Investing $1,000 is an important choice. Delaying spending and saving instead is a praiseworthy decision. But what ASX shares are you meant to choose?
Aussies should want their money to work as hard as it can to grow their wealth for the long-term.
Vanguard Australian Shares Index ETF (ASX: VAS) isn’t a terrible choice. It has low costs and (normally) a decent dividend yield. However, a large percentage of it is invested in the big four ASX banks of Westpac Banking Corp (ASX: WBC) and its peers.
I think Aussie investors can do better for their portfolio than that. Here are three ideas:
Share 1: BetaShares Global Sustainability Leaders ETF (ASX: ETHI)
I believe there are several exchange-traded funds (ETFs) that Aussies can buy that would provide better returns than the Vanguard Australian Shares Index ETF over the long-term.
This ETF is invested in around 200 international climate change leaders (as measured by their relative carbon efficiency) and they “are not materially engaged in activities deemed inconsistent with responsible investment considerations”.
Its top 10 exposures are: Apple, Mastercard, Visa, Nvidia, Home Depot, Adobe, Paypal, Toyota, Netflix and ASML. As you can see, it has excluded some of the biggest businesses in the world like Facebook, Alphabet and Microsoft.
But the returns of the ETF haven’t been hampered by the lack of those big names. At the end of May 2020 it had returned 33% over the prior 12 months. Over the past three years it had returned 19.75% per annum. Since inception in January 2017 it had returned 21.2% per annum. I think those are compelling returns. Plus, those returns are after fees. The ETF charges 0.59% per annum, which is good value considering there are ethical screens for the shares involved.
With this ETF I like that you get great international diversification, strong returns and it can align your investments with your values, if that’s what you’re aiming for.
Share 2: PM Capital Global Opportunities Fund Ltd (ASX: PGF)
At a share price of $0.89 I think listed investment company (LIC) PM Capital Global Opportunities Fund looks really good value.
The job of a LIC is to invest in shares on your behalf. PM Capital Global Opportunities looks to invest in good value non-ASX shares. The strengthening Aussie dollar makes this a good time to invest in overseas shares.
PM Capital Global Opportunities is invested in shares like Visa, KKR & Co and Siemens. It has a diversified portfolio and it is able to short shares, where it can make money if share prices go down. At the end of May, 8.2% of its portfolio was in short positions.
I think it looks great value right now because the share price is valued at a 24% discount to the pre-tax net tangible assets (NTA) at 19 June 2020. The NTA has probably reduced since then, but a 20% discount would still be great value in my opinion.
Share 3: Bubs Australia Ltd (ASX: BUB)
At a share price of $0.92 I think this ASX share looks increasingly good long-term value.
If you look at today’s revenue versus the market capitalisation then Bubs doesn’t look exciting. But as investors we need to think where businesses might be in a few years from now.
Bubs is growing at a very fast pace. In the quarter to 31 March 2020 it generated record quarterly revenue of $19.8 million – this was growth of 67% compared to the prior corresponding period and it represented growth of 36% compared to the previous quarter.
I think there’s plenty more growth in store for the goat milk infant formula business. Asia is a very large market that Bubs is targeting. Vietnam and China growth alone could turn Bubs into a much larger business. Also, Bubs’ profit margins are growing as it benefits from the economies of scale effect.
The fact that Bubs recently turned cashflow positive is a very good step for a business in the current COVID-19 circumstances. I think Bubs is definitely one ASX share to watch over the next five years.
I’d be happy to invest $1,000 into one of the above ASX shares. Indeed, at these prices I’d be happy to invest a lot more than just $1,000. The short-term may be volatile, but I think all three shares can beat the ASX index over the long-term at the current prices.
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Tristan Harrison owns shares of PM Capital Global Opportunities Fund Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia has recommended BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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