Category: Stock Market

If you’re a growth investor then you’re in luck. The Australian share market is home to a number of quality shares that have the potential to grow strongly in the future.

Two top ASX growth shares that have been tipped as buys are listed below. Here’s why they are highly rated:

Redbubble Ltd (ASX: RBL)

The first ASX growth share to look at is Redbubble. This ecommerce company’s shares have come under significant pressure this month following the release of its third quarter update.

For the three months ended 31 March, Redbubble reported a 54% increase in gross transaction value to $134 million. However, from this, it only generated EBITDA of $2.2 million. This compares to its first half EBITDA of $48.8 million, which averages out at $24.4 million per quarter.

Management advised that it is sacrificing margins in order to invest in its growth. An investment that it hopes will lead to gross transaction value of $1.5 billion by 2024 with an EBITDA margin of 10% to 15%. This compares to gross transaction value of $620 million and an EBITDA margin of 9% in 2020.

In response to the update, RBC Capital held firm with its buy rating but cut its price target to $5.60. This compares to the latest Redbubble share price of $4.08.

Zip Co Ltd (ASX: Z1P)

Another ASX growth share to consider is Zip. Thanks to the increasing popularity of the buy now pay later (BNPL) payment method with consumers and retailers across the world, Zip has been growing at a rapid rate in recent years.

This has continued in FY 2021, with Zip recently releasing its third quarter update. That update revealed an 80% increase in group quarterly revenue to $114.4 million. This was driven by a 195% increase in transaction numbers to 12.4 million, a 114% jump in quarterly transaction volume to $1.6 billion, and an 88% lift in active customers globally to 6.4 million.

The key driver of its growth was its Quadpay business in the United States. Pleasingly, with a $5 trillion market opportunity in the country, this side of the business still has a significant runway for growth over the next decade and beyond.

One broker that was pleased with its update was Citi. In response, the broker upgraded its shares to a buy rating with an $11.30 price target. This compares to the latest Zip share price of $8.90.

More reading

• Broker weighs in on the Redbubble (ASX:RBL) share price after its 20% dive
• The Youfoodz (ASX:YFZ) share price is down 15% today. Here’s why
• Why some of your favourite ASX growth shares are free-falling this week
• Could a dual listing drive the Afterpay (ASX:APT) share price higher? 
• Why Zip (ASX:Z1P) and this ASX growth share are rated highly

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 ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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High iron ore prices are continuing to boost the Fortescue Metals Group Limited (ASX: FMG) share price.

Over the last month the Fortescue share price has gone up by 12%. It has been a sizeable recovery after a decline between the end of February and the recent low in March 2021.

Even so, the Fortescue share price remains down by around 14% from that high in February 2021.

What’s going on with the iron ore price?

There have been some effects from COVID-19 on the iron ore price. China has been providing stimulus for its economy which has seemingly benefited the iron ore price. The Chinese demand for iron ore remains high and the iron ore price is also high. The iron ore price is currently around US$190.

Another factor for the strong iron ore price is that supply from Brazil continues to be lower than expected from the iron ore miner Vale. COVID-19 impacts have meant that production continues to be disappointing.

Analysis by the Australian Financial Review pointed out that margins for the miners are higher than they were a decade ago during the last boom. Another difference with that boom is that the US and Europe are spending a lot of money on infrastructure which should help things.

The iron ore price isn’t going to stay this strong according to analysts.

The AFR reported that Goldman Sachs said on Tuesday it thinks the iron ore will fall to $US137 a tonne by the end of June 2021, this could mean a 27% fall by the end of the financial year.

Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) think that conditions in China remain strong. This may mean that FY21 earnings of the iron ore giants are stronger than some analysts are expecting.

How good is the Fortescue FY21 result going to be?

It’s hard to know exactly how good the result will be because of the unknown of how iron ore prices will go over the next couple of months. But prices have remained high for most of the second half of the financial year too.

Morgan Stanley is one of the brokers that’s most bearish about Fortescue with a share price target of $17.45 over the next 12 months. The broker is concerned that emission reductions in the Chinese city called Tangshan could cause trouble for lower grade miners like Fortescue. Morgan Stanley thinks that Chinese stimulus ending will be a negative for the iron ore price.

Broker UBS also thinks the good times aren’t going to continue, with lower Chinese demand and more supply from Brazil.

But not every broker thinks that way. Ord Minnett thinks that concerns about China are too pessimistic. Production can come online in other places. The broker thinks that the Fortescue share price could go higher, with a share price target of $29.

According to Ord Minnett, Fortescue has a FY21 grossed-up dividend yield of 23%. Using its earnings estimates, the Fortescue share price is valued at 7x FY21’s estimated earnings.

More reading

• Top brokers name 3 ASX dividend shares to buy today
• 3 ASX dividend shares with fully franked yields over 5% today
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• 5 things to watch on the ASX 200 on Friday
• Why your ASX 200 shares aren’t going up with the market 

Motley Fool contributor Tristan Harrison owns shares of Fortescue Metals Group Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Are you looking to add some dividend shares to your portfolio next week? Then take a look at the ones listed below.

Here’s why they could be top options for income investors:

BWP Trust (ASX: BWP)

When it comes to retail property, there are few retailers (if any) that you would want more as a tenant than Bunnings Warehouse.

So, as the largest owner of Bunnings Warehouse sites across Australia, BWP is the envy of many retail landlords.

At the last count, BWP had a total of 68 properties which were leased to the home improvement giant. And thanks to its key tenant’s strong performance during the pandemic, it has been able to collect rent as normal this year.

This led to BWP reporting a 6% increase in profit during the first half of FY 2021, allowing the BWP board to reaffirm its plans to pay a full year distribution of ~18.3 cents per share.

Based on the current BWP share price, this equates to an attractive 4.45% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share to look at is this telco giant. Telstra’s outlook has improved greatly recently thanks to the easing NBN headwind, rational competition, lucrative 5G internet, and the planned splitting up of the company to unlock value.

In fact, management expects the above to put Telstra in a position to return to growth as soon as next year.

In light of this, the company’s dividend cuts appear to be over, with almost all analysts now expecting 16 cents per share to be the bottom.

So, with the Telstra share price ending the week at $3.41, this means its shares will provide investors with a fully franked dividend yield of approximately 4.7%. Given how low interest rates have fallen in recent years, this is certainly an attractive yield for income investors.

More reading

• ASX 200 finishes flat, Kogan drops, Accent jumps
• What’s with the Telstra (ASX:TLS) share price and other telcos today?
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• ASX 200 down 0.1%: Kogan crashes, AMP’s demerger plans, Telstra strengthens 5G network
• Telstra (ASX:TLS) share price on watch after 5G update

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) had a strong start to the week but faded as it went on. This led to the benchmark index falling by 2.8 points over the five days to finish the week at 7,060.7 points.

A number of shares on the index acted as major drags on proceedings during the week. Here’s why these were the worst performers on the ASX 200:

Challenger Ltd (ASX: CGF)

The Challenger share price was the worst performer on the ASX 200 last week with a disappointing decline of 23.8%. Investors were selling the annuities company’s shares following the release of a disappointing third quarter update. Although Challenger recorded solid growth in its assets under management, its margins have been impacted by a sharp decline in credit spreads over the year. This means it only expects to hit the low end of its guidance range. And while the company intends to lift prices significantly to combat this, there are concerns that this will weigh on sales.

Kogan.com Ltd (ASX: KGN)

The Kogan share price wasn’t far behind with a sizeable 19.7% decline over the five days. The catalyst for this was the release of the ecommerce company’s third quarter update. Although Kogan reported a 47% increase in gross sales and a 54% jump in gross profit, its operating earnings actually declined by 24%. This was predominantly due to the core Kogan business, which reported a 42% decline in adjusted operating earnings due to a significant increase in operating costs.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price was out of form and sank 11.9% last week. Investors were selling the lithium producer’s shares following the release of its third quarter update and a broker note out of Citi. According to the note, the broker has downgraded its shares to a sell rating with a $1.10 price target. Citi made the move largely on valuation grounds following a strong gain over the last couple of months. In addition to this, it notes that the company fell short of shipment expectations during the March quarter and its costs were higher than expected.

Whitehaven Coal Ltd (ASX: WHC)

The Whitehaven Coal share price was a poor performer and dropped 11.4% during the period. Last week analysts at Morgans gave their opinion on the coal miner. Although they have retained their add rating, they cut their price target by 8% to $2.05. The broker was disappointed with production issues at its Narrabi operation.

More reading

• Growing pains, or something worse, for Kogan?
• ASX 200 finishes flat, Kogan drops, Accent jumps
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• Why a2 Milk, Centaurus Metals, Kogan, & Youfoodz are sinking today
• The Youfoodz (ASX:YFZ) share price is down 15% today. Here’s why

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Pro Medicus Ltd (ASX: PME) share price is still a buy according to fund manager Ben Griffiths from the funds management business Eley Griffiths Group.

Why Eley Griffiths is worth listening to

Eley Griffiths runs two funds, The Small Companies Fund and The Emerging Companies Funds.

The Small Companies Fund targets businesses outside of the S&P/ASX 100 Index (ASX: XTO). After fees, it has outperformed the S&P/ASX Small Ord Accumulation Index by an average of 4.2% per annum since inception in September 2003.

What’s Pro Medicus?

It’s a business that is a health imaging technology provider, predominately in the radiology software and services space for hospitals, imaging centres and health care groups worldwide. It offers an end-to-end offering with its Visage technology.

Fund manager Ben Griffiths explained on Livewire Markets that radiologists and other medical imaging professionals use Visage to interpret images created by medical imaging equipment such as X-Ray, Ultrasound, CT and MRI Scanners.

Why does Eley Griffiths think that the Pro Medicus share price is an opportunity?

The fund manager said that its research shows that Pro Medicus is significantly ahead of its peers when it comes to viewer speed and efficiency for clinics.

One of the highlights for Mr Griffiths is that the healthcare ASX share has been winning contracts worth $155 million in the financial year to date. This has been much stronger than FY19 and FY20 where the wins amounted to around $50 million per annum in those years.

Since 31 December, Pro Medicus has won some very big contracts. One is a 7-year, $40 million contract with US-based Intermountain Healthcare, which operates in the mountain states of Utah, Idaho and Nevada. It also won a 7-year, $31 million contract with a leading Californian academic health system.

The valuation of Pro Medicus is high, according to Eley Griffiths.

However, it’s expected to have 20% compound revenue growth over the next five years. Mr Griffiths noted that Pro Medicus could have earnings before interest and tax (EBIT) margins of around 60% – he said it’s in “rarefied air”.

One of the other things that the fund manager noted was that Pro Medius has a very high return on invested capital (ROIC) compared to most other ASX shares.

Eley Griffiths is particularly excited by the fact Pro Medicus has plenty of ways that it can invest its capital whilst it wins more market share and attract more customers with an even stronger software offering.

More reading

• The ASX healthcare shares Goldman Sachs rates as a buy
• Why this ASX share bull market could run for longer
• Why the Pro Medicus (ASX:PME) share price could be in the buy zone
• 2 excellent ASX shares to buy in April
• 3 great reasons to own Pro Medicus (ASX:PME) shares

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 and recommends Pro Medicus Ltd. The Motley Fool Australia has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Australian share market is home to a number of quality companies with solid growth prospects.

Three that have been tipped to grow at stronger than average rates over the coming years are listed below. Here’s why analysts think investors should be buying their shares this month:

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is Australia’s leading online beauty retailer. At the last count, the company had almost 800,000 active customers on its platform.

While the company has been growing very strongly during the pandemic, it still has a very long runway for growth. Especially given the relatively low penetration of online beauty sales relative to other Western markets. This puts it in a great position to continue growing strongly in a post-pandemic world.

Morgan Stanley currently has an overweight rating and $8.75 price target on its shares.

Breville Group Ltd (ASX: BRG)

Kitchen appliances might not seem like the most exciting thing to invest in, but try telling that to its shareholders. Over the last decade the Breville share price has absolutely smashed the market with incredible returns.

The good news is that due to acquisitions, favourable consumer trends, and its global expansion, Breville appears well-placed to continue this positive form over the next decade.

One broker that thinks highly of Breville is Morgans. It currently has an add rating and $33.90 price target on its shares.

ELMO Software Ltd (ASX: ELO)

Another company that has been growing quickly is ELMO. It is a HR and payroll platform provider that allows businesses to simplify and streamline a wide range of tasks.

This has underpinned strong recurring revenue growth over the last few years. And thanks to acquisitions and its large addressable market, more of the same is expected in the coming years.

Earlier this week analysts at Shaw & Partners initiated coverage on the company with a buy rating and and $9.00 price target.

More reading

• Why retailers are stepping up as top performing ASX shares this week
• 3 fantastic ASX shares to buy this month
• 2 ASX growth shares that could generate huge returns for investors
• Brokers name 3 ASX shares to buy now
• 2 rapidly growing ASX shares to buy

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 and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Adore Beauty Group Limited. The Motley Fool Australia has recommended Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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I write about the psychology of investing a lot.

That’s because I think it’s the area of investing most likely to help you succeed – and most likely to be responsible for failure.

Sure, it’s possible that you get your analysis wrong on a given company, or even a whole sector.

But that error is unlikely to cost you all that much, in the overall scheme of things… if you get the psychology of investing right.

See, the basics are straightforward:

– Diversify.

– Invest small amounts, regularly

– Don’t speculate

– Don’t overtrade

We can add more, of course, but that’s the basics.

And, if you’ve done those things, the occasional temporary loss – or permanent mistake – on a given company just isn’t going to hurt you that much.

How do I know?

Because I own Kogan.com Ltd (ASX: KGN) shares.

Those shares are down 12% today, at the time of writing.

Yep, it sucks.

The good news is that I’ve taken my own advice on those rules, above.

I own shares in more than 20 companies and ETFs

I invest when I have enough saved to make the brokerage cost small enough to bear (under 2%, and ideally under 1% of the trade value).

I own shares in businesses and ETFs whose long term opportunity I believe in, and whose share prices are reasonable.

I buy regularly (see above), but rarely sell.

The result? 

Kogan’s 12% fall (plus other increases and decreases) pushed my Australian portfolio down about 1.8% this morning. My US portfolio was down about 1.2% last night.

Is it welcome?

No.

Though, to be honest, if it wasn’t already a sizeable portion of my portfolio, I’d probably be a buyer today. (Actually, The Motley Fool’s trading rules don’t let me trade a company two days either side of writing about it, so this very article would mean I wasn’t allowed to, either, but you get my gist!)

Yep, a 12% fall stings.

So, how do I feel?

First, poorer.

No-one likes losing money.

But we’ve been here before.

We’ll be here again.

The market fell 38% in a month and four days, around this time last year.

Falls are unwelcome, but, going back to my opening lines, you’ve just gotta make your peace with them.

I’m not perfect, and I’ve been doing this for a long time, but I’ve made my peace with share price falls. 

Second, it makes me feel tentative.

“Have I made a mistake?”

“Am I wrong?”

These are very normal and reasonable questions to ask when your company’s shares fall by a big margin.

And here’s the uncomfortable reality:

I might be.

No, I don’t think I am.

But – more importantly – I could be wrong about any single company in my portfolio.

Statistically speaking, I’m probably wrong about somewhere between 30%-40% of the companies I own.

That’s why I’m diversified.

These are the rules of the game we’re playing.

If you want perfection, you’d better make your peace with earning 0.05% interest on cash in the bank.

Or, if you want higher returns, you’re going to have to accept volatility.

See, even the best-performing companies can be very volatile.

Speaking of e-commerce – and volatility – I also own Amazon.com Inc.

Those shares have suffered many, many large percentage falls on their journey to their current 1000-fold gains since listing.

Sometimes, it was on the back of unflattering results. Sometimes, just because the market changed its (collective) mind.

If you’re going to invest, you need to expect these things.

Even Warren Buffett’s Berkshire Hathaway (yep, I own shares of it, too) has fallen 50%, top-to-bottom, three times in its market-crushing history.

And – get this – Buffett was there the whole time.

Yet investors got such cold feet, even with the world’s best investor at the helm, that shares more than halved.

Thrice.

As Kipling nicely put it

“And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’”

I don’t love days like today. 

(Especially when I can’t buy!)

But I’m used to them.

I expect them.

I’ve made my peace with them.

I refuse to let the market dictate my emotions or my actions.

I won’t trade recklessly, out of fear, impatience, intolerance or unhappiness.

See, I’m not the smartest investor I know.

I’m not the most educated.

I’m not the nerdiest spreadsheet jockey.

I’m not the one with the best contacts.

But I have two key advantages:

I’m pretty good at pattern recognition (I tend to notice similarities between past successes and failures, and today’s businesses).

And I have a very good hold over my emotions.

Remember, I was – and we at The Motley Fool were – telling you to buy when others were heading for the hills during the COVID crash.

Want the uncomfortable truth?

I have no idea if I’m right or wrong about Kogan.

… or any other company in my portfolio.

I have an informed opinion. More often than not, over the past almost-10 years running Motley Fool Share Advisor, I’ve been right.

And that ‘right-ness’ has delivered significant market out-performance for our members.

Yep, I’ve made mistakes.

We’ve lived through times when stocks like Kogan and Corporate Travel Management Ltd (ASX: CTD)(yep, another one I own) were hated by the market.

And as the legal eagles (rightly) insist I say, past performance is no guarantee.

I don’t expect you to love market falls.

I don’t expect you to even like them.

(Though don’t forget, if you have money to invest, they can be wonderful opportunities!)

But what I do need you to do is learn – with our help – to master your emotions.

I can’t help you if you don’t diversify.

I can’t help you if you won’t sit quietly, while the crowd outside is telling you to trade.

I can’t help you if you are going to freak out and sell when the going gets tough.

I can’t help you if you expect perfection.

And I can’t help you if you’re expecting returns in a week, a month, or even a year.

But I think I can help you – we can help you – if you’re prepared to invest the way we do.

Patiently.

Carefully.

Confidently.

Thoughtfully.

(Notice I didn’t say ‘smartly’? You don’t need a stratospheric IQ to invest. In fact, those who missed the April 2020 share market rally were disproportionately the ‘smarties’.)

If you learn to control your emotions, you’ll be better off than maybe 75% of investors. Perhaps more.

As Buffett said:

If you’ve got 160 IQ, sell 30 points to somebody else because you won’t need it in investing. What you do need is the right temperament. You need to be able to detach yourself from the views of others or the opinions of others.

You need to be able to look at the facts about a business, about an industry, and evaluate a business unaffected by what other people think. That is very difficult for most people.

Most people have, sometimes, a herd mentality which can, under certain circumstances, develop into delusional behaviour.

Oh sure, you can invest like that random bloke on that internet forum tells you to.

But we’re going to do our best to invest like Buffett.

I’m sure you can tell which approach we hope you’ll follow.

Fool on!

More reading

• ASX 200 finishes flat, Kogan drops, Accent jumps
• Why a2 Milk, Centaurus Metals, Kogan, & Youfoodz are sinking today
• The Youfoodz (ASX:YFZ) share price is down 15% today. Here’s why
• Kogan (ASX:KGN) share price crashes 13% on Q3 update
• ASX 200 down 0.1%: Kogan crashes, AMP’s demerger plans, Telstra strengthens 5G network

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Scott Phillips owns shares of Amazon, Berkshire Hathaway (B shares), Corporate Travel Management Limited, and Kogan.com ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Berkshire Hathaway (B shares) and recommends the following options: long January 2022 $1920 calls on Amazon, short June 2021 $240 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2022 $1940 calls on Amazon, and long January 2023 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Kogan.com ltd. The Motley Fool Australia has recommended Amazon and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares in Baby Bunting Group Ltd (ASX: BBN) have continued their trend upwards today to set yet another all-time high. Australia’s largest specialty retailer of baby goods has enjoyed a 165% rise in its share price over the last year.

At the end of Friday’s session, the Baby Bunting share price was $6.58, up 3.8%.

Results recap

The last lot of metrics to come out of the company were back in February. With the Baby Bunting share price surging since then, it might be worth taking a look again.

For the first half of FY21, the retailer achieved sales growth of 16.6% compared to the prior corresponding period (pcp) to $217.3 million. While earnings before interest, tax, depreciation, and amortisation (EBITDA) grew to $18.5 million – an increase of 29.7%.

Operating in what Baby Bunting describes as “a less discretionary category”, the company grew through a challenging period. During the first half, the company added 3 new stores and didn’t receive any JobKeeper payments.

Most notably, after a thorough assessment, Baby Bunting made the decision to expand to New Zealand. It now expects to open its first store in FY22, with plans of over 10 stores across the region.

It’s all good news, which explains the Baby Bunting share price rally. However, there is one potential ‘teething issue’ that could slow momentum.

Will fewer ‘customers’ affect Baby Bunting share price?

Australia’s birth rate has been in decline for several years. The natural increase in population was 3.8% lower than the previous year for the 12 months to September 2020.

Typically, Australia relies on immigration for its population growth. But with international borders remaining closed due to COVID-19, immigration inflows are non-existent.

Actual birth statistics are always lagging due to the arduous collection of data. As a result, we likely won’t know the full extent of birth rate impacts in Australia until the end of the year. Though, the longer border restrictions are in place, the bigger the birth deficit in Australia.

For now, the Baby Bunting share price and its shareholders are unfazed.

More reading

• 3 ASX retail shares at record highs
• 2 quality ASX shares rated as top buys by brokers
• Brokers think these 2 top ASX shares are buys in April 2021
• These top 2 ASX shares should be on your watchlist
• 2 ASX shares that may be hit by Australia’s declining birth rate

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Baby Bunting. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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One of the ways that legendary investor Warren Buffett has generated wealth over decades of investing is by buying and holding the shares of quality companies. This investment strategy is highly successful due to the power of compounding.

Compounding is interest on top of interest, or returns on top of returns for investments. It explains how an investment earning a 10% per annum return will double in value in a little over seven years.

With that in mind, listed below are two ASX shares that could be quality candidates for a buy and hold investment. Here’s what you need to know about them:

Altium Limited (ASX: ALU)

Altium is an award-winning printed circuit board (PCB) design software provider. PCBs are the circuit boards you find in almost all electronic devices. 

Given the proliferation of electronic devices globally and their complex designs, demand for its software has been growing very strongly over the last few years.

And while COVID-19 is hampering Altium’s growth and recently led to discounting, demand is expected to pick up again once the pandemic passes. 

Looking ahead, management continues to target subscriptions of 100,000 and revenue of US$500 million by FY 2025/26. This will be a big increase on FY 2020’s ~51,000 subscriptions and revenue of US$189.1 million.

Citi is positive on the company. It recently retained its buy rating and $33.50 price target on Altium’s shares.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another quality candidate for a buy and hold investment could be Domino’s.

This is due to its talented management team and their long-term thinking. Domino’s may be smashing expectations in FY 2021 with some very impressive sales and profit growth, but that doesn’t distract it from thinking about the next decade.

Domino’s finished the first half of FY 2021 with a network of 2,800 stores. It is now aiming to double this by 2023 in its existing markets. Management is also looking for acquisitions and could expand into new territories in the future. This would give it an even longer runway for growth.

Morgans is very positive on the company’s future. The broker currently has an add rating and $119.00 price target on its shares.

More reading

• Why Zip (ASX:Z1P) and this ASX growth share are rated highly
• Altium (ASX:ALU) share price tumbles on broker downgrade
• Aussie dollar shoots higher! Here are some ASX winners
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Goldman Sachs hosted its 4th small/mid-cap healthcare forum this week. This included 13 Australian and New Zealand healthcare companies across a diverse range of specialties. Here are the ASX healthcare shares that Goldman picked as a buy. 

Goldman’s ASX healthcare shares to buy

Opthea Ltd (ASX: OPT) 

Opthea is developing a complementary medicine to be used with existing inhibitors for the treatment of wet age-related macular degeneration (wet AMD) and diabetic macular edema (DME). 

Goldman believes there is multi-billion dollar potential in Opthea’s treatment. The broker observes that existing treatments only inhibit up to two of the factors responsible for retinal disease, with over half of patients not achieving significant vision gains and a quarter experiencing continued vision loss. 

The company’s lead candidate, OPT-302 is intended to complement existing treatments to produce an improved outcome for patients. 

Opthea successfully completed a A$169 million initial public offering on the US NASDAQ market in September 2020, improving its cash position to A$203 million in 1H21. Goldman believes this secures the company’s funding for the completion of two pivotal Phase 3 trials. 

Pro Medicus Limited (ASX: PME) 

Within the context of medical imaging, Goldman believes that “globally, there is rapidly growing demand for solutions that can process, transfer and store this data efficiently, particularly given that speed and accuracy is intrinsically linked to treatment outcomes and commercial incentives”.

Pro Medicus shares have been chugging along and up 33% year-to-date to a near all-time record high of $47.22.

Goldman has observed that its 3Q21 transaction volumes are tracking above pre-COVID levels with a strong backlog/deferral stream to provide growth for months to come.

Goldman has modelled “an average of 5 contract wins per year, at an average minimum size of A$15m pa, reflecting recent order momentum and our expectation of heightened interest in this technology through the coming periods “.

Integral Diagnostics Ltd (ASX: IDX) 

Integral Diagnostics is one of the largest diagnostic imaging companies in Australia.

Goldman observes that the company’s 1H21 growth of 6.5% was softer than the 8.3% improvement from Medicare.

This was largely driven by Integral’s geographical weighting in Victoria which was impacted by regional lockdowns. Looking ahead, the company has commented that volumes in the second half are growing in line with expectations. 

The growth drivers highlighted by Goldman and Integral include a “steady positive mix shift towards high-acuity imaging” and “Medicare reimbursement re-indexation from July-20 at c.+1.5% pa”.

More reading

• Why this ASX share bull market could run for longer
• 2 small cap ASX dividend shares to buy
• Why the Pro Medicus (ASX:PME) share price could be in the buy zone
• 2 excellent ASX shares to buy in April
• 3 great reasons to own Pro Medicus (ASX:PME) shares

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia has recommended Integral Diagnostics Ltd and Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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