ASX shares took a bit of a tumble today. The S&P/ASX 200 Index (ASX: XJO) dropped by around 3%. I’ve got my eyes on some high quality ASX shares if the COVID-19 selloff gets worse.

Only time will tell whether this is the start of another extended decline for the ASX or whether it was just a temporary blip during the recovery.

If today’s drop does lead to another painful decline then I’ve got my eyes on these top ideas:

Share 1: Pro Medicus Ltd (ASX: PME)

On a day that the ASX dropped 3%, the Pro Medicus share price went up 2.7%. That’s an impressive performance.

I think Pro Medicus is one of the best ASX shares. But it’s also one of the most expensive.

It’s very rare to find a business on the ASX with an earnings before interest and tax (EBIT) margin of above 50%. In the FY20 half-year result it reported an EBIT margin of 50.2%. This means that a lot of new revenue can flow straight to the bottom line. This strong economic performance means Pro Medicus’ cash reserves and dividend can increase at a fast rate. It also doesn’t have any debt.

The ASX share continues to win large international contracts. Each new client it wins gives it a stronger reputation to win over the next client in the pipeline.

I think it speaks volumes that Pro Medicus initiated a share buyback whilst other ASX shares were doing dilutive capital raisings during the COVID-19 share market crash.

However, I personally wouldn’t want to consider buying Pro Medicus shares unless it dropped under $22.50 again.

Share 2: Australian Ethical Investment Limited (ASX: AEF)

Australian Ethical’s share price fell 7.2% today. The ethical fund manager has been very volatile over the past nine months due to the bushfires and the recent coronavirus crash.

I think Australian Ethical is a very promising ASX business. Before COVID-19 it was rapidly growing funds under management (FUM).

Fund managers are very scalable because it doesn’t really cost much more to manage $2.1 billion compared to $2 billion. The early superannuation withdrawal and the decline of the share market won’t have helped the ASX share’s FUM. But that will hopefully just be a temporary setback for Australian Ethical.

If it can keep attracting more clients and benefit from rising superannuation contributions then this ASX share could be one to watch. I like that it doesn’t have any debt and it continues to grow its cash balance.

However, I’m waiting for a share price under $4 to buy shares.

Foolish takeaway

I may be waiting a long time to buy Pro Medicus and Australian Ethical shares. They’re two of the most promising ASX shares out there. I just want to buy them for a price that’s quite a bit cheaper.

More reading

• ASX 200 Weekly Wrap: ASX bulls crash through 6,000 points
• These were the worst performers on the ASX 200 last week
• ASX 200 down 0.35%: UBS upgrades NAB and Westpac, Qantas soars again
• These ASX healthcare shares could be long term market beaters
• Why Austal, Evolution, Newcrest, & Pro Medicus are tumbling lower

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. 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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The S&P/ASX 200 Index (ASX:XJO) dropped 3% today.

Pessimism seems to have returned because the boss of the US Federal Reserve downplayed how fast the US economy could bounce back.

The ASX 200 was a sea of red

There was a lot of red on the ASX today. There were two key industries that the market really punished, banks and travel companies.

The Commonwealth Bank of Australia (ASX: CBA) share price dropped 4.4%, the Westpac Banking Corp (ASX: WBC) share price dropped 6.1%, the Australia and New Zealand Banking Group (ASX: ANZ) share price declined 6.2% and the National Australia Bank Ltd (ASX: NAB) share price went down 5.4%.  

Looking at ASX 200 travel shares, the Webjet Limited (ASX: WEB) share price plunged 10.1%, the Flight Centre Travel Group Ltd (ASX: FLT) share price went down 10.4% and the Corporate Travel Management Ltd (ASX: CTD) share price declined 7.7%.

JB Hi-Fi Limited (ASX: JBH) fails to impress

The ASX 200 retailer revealed a trading update today. It was impressive, but the JB Hi-Fi share price still fell by more than 4%.

In the second half of FY20 to date, JB Hi-Fi Australia sales grew by 20%, JB Hi-Fi New Zealand sales dropped 19.3% and The Good Guys sales rose by 23.5%.

The New Zealand sales were impacted by the closure of stores due to restrictions.

The ASX 200 company is now expecting net profit to be in the range of $300 million to $305 million. This would be an increase of 20% to 22%. The profit growth includes an estimated impairment of New Zealand assets of around $25 million after tax.

IPH Ltd (ASX: IPH) share price rises again

The IPH share price went up another 4.3% today. Yesterday the ASX 200 IP company announced an acquisition called Baldwins Intellectual Property for $7.4 million.

It’s based in New Zealand and was established in 1896. Baldwins’ FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) after normalisation adjustments for partner salaries was approximately NZ$2 million.

Clients include large multi national businesses, universities, government agencies, start-ups and individual inventors.

More reading

• These ASX 200 stocks just got downgraded by top brokers
• 3 of the best ASX 200 blue chip shares to buy today
• Why the Webjet share price isn’t a bargain buy
• These ASX shares are the best way to invest overseas
• What today’s ASX 200 selloff tells me

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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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I think that having a little exposure to small cap shares can be a good thing for a portfolio if your risk profile allows it.

After all, if you can identify the next Afterpay Ltd (ASX: APT) when it is still only a small cap, you could generate mouth-watering returns.

With that in mind, here are three small cap ASX shares which I think are worth watching closely:

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan is a provider of enterprise mobility software to sales and service organisations. This software has been designed to increase sales win rates, reduce costs, and improve customer satisfaction. This is achieved through improved mobile worker productivity. Demand for Bigtincan Hub has been growing very strongly over the last couple of years and continues to this day. At the end of April the company revealed that it remains on course to achieve its 30% to 40% organic revenue growth target in FY 2020.

Volpara Health Technologies Ltd (ASX: VHT)

Another small cap ASX share to watch is Volpara Health Technologies. It offers cost-effective, mission-critical software that help radiologists deliver the highest-quality breast imaging services. Its software also leverages artificial intelligence imaging algorithms which assist with the early detection of breast cancer. At the end of FY 2020 its annual recurring revenue was up 172% year on year to NZ$18 million. This compares to its estimated US$750 million ARR opportunity in breast cancer screening.

Whispir (ASX: WSP)

A final small cap ASX share to watch right now is Whispir. It is a software-as-a-service communications workflow platform provider. Whispir’s intelligent and powerful workflows aim to revolutionise customer engagement, business resilience, and operational communications. Demand has been increasing very strongly during the pandemic and looks likely to lead to a strong full year result in August. I’m confident there will be more of the same in FY 2021 and beyond.

More reading

• 3 great shares to buy now if you’re an ASX 200 investor in your 20s
• EML Payments and these ASX mid cap shares could be destined for big things
• 3 small cap ASX tech shares that could be stars of the future
• Sezzle Inc shares and 2 other small cap ASX techs surge higher today
• 2 exciting small cap ASX shares that could have big futures

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, BIGTINCAN FPO, VOLPARA FPO NZ, and Whispir Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO, VOLPARA FPO NZ, and Whispir Ltd. 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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