I’ve got my eyes on a number of great ASX shares in December 2021, particularly with the increasing volatility due to COVID-19 and interest rates.
I believe that volatility is a good opportunity to buy great businesses at more attractive prices. But they are only opportunities if investors jump on them.
These are two ASX shares I’ve got my eyes on:
GQG Partners Inc. (ASX: GQG)
GQG is a newly listed US-based fund manager which offers a number of different investment strategies for people that want someone else to choose shares for them. The investment team have a track record of outperforming their benchmarks over the long-term.
I think that fund managers are usually attractive places to look at for opportunities during market declines because they usually fall heavier than many other sectors. Remember, fund managers usually generate earnings from how much funds under management (FUM) they have. A decline of the share market can lead to naturally falling FUM and a higher chance of people taking their money out of the fund manager’s hands and into the supposed safety of cash which would decrease FUM even quicker.
The GQG share price has already dropped by around 10% over the last few weeks, before taking into account any falls in December 2021. In October 2021 alone, FUM increased from US$85.8 billion to US$90.4 billion. I think its FUM can keep rising.
I believe GQG has an attractive growth runway, with plans to launch more investment strategies in more regions (like Australia). It has also committed to a high dividend payout ratio, which will boost investor cash returns each year.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is one of the most promising small-ish ASX shares around in my opinion.
It’s selling thousands of beauty products from hundreds of brands. I think e-commerce platforms have very promising economics. Once a business has developed its website, a business can usually slow down its investment in fixed costs which can lead to rising profit margins as more volume is processed and translated into rising revenue.
E-commerce businesses can achieve the attractive combination of a rising amount of dollars spent per active customer (through more orders and bigger orders from the same customer) and a growing number of active customers. In the first quarter of FY22, active customers rose by 24% year on year to 874,000.
In that first quarter, revenue rose by another 25%. I think Adore Beauty can continue to grow revenue by a good double digit rate on a compound growth basis over the next few years. In the shorter-term, profit margins are expected to remain low as it pursues rapid growth in a large addressable market. But this ASX share could be much more profitable in the longer-term, so I think it’s definitely worth watching.