Over the last three decades the Australian share market has provided investors with an average return of approximately 9.5% per annum.

This means that if you’re going to beat the market over the next decade, you’ll need to aim high and target returns of at least 10% per annum.

But which shares could be capable of beating the market in the 2020s? I think the two listed below could be market beaters:

a2 Milk Company Ltd (ASX: A2M)

I believe that a2 Milk Company could be a market beater over the next decade. This is due to its expanding fresh milk footprint and the growing demand for its infant formula in the China market. This strong demand was evident in the first half when a2 Milk Company’s China label infant nutrition sales doubled to NZ$146.7 million.

While this is a sizeable figure, the company only has a very modest market share. And due to its strong brand and increasing distribution network in the country, I expect the company to capture a greater slice of the market throughout the 2020s and drive further strong earnings growth.

SEEK Limited (ASX: SEK)

Another ASX share which I think could be a market beater in the 2020s is SEEK. While 2020 has been a difficult year for the job listings giant because of the pandemic, I believe its long term outlook is as positive as ever. This is due to its leadership position in the ANZ market and its rapidly growing China-based Zhaopin business.

It is the latter business which I expect to be the key driver of growth over the next decade. In the first half of FY 2020 it contributed 47.8% of SEEK’s total revenue. This is almost double the revenue contributed by the ANZ business. Given the size of the China market and its opportunities in other key Asian markets, I believe the company is well-placed to hit its revenue target of $5 billion later this decade. This compares to revenue of $1,537.3 million in FY 2019.

More reading

• Is the SEEK share price a buy right now?
• 3 five-star ASX shares I would buy today
• ASX shares I’d buy if this decline is a second COVID-19 crash
• S&P quarterly rebalance: A2 Milk added to ASX 50 & NEXTDC in the ASX 100
• 3 of the best ASX 200 blue chip shares to buy today

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended SEEK 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.

The post Why these ASX shares could help you beat the market appeared first on Motley Fool Australia.

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ASX shares can be a great way to grow your wealth over the long-term.

Investing in quality businesses for the long-term can produce great results if you pick correctly.

No ASX share is guaranteed to generate strong capital growth, but I think these ideas could be some of the ones to potentially beat the market over the next decade:

Share 1: Altium Limited (ASX: ALU)

Altium is a leading electronic PCB software business. It is already one of the biggest players in the market and it’s aiming for clear market dominance by the middle of this decade. Altium’s management are aiming for 100,000 Altium Designer subscribers by 2025, which should help reach the revenue goal of US$500 million.

The ASX share wants to keep growing its earnings before interest, tax, depreciation and amortisation (EBITDA) margin as economies of scale benefit the business. Software businesses have an advantage because their software can be easily replicated and distributed for little cost. In the FY20 half-year result Altium reported an EBTIDA margin of 39.7%, up from 38.8%.

I believe Altium is a great business for a number of reasons. I’ve already mentioned the growing profit margins. It’s debt free with a growing cash balance. Altium has been paying a growing dividend. I also like that Altium is growing revenue in multiple regions.

The world is becoming increasingly technological, so Altium’s service will be even more important to its clients. The ASX share’s current client list includes Tesla, Space X, NASA, Google, Siemens, Microsoft, NEC, Belkin, HP, Amazon, Fitbit, Disney and Qualcomm.

Share 2: Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX share which specialises in facilitating electronic donations to not-for-profits. It’s getting a lot of success from the large and medium US church sectors with their large congregations.

Over the long-term the ASX share is targeting US$1 billion revenue, which represents 50% of the medium and large US church segments. In FY20 the company made US$129.8 million of operating revenue. There is a lot of potential growth left. 

I think the Church Community Builder acquisition was a wise one. The two businesses launched a joint product offering in April 2020. Pushpay wants to be able to offer the best-in-class church management system and the best community app.

In FY20 the company generated US$25.1 million of earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF). In FY21 management has guided EBITDAF will be between US$48 million to US$52 million. That would be a strong year of growth!

One of the most attractive things to me about Pushpay is about how scalable it is. In FY20 it increased its gross margin by five percentage points from 60% to 65%. I expect the gross margin can keep going up as the ASX share heads towards US$1 billion of revenue.

Share 3: Xero Limited (ASX: XRO)

Xero is another ASX share with excellent growth potential. It’s a cloud accounting software business which provides its service in several countries including Australia, New Zealand, the UK and the US.

Xero’s gross profit margin is very attractive. It increased from 83.6% in FY19 to 85.2% in FY20. Every new subscriber means a lot of the revenue also turns into more gross profit. 

The tech ASX share is still heavily investing for growth, yet the 30% increase in operating revenue in FY20 resulted in a 52% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$139.2 million.

Xero also finally achieved a profit in FY20. Its net profit was NZ$3.3 million and free cashflow increased by 320% to NZ$27.1 million.

The software business continues to grow its subscriber numbers. I think it can add many more over the next decade. In FY20 alone it added 467,000 net subscribers. Each new subscriber is another business paying attractive monthly revenue to Xero.

I think more business owners will choose Xero’s service this decade for the time-saving tools and automation.

Foolish takeaway

In my opinion, all three of these ASX shares are some of the best on the ASX. At the current prices I’d probably go for Pushpay because it has a longer growth runway and its profit margins are rising the fastest. Altium and Xero are great businesses, but I’d prefer to buy them both for around 10% cheaper than what they’re trading at today.

More reading

• Coles shares and 2 other ASX 200 companies to buy in the current market
• Why Nearmap and this ASX mid cap share could be strong buys
• Is the Altium share price the steal of the century?
• $3,000 invested in these 2 shares could make you a fortune over the next 10 years
• The most explosive ASX tech shares you can buy today

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium, PUSHPAY FPO NZX, and Xero. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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.

The post 3 ASX shares to buy and hold for the next decade appeared first on Motley Fool Australia.

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