The ASX is recovering and now investors are looking at trying to find bargain shares.
Some of the highest quality shares like CSL (ASX: CSL) and Altium (ASX: ALU) have seen their share prices recover strongly since 23 March 2020. You can’t go terribly wrong holding those growth ideas, but there are plenty of shares that are still priced a lot lower.
Here are three ideas for the recovery:
WHSP (ASX: SOL)
A 22% drop of the WHSP share price since the beginning of the market drop has made the old investment house more attractively priced. For decades it has been paying a solid dividend but it has also been re-investing a portion of cash profits back into the business year after year for more growth.
It has survived crisis after crisis over the decades. This is different to the typical economic recession, but with large investments in a telco, a pharmacy business, a coal miner and a diverse property business, it seems defensive. The growing dividend is an attractive bonus.
Japara Healthcare (ASX: JHC)
Japara has been a tough share for a long time. Between 18 March 2020 and now the Japara share price has fallen 48.5%. There are obvious fears that COVID-19 could cause a terrible toll on its resident population. The Aged Care Royal Commission is also probably going to be a negative for the industry.
But, Australia seems to have gotten COVID-19 largely under control. Japara may have removed its guidance recently, but it is prepared for COVID-19 and its occupancy is in line with February 2020 with 4,127 residents which continue to generate fees for Japara.
It also owns its property portfolio and is currently selling two properties and then leasing/renting them. The proceeds will raise $13.3 million and $3.6 million.
There’s underlying value to Japara which I don’t think the market is appreciating at a share price of $0.50.
Bubs Australia (ASX: BUB)
Bubs is a fast-growing infant formula business which specialises with goat milk products. It’s the companies that are producing the essential products that people need to consume that are seeing high demand. Bubs is one that is seeing strong demand for its products.
Despite the continuing demand, Bubs’ share price has fallen to $0.77 at the time of writing. The half-year results was impressive with 37% growth of revenue and 77% growth of infant formula revenue. And the infant formula gross margin increased to 41% (up 5 basis points). The overall gross margin increased from 19% last year to 24% this year.
A business that has a large total addressable market, new products, fast-growing revenue, rising margins and focused leadership is worth keeping an eye on.
Summary
These three ideas have their different strengths and weaknesses. In my opinion, Bubs is the one most likely to deliver big returns over the next five years because of its growth trajectory. WHSP is something you could hold for decades. Japara would be a high-risk, high-reward idea if it can keep generating decent profits. But technology shares could recover even stronger than any of my ideas:
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Disclosure: At the time of writing, Jaz owns shares of WHSP and Altium at the time of writing, but this could change at any time.
