If I were given $2,000 to invest into ASX shares, I know the two stocks I’d want to pick.
I believe that businesses that are smaller have more growth potential.
In my opinion, the following two options are good ideas:
WAM Microcap Limited (ASX: WMI)
WAM Microcap is a listed investment company (LIC) that is all about investing in small caps on the ASX.
It’s trickier to invest in smaller ASX shares than larger ones. So it’s good to have some very effective investors doing the choosing.
And that investment team have been very good in my opinion. Over the last three years the gross return, which means before fees and so on, has been an average of 22.5% per year.
Things can get very volatile during crashes, but that can present an even nicer buying price. I’d be happy to buy some more shares, if given the opportunity.
There are fees involved, but I think the net returns more than makes up for it.
Some of the ASX share positions at the end of June 2021 included: Apiam Animal Health Ltd (ASX: AHX), Capitol Health Ltd (ASX: CAJ), Tuas Ltd (ASX: TUA) and Virtus Health Ltd (ASX: VRT).
The regular dividends and special dividends are a nice bonus as well.
Metcash Limited (ASX: MTS)
Metcash is a combination of a number of attractive businesses in my opinion.
Yet its larger peers like Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW) that are trading at much higher earnings multiples.
I’ve been particularly impressed by the growth of Mitre 10 and Home Timber & Hardware. They have been performing for Metcash.
The ASX share recently released its FY21 result which showed group revenue rose by 9.9% to $14.3 billion and total hardware sales grew 24.7% to $2.6 billion. Underlying group EBIT (EBIT explained) went up 19.9% to $401.4 million. Underlying profit after tax jumped 27.1% to $252.7 million. Statutory profit after tax was $239 million, up from a loss of $56.8 million. Cashflow more than quadrupled from $117.5 million in FY20 to $475.5 million in FY21.
One of the bonuses for shareholders is that Metcash said it was increasing its dividend payout ratio from 60% to 70% of underlying net profit after tax. The FY21 total dividend was increased by 40% to 17.5 cents per share.
Along with the above two ideas, there are some ASX growth shares that look very interesting right now.
