterly basis thanks to revenue growth and "cost initiatives". It also looks good value as its share price is down around 60% from the end of 2021.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is one of the most exciting ASX healthcare shares in my opinion. It provides breast screening software to help patients and healthcare providers better analyse the images and understand the risks of cancer developing.

The Volpara share price is down around 45% since October 2021, and I think it's much better value now, considering it has grown revenue strongly since then.

This business reported a gross profit margin of 92.5% in the FY23 result, meaning nearly all of its new revenue is a boost for gross profit.

The ASX growth share said that in FY23, its net revenue retention rate was 107%. This indicates that not only did it hang onto its existing revenue from customers, but it added an extra 7% revenue from those customers.

Volpara offers a number of different software modules, with analytics, patient hub, and risk pathways seeing revenue growth of 30%, 33%, and 49% respectively in the last financial year. FY23 total revenue went up 34% to NZ$35 million.

Its expenses only grew 1% in constant currency terms, suggesting the business is demonstrating good scalability and has good control over costs. It's starting to achieve breakeven on a cash flow basis, while FY24 could see positive earnings before interest, tax, depreciation and amortisation (EBITDA).

I think the business can keep growing its average revenue per user (ARPU). It could also achieve pleasing success in Europe, with most of its revenue currently coming from the US. Finally, it has a small but promising division focused on lung cancer which could unlock further earnings.

The post I rate these strong ASX growth shares as buys for FY24 and beyond appeared first on The Motley Fool Australia.

To me, taking on a lot of debt is not an ideal way of growing wealth. It comes with a wipeout risk if the investor is unable to keep making the loan repayments. And I'm sure you've seen that interest rates have soared.

Over the long term, shares have delivered average returns per annum of around 10% — that's just an average. One year might see a fall of 10%, while the next year could see a gain of 20%.

If an investment goes up by 10% per year, it doubles in less than eight years. In 20 years, it achieves a return of around 570%.

No returns are guaranteed in the share market, but I believe that good businesses can deliver impressive results.

The simplest advice is to just regularly invest in a broad, ASX-listed ETF that tracks the Australian or global share market, re-invest the dividends, and be patient. Two fund options might be Vanguard Australian Shares Index ETF (ASX: VAS) and the Vanguard MSCI Index International Shares ETF (ASX: VGS).

It would take 17 years for a portfolio growing at 10% per annum to grow to $100,000.

However, I think it's definitely possible for some investments to deliver more growth than that. If $20,000 grows at an average of 12% per annum, it reaches $100,000 in just over 14 years.

I believe there are two areas that have a good chance of delivering a stronger-than-10% return.

ASX growth shares

Businesses that are growing their finances and operations at a faster-than-average speed can deliver better shareholder returns over time, in my opinion.

Over the last five to 10 years, we've seen big returns from names like Xero Limited (ASX: XRO), WiseTech Global Ltd (ASX: WTC), and Pro Medicus Ltd (ASX: PME).

Each business is very different, but I think there are a few factors they all share. They have a global growth plan; they have strong gross profit margins; their customers have long-term relationships; and they deliver software of some sort (which is extremely easy to replicate, enabling quick growth).

Having a solid balance sheet is also helpful for financial stability and growth.

Not every business is going to tick every single box. But, if they're priced fairly and have multiple attractive features, I believe they can do very well.

No one can say which ASX shares can deliver returns that outperform, but I currently like the look of Volpara Health Technologies Ltd (ASX: VHT), Siteminder Ltd (ASX: SDR), Frontier Digital Ventures Ltd (ASX: FDV), and Gentrack Group Ltd (ASX: GTK).

Certain ASX ETFs

ASX ETFs can give us a lot of diversification with just one investment. They can be invested in a particular sector or in an investment style.

I think some sector-based ASX ETFs are demonstrating good revenue growth and increasing profitability with global growth. One industry that meets these criteria is cybersecurity and video gaming. Here, Betashares Global Cybersecurity ETF (ASX: HACK) and VanEck Video Gaming and Esports ETF (ASX: ESPO) look interesting to me.

I also believe that quality-focused ASX ETFs have shown they can deliver solid returns because the underlying businesses have good attributes, such as strong competitive advantages. Although past performance is not a guarantee of future returns.

For example, the Vaneck Morningstar Wide Moat ETF (ASX: MOAT) has delivered average returns per annum of 15% over the past three years. VanEck MSCI International Quality ETF (ASX: QUAL) has achieved an average return per annum of 14.9% over the last five years.

Certainly, I think the MOAT ETF and HACK ETF are two that have a good chance of achieving market-beating returns at the current prices.

The post Got $20k in savings? Here's how I'd aim to turn it into $100k with ASX shares appeared first on The Motley Fool Australia.

Who could be blamed for their interest when some companies in this fashionable industry showcase year-to-date returns of more than 100%? What began with the release of a makeshift AI chatbot known as ChatGPT quickly snowballed into an entire sector of countless companies feverishly stapling their names to this digital revolution.

Most investors have now heard 'AI' said so many times on quarterly calls that it feels like a constant reverberation in our minds. If it were a drinking game, we'd all have passed out many times over by this point.

Times like these are when investors pull up a chair and wonder: is this the 'next big thing' or another trend that will come and go like so many others before it?

Solving Australia's productivity problem

We are all well aware of the inflationary pressure bearing down on Australians like the unforgiving outback sun. After a shock interest rate rise in June, several economists are now tipping peak rates of 4.85%, inflicting greater pain on households.

Part of the problem is believed to be Australia's waning productivity, pictured in the chart below. As Capital Economics economist Abhijit Surya puts it, "[Falling productivity] will prop up unit labour cost growth and keep services inflation stubbornly high."

While some of the ideas of our AI future might well be fantasy — at least for now — its implementation could have very real societal impacts.

Arguably, one of the most highly desired impacts is a major productivity boost. Describing AI's potential influence over inflation, Blackrock CEO Larry Fink quips:

If AI can reach the levels of our imagination just think what it could do. It will change how we work. It would change our productivity. This could be the key that brings down inflation.

Does this all mean ASX artificial intelligence shares are a 'must-have' in the portfolio?

We'd likely need to consult a crystal ball to truly answer such a question. However, some reflection upon past tech booms could serve as valuable introspection.

Are ASX artificial intelligence shares in a mania?

A roll call of the biggest AI boomers on the ASX so far this year includes:

• WiseTech Global Ltd (ASX: WTC), up 63%
• Volpara Health Technologies Ltd (ASX: VHT), up 32.7%
• NextDC Ltd (ASX: NXT), up 43.7%
• Appen Ltd (ASX: APX), up 18.2%

All of the above AI-exposed companies have generated returns exceeding the S&P/ASX 200 Index (ASX: XJO) this year. Yet, their gains are still a far cry from the colossal moves made by their US counterparts. Even further still from the market-melting heights displayed by tech companies during the dot-com bubble.

The apparent disconnect between gains in ASX artificial intelligence shares and others worldwide could be a siren song for investors. For those tempted to dive in on the trend, Motley Fool equity research analyst Andrew Legget provides a word of caution, stating:

It is important for investors to remain cautious in my opinion. We are still in the really early stages of even understanding artificial intelligence let alone how it can be best used.

There is a good chance that a lot of the 'AI' speak we see today is seen in hindsight as a lot of hot air. I wouldn't be basing any investment decision, for any company, at the moment solely on artificial intelligence.

Amid the rapid unfurling of this emerging technology, the importance of applying fundamental analysis is critical. The investors worst affected by the popping of the dot-com bubble were those holding companies with no proven business, no revenue — just a website.

That isn't to say AI is necessarily in a bubble now. In fact, in retrospect, the future may tell us that we undervalued the potential all along.

What everyone should do is evaluate companies, of all sorts, on their own merit. Warren Buffett — arguably the greatest investor of our lifetimes — made his billions by investing in businesses, not trends.

The post Should I be buying ASX artificial intelligence shares right now? appeared first on The Motley Fool Australia.