I’ve got my eyes on some ASX growth shares that might be good buys during February 2021.
I like the idea of investing in businesses that can be long term holdings and have the potential to make pretty big returns. That’s why I like these two shares:
Redbubble Ltd (ASX: RBL)
Redbubble is one of the most promising ASX growth shares in my opinion. The e-commerce business has seen excellent growth over the past year as shoppers turn to online shops to make their purchases. That’s been really good news for artist-product website business Redbubble.
I think the e-commerce trend was always going to happen, it’s just been rapidly accelerated by COVID-19 and the related impacts.
There are some wonderful network effects that come with being a leading platform like Redbubble. Being large attracts lots of potential shoppers, which then encourages artists to make sure their products on the Redbubble website, which then attracts more shoppers..and so on.
Once a platform business has developed the system then quite a lot of the extra revenue can fall to the profit lines. That’s what is happening with Redbubble.
In the first quarter of FY21, Redbubble said its marketplace revenue soared 116% to $147.5 million. Gross profit grew even faster, rising by 149% to $64.5 million, that’s a big increase of the gross profit margin for the ASX growth share. It generated $22.1 million of EBIT (EBIT explained) in the first quarter, up from an EBIT loss of $1.5 million last year.
Operating cashflow shot up by 166% to $27.1 million, up from $10.2 million in the prior year. The e-commerce business finished with a closing cash balance of $85.4 million.
As long as Redbubble keeps investing in the customer experience, marketing and in other initiatives then I think Redbubble can become a much larger business over time.
Betashares Global Quality Leaders ETF (ASX: QLTY)
I like the idea of investing in companies that diversify away from Australian shares.
Australia only accounts for around 2% of the global share market, so there are plenty of other opportunities.
But where to invest? Europe? The US? Asia? It’s hard to know. The ASX already represents a lot of different shares, the investment universe is quite large. A good way to cover international shares could be to invest in an exchange-traded fund (ETF) which only invests in quality overseas businesses.
Betashares Global Quality Leaders ETF ticks the box for me. It only invests in businesses that rank well on return on equity (ROE), debt to capital, cash flow generation and earnings stability.
Overall, it has around 150 positions with names like Intel, Keyence, Johnson & Johnson, AIA, SAP, Alphabet, Texas Instruments, 3M, Cisco Systems and Nvidia.
The net returns, after the 0.35% annual management fee, have been solid since inception in November 2018 – with a performance of an average of 18.9% per year.
As well as the above growth ideas, 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.