Author: therawinformant

On Friday the S&P/ASX 200 Index (ASX: XJO) was out of form and sank notably lower. The benchmark index fell 0.8% to 5,859.4 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to rise.

It looks set to be a better day of trade for the ASX 200 index. According to the latest SPI futures, the ASX 200 is poised to start the week higher. Current futures contracts are pointing to a 4-point or 0.1% gain at the open. This follows a reasonably positive night of trade on Wall Street on Friday which saw the Dow Jones rise 0.5%, the S&P 500 edge slightly higher, and the Nasdaq fall 0.6%.

Oil prices mixed.

Energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) will be on watch today after a mixed night of trade for oil prices on Friday. According to Bloomberg, the WTI crude oil price rose 0.1% to US$37.33 a barrel and the Brent crude oil price dropped 0.6% to US$39.83 a barrel. Oil prices recorded their second straight week of declines.

Tech shares on watch.

Tech shares including Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) could start the week in the red after their U.S. counterparts continued their slide. The tech-heavy Nasdaq index tumbled 0.6% lower on Friday night and current Nasdaq futures are pointing to further declines tonight. The S&P/ASX All Technology Index (ASX: XTX) has lost 9.3% of its value since the start of the month.

Gold price drops lower.

The shares of Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could come under pressure today after the gold price softened. According to CNBC, the spot gold price fell 0.8% to US$1,947.90 an ounce on Friday night. Despite this decline, the precious metal recorded a small weekly gain due to economic recovery concerns.

Vocus given conviction buy rating.

The Vocus Group Ltd (ASX: VOC) share price could be on the rise today after analysts at Goldman Sachs put the telco on its conviction buy list. Goldman believes Vocus delivered a solid FY 2020 result and constructive FY 2021 guidance. It notes that it is the only telco guiding to growth this year. The broker has a price target of $4.70 on its shares.

More reading

• How to tell if this is the end of the ASX bull market
• 3 ASX 200 shares I’d buy right now
• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• 5 things to watch on the ASX 200 next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen 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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I think the healthcare sector is a great place to look for buy and hold options.

This is because in this sector you’ll find a number of companies that have the potential to grow significantly in the future thanks to favourable tailwinds and new technologies.

Three small cap ASX healthcare shares I am watching closely are listed below. Here’s why I like them:

Alcidion Group Ltd (ASX: ALC)

Alcidion is a growing informatics solutions company. It provides software that aims to improve the efficacy and cost of delivering services to patients and reduce hospital-acquired complications. It has been winning a number of contracts over the last couple of years in the UK with the NHS and privately in Australia.

Telix Pharmaceuticals Ltd (ASX: TLX)

Another small cap ASX healthcare share to watch is Telix Pharmaceuticals. It is a clinical-stage biopharmaceutical company developing an advanced pipeline of molecularly-targeted radiation (MTR) products. I think MTR is an exciting treatment approach. It chemically links radioactive isotopes to target molecules specific to cancer cells. One key therapy in its portfolio is TLX591, which is also known as Illumet. It is a metastatic prostate cancer radionuclide therapy. Management estimates that it has a $2 billion market opportunity in late-stage disease alone.

Volpara Health Technologies Ltd (ASX: VHT)

A final small cap ASX healthcare share to look at is Volpara. It is a healthcare technology company that provides software which leverages artificial intelligence imaging algorithms to help with the early detection of breast cancer. It has been a very strong performer in recent years and has consistently grown its market share in the United States at a strong rate. I expect more of the same in the coming years and for recent acquisitions to start supporting the growth of its average revenue per user metric. Combined, this should underpin strong revenue growth over the next decade.

More reading

• 3 very exciting small cap ASX shares to watch
• Why IOOF, SKYCITY, Starpharma, & Telix shares are storming higher
• Alcidion share price drops despite FY20 revenue growth
• 3 exciting small cap ASX shares to watch in FY 2021
• Why you should add these small cap ASX shares to your watchlists

James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and VOLPARA FPO NZ. The Motley Fool Australia has recommended Alcidion Group Ltd and VOLPARA FPO NZ. 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 roller coaster ride on equity markets is enough to send your head spinning with many investors questioning if this is the end of the bull market.

The sharp fall in the share prices of tech darlings both in the US and Australia is sapping confidence.

It’s not only the crash in the Tesla Inc (NASDAQ: TSLA) share price along with other FAANG favourites that I am talking about.

Tech standing on the neck of the bull market

The pullback in the Afterpay Ltd (ASX: APT) share price, Appen Ltd (ASX: APX) share price and Xero Limited (ASX: XRO) share price are also rattling the bull market cage.

The rest of the S&P/ASX 200 Index (Index:^AXJO) hasn’t faired too well either. It retreated around 1% for the week and shed 5% since hitting its COVID-19 high less than a month ago, thanks to a pleasing August reporting season.

Is the bull party over and should you be taking profits now? I don’t think we are at a sinister turning point, but I will admit this call is a bit of crystal ball gazing on my part.

Bears still yielding to bulls

But there are three things my crystal ball is showing me to support the belief that ASX investors should stay hold the line.

The first is the yield curve. This is the difference between the two-year bond yield and the 10-year yield on US government bonds.

While equity markets were whiplashed and volatility spiked, the gap between the two yields remains more than 50 basis points apart.

The fact that the 10-year is providing a fatter return than the 2-year is promising. The curve tends to be steep when credit markets are anticipating growth and curve flattens, or even inverts, when the outlook sours.

Earnings still positive in uncertain world

The second point is that company profits are still growing on the most part. This is true for the ASX as it is for the US share market in general.

The “good performance” for ASX stocks is no doubt artificially bolstered by government handouts, but analysts are still tipping earnings growth for FY21 when these measures mostly expire.

I doubt we will slip into a bear market when earnings are expanding, even though the growth isn’t particularly exciting. But hey, growth is growth.

Least dirty shirt

The third reason I think the bull market will survive is the lack of alternatives. Love them of hate them, equities are still the best major asset class for Australian investors.

If you did cash in your chips now, where would you put the cash for the medium to longer-term? Credit investments aren’t dead (and may even outperform in the short-term if the RBA cuts rates to 0.1% as some speculate), but shares still offer the best risk-reward, in my view.

ASX 200 correction still a strong possibility

However, there are two caveats to my optimistic outlook. The first is that the ASX 200 may drop into correction territory in the near-term.

This means there may be another 5% plus drop for our market if this happens – and that’s a good reason to keep some powder dry.

Rotation from growth to value not over

The second is that the dramatic price-earnings (P/E) expansion that boosted many market darlings is probably over as we move into a “late-stage” bull market.

I know this prediction was made before and proved to be wrong. But there have been recent signs of this transition.

As the bull market pushes on each week or month, it increases the probability that value stocks will dominate.

More reading

• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• 5 things to watch on the ASX 200 next week
• Buy these ASX growth shares after the market selloff
• 3 five-star ASX stocks to buy right now

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen 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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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

ASX Ltd (ASX: ASX)

According to a note out of Morgans, its analysts have retained their reduce rating and lowered the price target on this stock exchange operator’s shares to $74.82. Morgans made the move following the release of the company’s activity statement for the month of August. The broker felt that ASX’s update was a touch weak, particularly in respect to futures. In light of this, it has reduced its earnings estimates and its valuation accordingly. The ASX share price was changing hands for $82.76 on Friday.

Fortescue Metals Group Limited (ASX: FMG)

A note out of Morgan Stanley reveals that its analysts have downgraded this iron ore producer’s shares to an underweight rating with an improved price target of $14.50. Although the broker has upgraded its iron ore price forecasts to reflect strong steel production in China, it isn’t enough to stop it downgrading its shares. Its analysts believe Fortescue’s valuation is looking stretched at the current level and the risk/reward on offer isn’t sufficient. The Fortescue share price ended the week at $17.34.

Mineral Resources Limited (ASX: MIN)

Analysts at Morgan Stanley have also downgraded this mining and mining services company’s shares to an underweight rating with an improved price target of $23.50. As with Fortescue above, the broker made the move on valuation grounds after some exceptionally strong gains in 2020 for the Mineral Resources share price. The company’s shares are up over 64% year to date thanks to its exposure to the rising iron ore price. This left them trading at $27.15 at Friday’s close.

More reading

• Are higher P/E ratios really here to stay?
• 3 top ASX dividend shares I would buy next week
• A definitive guide to September ASX share trends
• 2 ASX shares I would buy again and one I regret
• Why the Rio Tinto share price is outperforming its peers

Motley Fool contributor James Mickleboro 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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Buying crashing stocks to make a million may not be an appealing idea to many investors at the present time. The uncertain global economic outlook may cause them to buy other assets, such as gold and Bitcoin, in the hope of generating higher returns than those offered by the stock market.

However, the track record of equity markets suggests that they offer excellent long-term recovery potential. As such, buying cheap stocks today, and holding them for the long run, may be a better means of obtaining a seven-figure portfolio than purchasing gold or Bitcoin.

Crashing stocks with recovery potential

While it may be natural to initially view crashing stocks as potential risks to your financial prospects, they could offer excellent long-term capital returns. Certainly, this process is likely to take a sustained period of time. And, in the meantime, further falls could be ahead even for high-quality businesses that face difficult operating conditions. However, in the coming years, stocks that are experiencing major falls and high volatility today could become stunning recovery shares.

The stock market’s track record suggests that a long-term recovery after the recent market crash is very likely. It has experienced several major bear markets over recent decades, and has been able to post new record highs in the bull markets that have followed them. Therefore, while stocks that have fallen heavily may take some time to return to valuations that are similar to their historic averages, a reversion to the mean seems to be a likely long-term outcome.

Gold and Bitcoin

Of course, some investors may feel that recent trends which have pushed Bitcoin and the gold price higher will continue. As such, they may decide to avoid crashing stocks in favour of the precious metal and the cryptocurrency.

However, gold’s defensive appeal is a major reason why its price has soared to a record high. As the world economy returns to a higher growth rate, and investors become more optimistic about the outlook for undervalued businesses, they may shift their capital towards riskier assets such as stocks. This could limit gold’s capital returns from what is a very high current price level.

Likewise, buying Bitcoin instead of crashing stocks may not produce high returns. The virtual currency faces competition from other cryptocurrencies that may cause investor demand to moderate. Since its price is based solely on demand and supply due to its lack of fundamentals, this may lead to a disappointing performance compared to the stock market in the coming years.

Making a million

Making a million from crashing stocks is a realistic prospect for many investors over the long term. Indexes such as the FTSE 100 and S&P 500 have produced annualised total returns of at least 8% since their inceptions. Assuming a similar rate of return on a monthly investment of $750 would produce a seven-figure portfolio within 30 years.

However, by purchasing cheap stocks after the market crash, you could achieve a higher rate of return as the market recovers. This may allow you to obtain a seven-figure portfolio at an even faster pace.

More reading

• Top brokers name 3 ASX shares to sell next week
• 3 ASX 200 shares I’d buy right now
• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor Peter Stephens 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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I think there are some great shares in the S&P/ASX 200 Index (ASX: XJO) that are worth buying.

However, there are some ASX shares that are trading with very high expectations like Afterpay Ltd (ASX: APT). There are some ideas that are probably near their (medium-term) peak like Fortescue Metals Group Limited (ASX: FMG). I also think that some shares face a disappointing future compared to the past like Westpac Banking Corp (ASX: WBC).

That only leaves a certain group of businesses that I would be happy to invest in at today’s prices. Here are three ASX 200 share ideas I’d buy today:

A2 Milk Company Ltd (ASX: A2M)

I think that A2 Milk is the one of the highest-quality ASX 200 shares that investors can choose. It has done extraordinarily well for a number of years. It grows its profit and revenue year after year. In FY20 it grew its revenue and profit by around a third – a strong result.

A2 Milk is growing strongly in both China and the USA. These are much larger markets than Australia and New Zealand. I believe that A2 Milk can become a much larger business over the next decade by doing well in just the US and China. However, places like Canada and Europe are large long-term opportunities for further growth. I don’t think the market is appreciating how long A2 Milk’s growth runway is. 

The A2 Milk share price has dropped 16% since 18 August 2020. That puts it at 24x FY23’s estimated earnings.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a leading ASX-listed fund manager. Most of its funds under management (FUM) is focused on international equities, not ASX shares.

I think Magellan is one of the highest-quality managers in Australia. I really like how it operates with an aim of investing in high-quality businesses across all of its investing strategies. The unlisted Magellan Global Fund has a solid performance over the past decade with average returns per annum of 16.1%.

The manager recently reached $100 billion of FUM (again) as it recovered from the COVID-19 share market crash. That’s a good milestone. 

Magellan has always been a great business. I’m excited by the different growth ideas and it’s intriguing to know that the retirement product is coming soon.

In recent weeks the Magellan share price has dropped 13%. Lower prices are better for a good business. It’s priced at 18x FY23’s estimated earnings with a current grossed-up dividend yield of 5.4%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is a regular pick of mine because it’s genuinely one of the ASX shares I’d buy (and have bought) a lot for my portfolio. It’s actually one of the largest positions in my portfolio. The reason for that is that it’s a solid ultra-long-term pick. The investment conglomerate has been listed since 1903 and I think it could keep going for many more decades.

I like the idea of investing in businesses that I’d never have to sell. For starters, it limits capital gains tax events. Soul Patts could definitely be a hold-forever idea due to its investment house nature. It can steadily shift its investment holdings to the new opportunities over time. For example, it’s looking to invest in regional data centres.

Its existing portfolio of businesses are attractive. It owns fairly defensive names like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Australian Pharmaceutical Industries Ltd (ASX: API), Clover Corporation Limited (ASX: CLV), agriculture, resources, financial services and swimming schools.

I like the underlying ASX share holdings and I really like the direction that Soul Patts is investing recently.

At the current Soul Patts share price it offers a grossed-up dividend yield of 4.1%.

Foolish takeaway

I think each of the above ASX 200 shares are really good ideas to buy today. At today’s prices I think each of them can beat the ASX 200 index return over the next few years, particularly A2 Milk with its international growth.

More reading

• 3 ASX shares for beginners to buy
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week
• ASX dividend shares raising their dividends like clockwork
• These were the worst performing ASX 200 shares last week

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk and AFTERPAY T 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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The availability of low cost brokerage and market volatility during the pandemic appears to have led to a surge in day trading activity from investors around the globe.

This is certainly evident on social media platforms, particularly on Facebook in stock tipping groups.

While it is certainly true that you can make money trading shares, it is worth remembering that statistically it creates far more losers than winners.

What should you do?

As tempting as it is to trade shares, I believe the best way to build your wealth is to invest with a long term view. By buying and holding quality ASX shares, investors can take advantage of compounding.

But which shares should you buy and hold? Three top options that I would buy with a long term view are listed below. Here’s why I think they are quality options:

Appen Ltd (ASX: APX)

Appen is a leading developer of high-quality, human annotated datasets for the machine learning and artificial intelligence markets. These markets are expected to grow materially in the future, which can only be a good thing for Appen. Approximately 10% of spending in these markets is estimated to be made on the data labelling that it is an industry leader in. In light of this, I expect demand for its services to continue to grow in the coming years. This should support strong earnings growth over the 2020s.

Cochlear Limited (ASX: COH)

Cochlear is a global developer, manufacturer, and distributor of cochlear implantable devices for the hearing impaired. I think it would be a great long term option due to the ageing populations tailwind. This is because as people age, their hearing will more often than not require some form of assistance. So, with the World Health Organization estimating that there will be almost three times more people over the age of 65 by 2050 than there were in 2010, demand for Cochlear’s industry-leading cochlear implantable devices looks likely to grow strongly over the next few decades.

Kogan.com Ltd (ASX: KGN)

A final option to consider buying is Kogan. It is Australia’s leading ecommerce company and our homegrown answer to Amazon. I think it would be a top option due to the ongoing shift to online shopping and its increasingly popular website. As of last year, just 10% of shopping was made online. I expect this percentage to grow materially over the next decade, particularly given the pandemic’s impact on consumer behaviour. Combined with potential earnings accretive acquisitions, I believe this positions Kogan well for long term growth.

More reading

• 5 things to watch on the ASX 200 next week
• 3 five-star ASX stocks to buy right now
• Insiders have been buying Cochlear (ASX:COH) and this ASX share
• Where to invest your JB Hi-Fi (ASX:JBH) dividends today
• 2 ASX shares I would buy again and one I regret

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 Cochlear Ltd. and Kogan.com ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Kogan.com 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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A lot has been made recently about the high prices of many shares – both on the ASX and around the world. Like, a lot. ASX share market news has been dominated in recent months by stories like that of Afterpay Ltd (ASX: APT), up more than 700% since 23 March. Or Sezzle Inc. (ASX: SZL), up more than 1,500% over the same period.

Even the blue chip shares some investors decry as ‘boring’ haven’t disappointed. Fortescue Metals Group Limited (ASX: FMG) shares, for instance, have risen more than 60% this year so far.

2020 was supposed to be a year of extreme uncertainly for global share markets. At least that’s what we all thought back in March. But in reality, we saw one of the shortest bear markets in history, and it’s been ‘back to the races’ ever since. But how is this possible? The coronavirus pandemic has wreaked global economic damage of the once-in-a-hundred-years kind. We are seeing unprecedented GDP numbers right around the world. Australia’s fell 7% (the largest quarterly drop on record) for the quarter ending 30 June 2020. Unemployment is forecast to rise above 10% by the end of the year. And yet we have seen a rampaging share market for most of 2020.

Over in the United States (which has arguably been hit a lot harder than Australia), we saw all-time record highs for markets as recently as last week.

Why are markets so high in the coronavirus age?

Well, there’s only one explanation, in my view. See, the share price that the market comes up with at any given time for any particular company can be explained by the price-to-earnings (P/E) ratio. This takes a company’s earnings per share (EPS), or how much money it makes, divided by the number of shares outstanding, and divides it by the company’s share price.

This means that the only two variables that influence a share price are how much earnings the company makes (which is a universal metric seeing as a dollar is worth the same across the economy), and how much investors are willing to pay for those earnings. Take the current Woolworths Group Ltd (ASX: WOW) share price. The company recently reported EPS of 92.7 cents. That gives Woolworths a P/E ratio of approximately 39.60 on recent pricing.

Now, if an investor decides to bid $41 per share for Woolworths tomorrow, they are effectively upping the P/E ratio of Woolworths shares, given that the earnings (or E) haven’t changed.

And because markets have exploded higher in 2020 in what has been a mixed bag (at best) of earnings in 2020, we can only assume that investors have suddenly decided to value shares across the board at higher rates, a view confirmed by The Wall Street Journal. According to the WSJ, exactly a year ago, investors were paying an average P/E of 22.95 for S&P 500 shares (the flagship US index). Today, it’s 37.92. My Fool colleague, James Mickleboro, explored this concept in-depth a few days ago.

Are high P/E ratios here to stay?

I think they might be, but that isn’t comforting. Historically, a market-wide high P/E ratio signals danger around the corner. But with interest rates virtually at zero around the world, there isn’t much that can pull these valuations down in a permanent sense. Once interest rates start rising again? Well, that’s a different story. So make sure you have absolute faith in the companies in your portfolio, because the market won’t be kind to everyone forever!

More reading

• 3 top ASX dividend shares I would buy next week
• 5 things to watch on the ASX 200 next week
• Buy these ASX growth shares after the market selloff
• 3 exotic ASX tech ETFs you might want to add to your portfolio today
• Why the Afterpay (ASX:APT) and Sezzle (ASX:SZL) share prices are falling again today

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO and Woolworths Limited. The Motley Fool Australia has recommended Sezzle Inc. 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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Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

IDP Education Ltd (ASX: IEL)

According to a note out of Goldman Sachs, its analysts have retained their buy rating and lifted the price target on this student placement and language testing company’s shares by almost a third to $22.50. Goldman believes IDP Education is well positioned for the eventual restart of the international student market. And looking further ahead, its analysts note that it is exposed to long dated structural tailwinds in international education and well placed to increase its market share in the fragmented student placement market. I agree with Goldman Sachs and would be a buyer of IDP Education’s shares.

Nearmap Ltd (ASX: NEA)

A note out of the Macquarie equities desk reveals that its analysts have retained their outperform rating and lifted the price target on this aerial imagery technology and location data company’s shares to $3.20. Its analysts appear pleased with its capital raising and expect it to support its future growth in the key United States market. In light of this, it has upgraded its annualised contract value estimates for the coming years. I think Macquarie is spot on and Nearmap could be a great long term option for investors.

Westpac Banking Corp (ASX: WBC)

Another note out of Goldman Sachs reveals that its analysts have retained their buy rating and $19.83 price target on this banking giant’s shares. The broker notes that APRA has released additional data on loan repayment deferrals. This data reflects very positively on Westpac and appears to show that just 7% of its loan book is on deferral at present. In addition, of the big four banks, Westpac has seen the biggest net improvement in mortgage deferrals. I would have to agree with Goldman Sachs on this one too. I think Westpac is trading at a very attractive level at present.

More reading

• These were the worst performing ASX 200 shares last week
• ASX 200 drops 0.8%, Nearmap (ASX:NEA) sinks
• Leading broker downgrades Nearmap (ASX:NEA) shares
• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd and Nearmap Ltd. The Motley Fool Australia has recommended Nearmap 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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If you’re a investor just starting your portfolio I think there are a number of ASX shares that could be good ideas.

I wouldn’t want one of your first investments to blow up in your face. That could put you off ASX shares, which would be very disappointing because I think shares are the best long-term wealth creation tool out there.

Here are three good investments that would be really good as long-term wealth building ideas for beginner investors:

WAM Microcap Limited (ASX: WMI)

WAM Microcap is a listed investment company (LIC) which invests in small ASX shares. It targets ones with a market capitalisation under $300 million. These smaller businesses can be very exciting growth ideas.

The investment team have proven to be very good investors. WAM Microcap reports its investment returns before expenses fees and taxes. Over the past three months its gross return was 26.9%, over the past year (including the COVID-19 crash) its gross return was 25.4% and since inception in June 2017 it has returned 21.7% per annum.

Since inception in June 2017, its gross performance outperformed the S&P/ASX Small Ordinaries Accumulation Index by 13.3% per annum.

It invests in exciting businesses like People Infrastructure Ltd (ASX: PPE), Citadel Group Ltd (ASX: CGL, Redbubble Ltd (ASX: RBL) and Selfwealth Ltd (ASX: SWF). It offers good diversification as it owns dozens of smaller ASX shares. 

As a bonus, WAM Microcap is steadily increasing its ordinary dividend and it regularly pays a special dividend.

At the current WAM Microcap share price it’s trading at a slight discount to the August 2020 net tangible assets (NTA) per share. That you means you can buy a basket of ASX shares worth $1.49 per share for $1.46 per share.

Betashares Global Sustainability Leaders ETF (ASX: ETHI)

New investors may want to only invest in businesses that are doing good in the world. Or at least aren’t causing negative effects on the world.

This is an exchange-traded fund (ETF) which owns a portfolio of businesses that have been identified as climate leaders that have also passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investing considerations.

In practice, that means excluding businesses with exposure to gambling, tobacco, armaments, alcohol, junk foods, pornography, the destruction of valuable environments, human rights and supply chain concerns and so on.

The Betashares Global Sustainability Leaders ETF has actually performed very well. Investing ‘ethically’ doesn’t have to come at the expense of returns. Over the past year it has returned 27.8%, over the past three years it has returned 23.5% per annum and since inception in January 2017 it has returned 21.6% per annum.

It’s invested in lots of great businesses like Apple, Nvidia, Mastercard, Visa, Home Depot, Adobe and PayPal. It doesn’t invest in ASX shares, as the ‘global’ name may suggest.

Its annual management fee is just 0.59% per annum, which is very cheap for an ethical option.

This is the type of investment you could own as your only investment because of its performance and global diversification. It’s invested in around 200 businesses.

A2 Milk Company Ltd (ASX: A2M)

If you want to invest in an ASX share with plenty of growth potential then I think A2 Milk is a great option today.

In the FY20 result, A2 Milk grew revenue by 32.8% to NZ$1.73 billion and net profit after tax (NPAT) rose by 34.1% to NZ$385.8 million.

There are two reasons why I think A2 Milk is a really good buy today. It continues to grow its distribution and market share in the US and China. Those are two huge markets that could support a much bigger A2 Milk business.

The other reason is that the A2 Milk share price has fallen by 16% since 18 August 2020. It’s trading at a more attractive valuation, it’s priced at 24x FY23’s estimated earnings.

Foolish takeaway

I believe each of these ASX shares would be good picks to start a portfolio with. WAM Microcap is a really good option for dividend income, but Betashares Global Sustainability Leaders ETF offers attractive global diversification with (historically) good returns as well.

More reading

• Where to invest $10,000 into ASX shares today
• 3 small cap ASX shares I’d buy with $3,000 right now
• Top brokers name 3 ASX shares to sell today
• Interested in ethical investing? Look at these 3 ETFs
• Why you shouldn’t be concerned by the high PE multiples of ASX tech shares

Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Citadel Group Ltd and People Infrastructure 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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