ASX shares to buy for post COVID-19 profits

The world after COVID-19 is clearly going to be a changed place. Deciding which ASX shares to buy will require top-down and bottom-up analysis.

For instance, I don’t think the international borders are going to open any time soon. However, when they do, companies like Qantas Airways Limited (ASX: QAN) are likely to find fewer competitors still operating. Yet, from a bottom-up perspective, the company has a lot of cash and is taking the hard decisions to preserve it.

However, this means many Australians who were planning to travel overseas will spend their money on national tourism instead.

ASX shares to buy in national tourism 

There are two shares I think are likely to do well when state borders fully open. Both provide services based on national tourism and travel. 

First, Ingenia Communities Group (ASX: INA) develops, operates and sells residential housing in retirement, lifestyle and holiday communities. While it has already started to see sales return, this will only increase once all state borders come down. Despite the pandemic, the company still managed to increase earnings per share (EPS) by 5%, and increased operating cash flow by 13%. I think Ingenia is a great share to buy for short-term gains as well as strong performance over the medium to long term.

Second, Alliance Aviation Services Ltd (ASX: AQZ) is an airline that has done very well throughout the pandemic. In its FY20 report, it was able to show an increase in net profit before taxes of 24.1%. As a result of the company’s stoic lockdown performance, it was awarded flights to the Whitsundays by the Queensland Government. In addition, Alliance has also won a new 10-year airline services contract with South32 Ltd (ASX: S32) for the Cannington and Groote Eylandt (GEMCO) mine sites.

Entertainment shares

I have long been a fan of casino gaming company Aristocrat Leisure Limited (ASX: ALL). The company has branched out from poker machines. It now has revenue streams from casino management systems, online games, and electronic casino game platforms. I think Aristocrat is going to be a beneficiary of surplus cash from Aussies who can’t travel overseas. I believe Aristocrat is one of the best value shares to buy on the ASX today.

In its 6-month report to 31 March, the company reported a 7% increase in operating revenue. However, it recorded a 14.2% drop in net profit after tax. This was due to the coronavirus lockdowns eating into the company’s profits during March. Aristocrat is currently trading at a price to earnings (P/E) ratio of 11.32, less than half of the company’s 10-year average P/E.

Foolish takeaway

The next 6 to 12 months will see many companies change course as the economy starts to open up again. Instead of spending money on international travel, many people will look at spending it within Australia. This means good ASX shares to buy will be those particularly associated with leisure and entertainment. It has been a pretty rough year for all of us after all.

More reading

• Why I would buy these ASX growth shares right now
• The 3 best ASX shares to buy before October
• 3 ASX 200 growth shares to buy right now
• 5 quality ASX shares to buy in September
• Where to invest $10,000 into ASX shares

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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