I’m always on the lookout on where to invest for ASX share opportunities. If I had $5,000 to invest into shares, I know which ones I would want to buy.
I want to find ASX shares that are good value and offer plenty potential growth. Over the long-term, I believe that compound returns can make a really significant contribution to wealth.
I’m not looking at the ASX 20. As a group, I don’t think names like Commonwealth Bank of Australia (ASX: CBA) or Woolworths Group Ltd (ASX: WOW) are going to generate strong long-term returns.
But if I had $5,000 to invest next week, I think these ideas could be good:
WCM Global Growth Ltd (ASX: WQG)
This is a listed investment company (LIC) that is managed by WCM, a fund manager based in California. As the name suggests, it’s looking for businesses that offer investors global growth.
There are two interesting aspects to WCM’s investment strategy.
The first is that it’s looking for businesses with a rising competitive advantage (or expanding economic moat), as measured by a rising return on invested capital (ROIC). It’s the direction of the moat that is the most important, rather than a large but static (or declining) competitive position.
The second element that’s different is that WCM looks for a corporate culture that supports the expansion of this moat. The fund manager thinks that a culture is a key part of a business’ performance and ability to deliver a growing competitive position. WCM says it has developed a unique way to analyse corporate culture and has investment team members solely focused on this part of the investment process.
In terms of names, some of the current biggest positions in the ASX share’s portfolio include West Pharmaceutical Services, Stryker Corporation, Shopfy, Sherwin-Williams, Thermo Fisher Scientific, LVMH and Amphenol.
Past performance is not a reliable indicator of future performance. However, since inception in June 2017, the portfolio has delivered average returns per year (after fees) of 22.25%.
The WCM Global Growth share price is currently at a 13% discount to the latest weekly pre-tax net tangible assets (NTA) figure of $1.90.
Adairs Ltd (ASX: ADH)
Finding a good business that can deliver long-term growth at good value may lead to solid returns.
I believe Adairs can be one of those ‘growth at a reasonable price’ ideas. Using CommSec’s projection, the Adairs share price is valued at 10 times the 2023 financial year’s estimated earnings.
Home furnishings is not exactly a strong growth area. But Adairs is doing a good job of increasing its market share within this large market in Australia and New Zealand. The retail business is planning to increase its store count, upsize a number of its stores, become more efficient and continue to increase its level of online sales.
The ASX share has just opened a new national distribution centre which should help with the performance of the business, as well as reduce costs. Adairs also has compelling growth plans for the online-only Mocka business which sells furniture.
A bonus to the low price/earnings ratio (P/E ratio) that Adairs has is that its attractive dividend payout ratio makes the dividend yield very exciting. In FY23, Adairs is expected to pay an annual dividend per share of $0.26 per share, which translates to a fully franked dividend yield of 6.6%.
FY22 profit may be not be quite as strong as FY21, but I think that the longer-term looks good for Adairs – particularly at this valuation.
But I’ve also go my eyes on other ASX growth shares that could have a good future ahead.
