In my opinion, there are some ASX shares that could be good long-term picks for potential returns.
Not every business is worth owning. I’m looking to find businesses that can generate good profit growth at share prices that make sense.
Adairs Ltd (ASX: ADH)
Adairs is a leading business that sells homewares and furnishings.
It operates both the Adairs business as well as Mocka which is an online-only furniture brand.
The Adairs share price has fallen over 10% since early August.
FY21 was a very strong year for the business which included good sales growth, excellent gross profit margin improvement (thanks to the prices it was charging for products), strong online sales growth and operating leverage across the business. The Adairs statutory net profit after tax soared by 80.7% over the year.
But sales are currently heading backwards in FY22 compared to the first few months of FY21 (down 11.7% in total in the first seven weeks of FY22).
But the business has a number of growth plans for the long-term to grow profit.
It’s improving its supply chain with the construction of a new national distribution centre which will save $3.5 million per year once fully operational.
The ASX share is upsizing its stores. Bigger locations are more profitable in both percentage and particularly dollar terms.
Adairs is also working on growing its online offering evening more. Online is a big addressable market and can come with attractive profit margins. Mocka is an important part of the growth story here.
Using CommSec numbers, the latest Adairs share price is valued at 11 times the estimated earnings for the 2022 financial year. It’s also expected to pay a fully franked dividend yield of 5.6%. That looks good to me for total returns over the long-term.
MFF Capital Investments Ltd (ASX: MFF)
I think MFF is one of the best listed investment companies (LICs) around.
It has low, fixed costs. That means it’s getting more attractive as it gets larger, the costs as a percentage of assets are falling.
MFF Capital has a global portfolio that is managed by a very effective fund manager called Chris Mackay.
The ASX share has a quality portfolio of global growth shares like Visa, Mastercard, Amazon, Home Depot, Microsoft and Alphabet.
With a growing dividend and a commitment to reach an annualised dividend per share of $0.10, it ticks the income box. That equates to a forward fully franked dividend yield of 3.3%.
It also seems good value with the MFF share price at $3.00 and the latest MFF Capital pre-tax net tangible assets (NTA) being $3.466. That’s a 13.5% discount, meaning you can buy $1 of shares for $0.865. Buying those underlying shares at a good discount is attractive to me.
