ASX growth shares, in my mind, are capable of producing attractive capital growth.
Dividends are great, the income can really help, but I think it’s more likely that investors can find outperformance from investments that can deliver good share price returns.
A lot of appealing, growing ASX businesses are at all-time highs right now. The higher prices go in a short amount of time, the more cautious we should be about overpaying. To combat that, I’m going to talk about two diversified ASX growth shares I think can deliver long-term capital growth.
Betashares Global Quality Leaders ETF (ASX: QLTY)
This is an exchange-traded fund (ETF). It’s designed to target some of the highest-quality businesses in the global share market – Aussies focused on the ASX could benefit from this diversification.
It owns 150 businesses that score highly on a combined quality score ranking of return on equity (ROE), debt to capital, cashflow generation ability and earnings stability. The QLTY ETF comes with a yearly management fee of 0.35%.
The portfolio holdings are quite similar in position sizing – the biggest is Alphabet (Google), with a weighting of 2.3%. Other examples include UnitedHealth, Coca-Cola, Microsoft, Cisco Systems, Honeywell International and Visa.
BetaShares itself says past performance is not an indicator of future performance. We can’t know what future returns are going to be. But, the long-term returns have been good – since the QLTY ETF’s start date of November 2018, it has delivered an average return per year of 15.76%. If it can keep delivering a long-term average return above 10% per year from here, I think it can qualify as a very good ASX growth share.
MFF Capital Investments Ltd (ASX: MFF)
This is a listed investment company (LIC) managed by Chris Mackay, one of the founders of Magellan Financial Group Ltd (ASX: MFG).
MFF typically takes long-term investment positions in high-quality international businesses, which are largely listed in the US. Of course, American-listed companies can have an underlying global earnings base.
Some of the biggest positions in the portfolio include Amazon, Alphabet, Visa, American Express, Meta Platforms (Facebook and Instagram), Home Depot and Microsoft. These stocks are appealing in terms of growth potential, so I think we can call this an ASX growth share.
Since the start of 2023, the MFF share price has climbed around 60% thanks to the strong performance of its US holdings, which is a great return. It has also been growing annual normal dividend each year since 2018.
Its latest net tangible assets (NTA) update showed it had an underlying pre-tax value of $4.362 as at 22 March 2024. The current MFF share price is at a 16% discount to that NTA value. I think this is an appealing discount and it comes with a dividend yield of 4.7% if the franking credits are included.
