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I’d buy these ASX shares in February 2021

There are some ASX shares that I've got my eyes on in February 2021 including fund manager Magellan Financial Group Ltd (ASX:MFG).

There are some ASX shares that I’ve got my eyes on in February 2021.

It’s kind of crazy that it’s already almost the second month of 2021. We’ve seen the US Capitol building stormed, a unique inauguration of the US president and a David versus Goliath tussle over Gamestop.

I’m just going to stick to my normal investing strategy of finding good businesses at seemingly good prices and hopefully benefit from pleasing long term returns. Here are some of the ideas I’m looking at for February 2021:

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a business that has seen its share price fall 12% over the last month and 27% over the past year. I like a good discount. That fall is despite the funds under management (FUM) being over $100 billion and it’s still seeing more net inflows every month. In December it saw net inflows of $579 million, which included net retail inflows of $327 million and net institutional inflows of $252 million.

With the types of investments that Magellan invests in, I think it will be able to deliver good organic FUM growth from investment returns. Magellan has also just launched a series of ETF products that could attract more FUM over time.

Another way that Magellan plans to grow its FUM in the medium term is a new product for retirement. It’s yet to reveal how it works, but it could be announced during the February 2021 reporting season. As long as it’s not too complicated, I think that could prove attractive to both Magellan investors and retirees.

The next reason I like this ASX share is because it’s making its own investments into exciting operating businesses which could produce a lot of capital growth over the next five years. Those investments include Mexican outlet chain Guzman y Gomez, financial business FinClear and new investment bank Barrenjoey.

The final reason why I think Magellan is worth looking at is because of its high level of dividends, which is a good way of delivering total shareholder returns in my opnion because of how capital light investment management businesses are. It doesn’t need to hold onto high levels of profit to grow. Magellan has a trailing partially franked dividend yield of 4.5%.

Using the earnings projections on CommSec, Magellan is priced at 17 times the estimated earnings for the 2022 financial year.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is a payments business that specialises in helping US large and medium churches.

I think the market originally underestimated how scalable Pushpay was and now I think the market is underestimating Pushpay’s growth runway.

The ASX share has already increased its guidance for EBITDAF (EBITDA explained, the F stands for foreign currency) a few times for FY21, that EBITDAF guidance is now for a range between US$56 million to US$60 million after an update a couple of weeks ago.

Using the earnings projections on CommSec, Pushpay shares are priced at 39 times the estimated earnings for the 2021 financial year.

However, I think it’s important to remember that Pushpay is experiencing excellent operating leverage improvements and management are expecting even more. In HY21 alone, the EBITDAF margin went up 14 percentage points to 31%, up from 17%.

Over the longer term, I think Pushpay has a longer growth runway than expected.

Pushpay said that it has allocated an initial investment of resources into developing and enhancing the customer proposition for the Catholic segment of the US faith sector. Management said that focused investment into the Catholic segment represents a significant milestone as Pushpay continues to execute on its strategy to become the preferred provider of mission critical software to the US faith sector.

Pushpay is also looking at smaller churches. It could also expand into churches in other countries (such as Central America or South America). The ASX share could develop tools for other religions. With such high profit margins, I think Pushpay is a very promising business.

As well as Magellan and Pushpay, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.

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