If I were looking to buy the best ASX shares right now, there are a few I’ve got my eyes on.
There are some great businesses out there, like CSL Limited (ASX: CSL). But I’m on the look out for investments that are quality, have good profit growth potential and have the ability to generate outperformance over the long term. As one of the world’s biggest businesses, CSL may have achieved most of its capital growth already (in percentage terms).
I recently wrote about some high quality ASX tech shares that could be worth taking a look at.
These ASX shares are ones I’d really like to buy for my portfolio:
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an electronic donation business. It offers systems and tools to large and medium US churches to connect with their community, track donations, livestream the service and so much more. It’s a very strong offering for clients, particularly in this COVID-19 world.
I believe that Pushpay’s revenue and earnings are pretty defensive. Each household donates different amounts to their church each year, but I think that people would try to donate annually.
Pushpay is one of the ASX growth shares that I think has a very good future because of how quickly its profit margins are growing. In the FY21 half year report, Pushpay managed to increase its gross profit margin from 65% to 68%. The EBITDAF margin (EBITDA explained – the F stands for foreign currency) improved much faster, rising from 17% to 31%.
It’s hard to understate how much that good operating leverage can help a business generate good shareholder returns. Remember, lots of investors value a business based on the profit of a business, not the revenue.
The business is making a lot of cashflow already, which can be used to expand into other countries, fund acquisitions or even pay dividends.
One of the main reasons why I like the company so much is that the Pushpay share price looks good value when you look ahead a couple of years. The Pushpay share price has a valuation of 24 times the estimated earnings for the 2023 financial year.
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This might be one of the very best exchange-traded funds (ETFs) on the ASX for capital growth in my opinion.
It’s invested in quality businesses that are trading at good value. But, those companies must have a strong economic moat. In other words, they need to have good competitive advantages. Think of an Apple Inc (NASDAQ: AAPL) smartphone – it has many millions of loyal customers and you’d have to invest billions to remotely have a chance of taking 1% market share in the smartphone space.
MOAT ETF has 49 holdings, which is a solid number for diversification. The holdings are regularly changing to reflect what Morningstar analysts – the people who choose the investments – think are good value and also have strong moats.
In terms of sectors, the five leading sector weightings right now are health care (20.6%), IT (17.7%), industrials (15.3%), financials (12.3%) and consumer staples (11.4%).
The net returns of VanEck Vectors Morningstar Wide Moat ETF have been very strong even after including the management fees of 0.49% per annum. Over the last five years it has returned an average of 19.3% per annum.
Current large holdings in the portfolio include Wells Fargo, Intel, Alphabet, Altria, General Dynamics, Blackbaud and Northrop Grumman.
There are plenty of other ASX growth shares I’ve got my eyes on too.
