If I were going to buy some ASX growth shares next week, then there are two that would be right at the top of my wish list:
Redbubble Ltd (ASX: RBL)
Redbubble is one of the ASX shares that has seen an enormous increase in demand since the onset of the COVID-19 pandemic.
The business has a website selling artist-designed goods to a global customer base. Artists create the designs and Redbubble handles the logistics, with the help of third party printers. Items sold include clothes, phone cases, masks, stationery, bags and so on.
Since 25 January 2021, the Redbubble share price has actually fallen by around 20%. There are a couple of logical reasons – concerns about rising interest rates (which hurts valuations) and a slowing of growth of e-commerce. It’s now cycling against strong sales in 2020 and vaccine rollouts might mean less online shopping growth and more physical shopping. Might.
But, this ASX growth share has been growing for years and it’s continuing to grow quickly. The business should benefit as the long-term rise of online shopping continues.
In the FY21 half-year result, it generated $80 million of cashflow and it also revealed that marketplace revenue increased by 66% in January 2021.
The Redbubble share price looks good value to me for the long term at $5.70.
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This might be the best exchange-traded fund (ETF) to think about for capital growth. I’m not saying it’s going to generate 50% returns, but I think how it’s set up can produce very nice long term capital returns.
It only invests in quality US businesses that Morningstar analysts – a financial research outfit – think possess sustainable competitive advantages, or “wide economic moats”. That’s something that Warren Buffett likes to talk about.
The net returns of VanEck Vectors Morningstar Wide Moat ETF have been great – over five years its average return has been 19.3%. The index it tracks has returned 19.7% per annum over the last decade.
Who knows what the next five or ten years will do? But I think it shows the level of outperformance that can be produced compared to other indices like the S&P 500 which has returned 16.7% per year over the last decade.
Some of the names that the ETF owns includes Wells Fargo, Intel, Altria, General Dynamics, Blackbaud, Boeing, Cheniere Energy, Biogen and Corteva.
Summary thoughts
I think each of these ASX growth shares are high quality, and have a good chance of continuing their outperformance over the next five years. MOAT ETF definitely offers a more diversified investment with 49 holdings. But Redbubble has a good chance of doing well if it can keep growing its market share of global online ‘art’ spending over time. It can help this by continuing to add new categories.
There are some other ASX shares that are also on my radar, particularly with Australia’s strong dollar right now.
