Are you interested in adding some more ASX shares to your portfolio?

Five ASX shares that could be worth considering this month are listed below. Here’s what you need to know about them:

CSL Limited (ASX: CSL)

CSL is the biopharmaceutical giant behind the CSL Behring and Seqirus businesses. These two businesses have a host of lucrative therapies and vaccines that generate billions in revenue each year. CSL also invests significantly in its research and development pipeline and will be putting almost US$1 billion into these activities in FY 2021. By doing this, it ensures that the company stays ahead of the curve and has a pipeline of potentially life-saving products. One of those is Clazakizumab, which is being developed to treat kidney transplant rejection. This product alone has the potential to generate peak sales of US$5.4 billion if successful. Citi recently upgraded its shares to a buy rating with a $310 price targe

Domino’s Pizza Enterprises Ltd (ASX: DMP)

This pizza chain operator could be worth considering due to its strong market position and bold growth targets over the next decade. At the last count, Domino’s had a network of 2,800 stores. However, it is aiming to grow this organically to 5,500 stores by 2033. Management is also looking for possible acquisitions, which would increase its footprint even further. Combined with its same store sales growth target and operating leverage, Domino’s looks well-placed to deliver strong earnings growth over the 2020s. Goldman Sachs is very positive on the company. It recently put a buy rating and $112.60 price target on its shares.

Nanosonics Ltd (ASX: NAN)

Nanosonics is one of the world’s leading infection prevention companies. It is the name behind the trophon EPR disinfection system for ultrasound probes. This product is regarded as the best in its class and has been capturing market share consistently over the last decade. This has underpinned strong unit sales and even stronger recurring revenues from the consumables that the system requires. Looking ahead, the increased importance of infection prevention following the pandemic and potential new product launches look set to underpin strong growth over the long term. UBS is positive on Nanosonics and currently has a buy rating and $7.00 price target.

Nearmap Ltd (ASX: NEA)

Nearmap is a leading aerial imagery technology and location data company with operations in the ANZ and North American markets. It provides businesses with instant access to high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools. While its growth has been a bit up and down over the last couple of years, management appears confident on the future. It is targeting annualised contract value (ACV) growth of 20% to 40% per annum over the long term. Underpinning this growth will be the release of its next generation of the world’s leading aerial camera system – HyperCamera3, and its artificial intelligence offering. Goldman Sachs recently put a buy rating and $2.95 price target on Nearmap’s shares.

NEXTDC Ltd (ASX: NXT)

NEXTDC is a leading data centre operator. It has been benefiting greatly in recent years from the increasing amount of data being generated by consumers and businesses. This has certainly been the case during the pandemic thanks to the accelerating shift to the cloud. This led to a surge in demand for data centre capacity. In fact, NEXTDC even has a significant amount of its future capacity already contracted. This bodes well for its future growth, as does its potential expansion into Singapore and Tokyo in the near future. UBS is a fan of the company and has a buy rating and $15.40 price target on its shares.

More reading

• Why COVID-19 is launching the IDT Australia (ASX:IDT) share price 65%
• Are COVID-19 vaccine worries affecting the CSL (ASX:CSL) share price?
• 2 ASX growth shares for smart investors to buy
• 2 strong blue chip ASX shares rated as buys by brokers
• 3 stellar ASX tech shares to buy for the long term

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and Nearmap Ltd. 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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Wilson Asset Management (WAM) is one of the highest-performing fund managers. WAM has named a number of ASX shares that could be worth taking a look at.

WAM runs a number of different funds/listed investment companies (LICs) including WAM Capital Limited (ASX: WAM) and WAM Microcap Limited (ASX: WMI). The WAM Microcap portfolio has performed particularly strongly since the bottom of the COVID-19 crash.

Lead portfolio manager Oscar Oberg spoke to Livewire about the market and some of the ASX shares and themes that WAM is looking at:

COVID-19 recovery

One of the main areas where WAM is finding opportunities at the moment is looking at companies, sectors and countries that have been particularly hit hard by COVID-19 but may soon go through a recovery phase. He was referencing the UK and US in-particular.

Some of the ASX shares that he mentioned were: Pendal Group Ltd (ASX: PDL), Virgin Money UK CDI (ASX: VUK), Reliance Worldwide Corporation Ltd (ASX: RWC), Corporate Travel Management Ltd (ASX: CTD) and Flight Centre Travel Group Ltd (ASX: FLT).

One of the main ones he talked about was the UK bank Virgin Money which is/was trading at a 30% discount to its book value and could be well placed to rebound. The ASX banking recovery could prove to be a template with what might happen with Virgin Money over time.

Changing business models

WAM is also looking for ASX shares that are emerging from this COVID-19 period with a stronger competitive position or a better offering. Virtus Health Ltd (ASX: VRT) was one example that he talked about, suggesting that the IVF business may license its technology to IVF providers around the world.

Doing it this way wouldn’t take up much capital and wouldn’t be expensive, and could bring in some good earnings for the company over time.

Environmental, Social, and Corporate Governance (ESG)

ESG is becoming a bigger factor for investors as time goes on. One ASX share he mentioned was Pact Group Holdings Ltd (ASX: PGH).

Mr Oberg thinks that Pact is going through a recovery phase and the strategy of increasing exposure to recycling plants makes sense.

Left-field pick

One interest pick that the WAM portfolio manager talked about was Link Administration Holdings Ltd (ASX: LNK). WAM believes it actually has a lot of growth potential because of its 44% holding of PEXA, which is an online electronic conveyancing ASX share – it has a market share of 75% in Australia.

Mr Oberg thinks that PEXA could be a global growth story and the UK could be one of the first places that it attempts an expansion.

Small cap

WAM Microcap’s entire purpose is to find small cap ASX shares and Enero Group Ltd (ASX: EGG) is one that he mentioned that has really turned itself around over the last decade. A sizeable amount of its earnings comes from US tech companies. WAM really likes the OB Media business for its growth potential, balance sheet, potential to make acquisitions and cheap valuation.

He revealed that Enero is the biggest position in the WAM Microcap portfolio.

Aged care

Aged care is another sector that makes up quite a sizeable position in the WAM portfolios. Estia Health Ltd (ASX: EHE) is one of the larger ASX share positions in WAM Microcap and WAM Capital.

WAM thinks the sector has bottomed and will benefit from the ramifications of the royal commission if the upcoming federal budget is favourable for the sector. Regis Healthcare Ltd (ASX: REG) is another pick within the sector. The aged care players also benefit from higher property prices.

More reading

• These were the best performers on the ASX 200 last week
• Why Corporate Travel Management, Silver Lake, Volpara, & Vulcan are pushing higher
• Where is the Flight Centre (ASX:FLT) share price going in 2021?
• Why Corp Travel Management, IGO, Limeade, & ResApp are tumbling lower
• Corporate Travel Management (ASX:CTD) shares sink after CEO’s $31.5m share sale

Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd and Reliance Worldwide Limited. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited, Link Administration Holdings Ltd, Reliance Worldwide Limited, and Virtus Health 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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Warren Buffett has a long track record of buying undervalued shares. In doing so, he has been able to use the market cycle to his advantage. Over time, this has contributed to him outperforming the wider stock market over the long term.

Even after the recent stock market rally, there could be opportunities to buy undervalued stocks. They may offer greater scope for capital growth in a stock market rise, as well as more stable performance should there be another stock market crash in future.

Warren Buffett’s focus on undervalued shares

As a value investor, Warren Buffett has always sought to buy undervalued shares. This does not necessarily mean that he purchases companies trading at cheap prices. Instead, he aims to buy a high-quality business for less than he believes it is worth. Sometimes, this can mean paying a higher price than sector peers are currently trading at. However, should the company in question have attributes such as a wide economic moat, Buffett has often purchased it in the past.

The result of this strategy has been very successful for Buffett. He has outperformed the wider stock market over a period of many years. Following a similar strategy could be worthwhile, since it may allow an investor to generate relatively high returns. After all, a stock that is priced for less than it is worth may be able to deliver stronger capital gains versus fairly priced or overpriced shares.

The potential for a stock market crash

Warren Buffett’s strategy of buying undervalued shares could also be appealing due to the potential for a stock market crash. Predicting when this will occur may be challenging. However, through buying companies that do not trade on excessively high valuations, it may be possible to outperform the wider market in a downturn.

Clearly, this does not mean that losses will be avoided. After all, no stock is guaranteed to produce positive returns over any time period – even if it seems to be undervalued when bought. However, it can mean that an investor’s portfolio which is focused on undervalued shares is less negatively impacted by weak investor sentiment and falling stock prices. Such companies may already trade at discounts to their intrinsic values, while overpriced shares decline to their real worth.

Opportunities to buy undervalued shares today

There may be opportunities to follow Warren Buffett’s strategy in today’s stock market. A number of stocks and sectors are yet to fully recover from the 2020 stock market crash.

Certainly, some industries are trading at high prices and global stock markets have hit record highs of late. However, sectors such as retail and consumer goods could contain undervalued shares that represent buying opportunities. Through capitalising on them, it may be possible to earn attractive total returns in the coming years.

More reading

• How to turn $20,000 into $650,000 in 5 years with ASX shares
• Why it’s a great time for ASX investors to buy US shares
• These were the best performers on the ASX 200 last week
• 2 exciting small cap ASX shares with huge growth potential
• These were the worst performers on the ASX 200 last 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. 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’m a big fan of buy and hold investing and believe it is the best way for investors to grow their wealth.

To demonstrate how successful it can be, I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

However, on this occasion I’m going to do things a little differently and change the time scale to just five years. This allows me to look at companies that have not been listed as long as normal.

With that in mind, here’s how you would have fared if you had invested in these ASX shares five years ago:

Appen Ltd (ASX: APX)

The Appen share price may be trading significantly lower than its 52-week high, but that won’t be bothering longer term shareholders. Since this time in 2016, Appen’s shares have thoroughly smashed the market. The catalyst for this has been increasing demand for the artificial intelligence data service company’s services from some of the largest tech companies in the world. This includes the likes of Apple, Facebook, and Microsoft, and is being driven by the increasing importance of AI for businesses. Over the last five years, Appen’s shares have generated a total return of 62.7% per annum. This would have turned a $20,000 investment into $230,000.

Temple & Webster Group Ltd (ASX: TPW)

Thanks to the shift to online shopping, which has accelerated during the pandemic, this furniture and homewares focused ecommerce company has been growing its sales at an explosive rate. This has led to Temple & Webster’s shares surging higher since their IPO in 2016. In fact, anyone lucky enough to have invested in its shares five years ago, would have generated an average total return of 101.5% per annum. This means that a $20,000 investment in its shares at that point would be now worth a staggering $665,000.

Xero Limited (ASX: XRO)

Finally, this cloud-based business and accounting platform provider has been a great place to invest over the last five years. Thanks to its strong recurring revenue, which has been underpinned by its rapidly growing customer base globally, Xero’s shares have generated mouth-watering returns for investors. Since this time in 2016, its shares have provided a total return of 53.7% per annum. This would have turned a $20,000 investment into almost $172,000.

More reading

• When dividends can be a bad thing for an ASX share
• ASX tech shares: A once-in-a-lifetime buying opportunity?
• 2 quality ASX shares to buy for the long-term
• 5 things to watch on the ASX 200 on Friday
• A2 Milk (ASX:A2M) share price tumbles on NZ recession fears

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 Appen Ltd and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Temple & Webster Group 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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We Fools have long touted the benefits of buying US shares to add to a portfolio of diversified ASX shares.

There are diversification benefits alone of owning companies that are domiciled in another country. Not to mention the benefits of owning assets that are priced in a different currency.

But the US is also home to some of, if not most of, the best businesses in the world. We do have some fine companies on the ASX, don’t get me wrong. But companies of the calibre of Apple Inc (NASDAQ: APPL), of Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL)? That’s a harder bow to string.

That brings us to the question at hand. Why is now a great time to buy US shares?

I’ll preface this by saying no one knows when the best time to buy anything is. The US markets could tank next week and provide even better deals than the present.

But that’s a fool’s game to play (and not the good kind of Fool). I prefer to think of that old proverb of ‘the best time to plant a tree was 20 years ago, the next best time is right now’ in this situation.

US-Australia relations warm

But right now is certainly shaping up to be an attractive time to hop across the Pacific for a few reasons.

The first is our dollar. Currency movements tend to work out over time and thus shouldn’t be an issue of major concern for any longterm investor. But even so, there’s no hiding that our dollar has appreciated significantly against the US dollar over the past year or so.

Exactly a year ago, one Aussie dollar was buying around 57 US cents. Today, it is buying 77 cents. That means we can buy 35% more US assets with the same Aussie dollar today than this time 12 months ago.

The second reason is that many US companies have seen their share prices cool over the past month or two. Look at Apple.

It’s more than 15% cheaper at the time of writing than it was in late January. Amazon.com Inc (NASDAQ: AMZN) is more than 10% lower over the same period. It hasn’t been too often in the past when we have seen these kinds of companies sell off like that.

Foolish takeaway

Buying quality US shares to add to your ASX portfolio is a great move from several angles. So if you agree, but have been holding back in recent months, now might be a good time to revisit this idea, if for the above reasons and nothing else.

As that other saying goes, if the iron is hot…

More reading

• When dividends can be a bad thing for an ASX share
• Amazon expands road testing of Rivian electric delivery vans
• 2 ETFs to buy today for future-proof ASX diversification
• ASX tech shares: A once-in-a-lifetime buying opportunity?
• 3 reasons Amazon stock could underperform in 2021

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Amazon, and Apple and recommends the following options: short March 2023 $130 calls on Apple, long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long March 2023 $120 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Amazon, and Apple. 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) was out of form last week and dropped 0.9% over the period to end at 6,708.2 points.

Fortunately, not all shares dropped lower with the index. Here’s why these were the best performers on the ASX 200 last week:

Collins Foods Ltd (ASX: CKF)

The Collins Foods share price was the best performer on the ASX 200 last week with a sizeable 19.1% gain. This was despite there being no news out of the quick service restaurant operator. However, with its shares trading at a significant discount to rival Domino’s Pizza Enterprises Ltd (ASX: DMP), some investors may believe a rerating was due. Even after this strong gain, the Collins Foods share price is trading at 28x estimated FY 2021 earnings. This compares to 44x FY 2021 earnings for Domino’s.

Clinuvel Pharmaceuticals Limited (ASX: CUV)

The Clinuvel share price was some way behind as the next best performer with a gain of 11.8%. Once again, this was despite there being no news out of the biopharmaceutical company last week. However, earlier this month analysts at Moelis put a buy rating and $27.77 price target on the company’s shares. The Clinuvel share price ended the week a touch higher than this at $28.29.

Harvey Norman Holdings Limited (ASX: HVN)

The Harvey Norman share price was on form last week with a 9.7% gain. This gain appears to have been driven by a couple of recent broker notes which spoke positively about the retailer. A week earlier both Macquarie and Citi put the equivalent of buy ratings and $6.00 price targets on the company’s shares. The Harvey Norman share price ended the week at this level having touched on a multi-year high of $6.06 briefly on Friday.

Link Administration Holdings Ltd (ASX: LNK)

The Link share price was a strong performer and recorded a gain of 9.3% last week. This appears to have been driven by speculation that the administration services company could be the subject of a new takeover approach in the near future. This follows the breakdown in takeover talks with SS&C Technologies earlier this year.

More reading

• These were the worst performers on the ASX 200 last week
• ASX 200 dips, Sydney Airport falls, AGL rises
• Why the Collins Foods (ASX:CKF) share price just hit a record high
• ASX stock of the day: Audio Pixels (ASX:AKP) shares shoot up 8%
• ASX 200 down 0.3%: Afterpay & Zip lower, AGL signs Portland Smelter deal

James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia has recommended Collins Foods Limited, Dominos Pizza Enterprises Limited, and Link Administration Holdings 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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If your risk profile allows for it, then having a little exposure to the small side of the market could be a good thing for a balanced portfolio.

After all, if you can identify the next blue chip while it is still in its infancy, the potential returns could be staggering.

There are a lot of small cap options for investors to choose from, but two that are highly rated are listed below. Here’s what you need to know about them:

Damstra Holdings Ltd (ASX: DTC)

Damstra is a $210 million integrated workplace management solutions provider. The company’s cloud-based workplace management platform is used by businesses across numerous industries to track, manage, and protect their workers and assets.

Among its customer base are the likes of Boeing, Boral Limited (ASX: BLD), NBN, Thiess, and WaterNSW.

During the first half of FY 2021, Damstra reported a 29.6% increase in revenue to $13.3 million. Pleasingly, this is still only a small fraction of an addressable market which is expected to be worth US$20 billion by 2022.

Shaw and Partners is a fan of the company. It currently has a buy rating and $1.93 price target on its shares. This compares to the current Damstra share price of $1.06.

Whispir (ASX: WSP)

Whispir is another small cap share to watch. It is a $350 million software-as-a-service communications workflow platform provider which automates communications between businesses and their workers and customers.

Like Damstra, it has been growing at a quick rate. This led to the company reporting a 29.2% increase in its annualised recurring revenue to $47.4 million at the end of the first half. Pleasingly, more of the same is expected in the second half, which should be supported by its recent $45.3 million placement. These funds will be used to accelerate its growth strategy.

Whispir is another company with a large addressable market. Management currently estimates that the Workflow Communications platform as a Service market will be worth US$8 billion per year by 2024. This gives it a very long runway for growth.

Ord Minnett is positive on the company’s future. It has a buy rating and $4.25 price target on its shares. This compares to the latest Whispir share price of $3.69.

More reading

• Brokers name 2 exciting small cap ASX shares to buy
• 2 small cap ASX shares to watch closely in 2021
• ASX tech correction? 10 of the worst-hit shares
• 2 small cap ASX tech shares trading at a big discount
• Why Limeade, Oil Search, Platinum, & Whispir shares are sinking

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 Damstra Holdings Ltd and Whispir Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd and Whispir 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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Last week the S&P/ASX 200 Index (ASX: XJO) was out of form and tumbled 0.9% lower over the five days to end at 6,708.2 points.

While a good number of shares dropped lower with the market, some fell more than most. Here’s why these were the worst performers on the ASX 200 last week:

Austal Limited (ASX: ASB)

The Austal share price was the worst performer on the ASX 200 last week with a 7.8% decline. A portion of this decline can be attributed to its shares trading ex-dividend last week for the shipbuilder’s interim dividend. This dividend will be paid to eligible shareholders next month on 22 April. In other news, Austal delivered its ninth guardian-class patrol boat to the Australian Department of Defence.

Nufarm Ltd (ASX: NUF)

The Nufarm share price wasn’t far behind with a disappointing 6.8% decline over the five days. This was despite there being no news out of the agricultural chemical company last week. In fact, not even a positive broker note out of Citi could stop the Nufarm share price from sliding over the five days. Its analysts have retained their buy rating and $5.40 price target.

Rio Tinto Limited (ASX: RIO)

The Rio Tinto share price was out of form last week and dropped 6.5% over the period. Concerns about iron ore moving from a deficit into a surplus in the near future has been weighing on the company’s shares. For example, Goldman Sachs is now forecasting a 23Mt surplus next year compared to an 8Mt deficit previously. This is likely to put pressure on the sky high prices that the steel making ingredient is commanding. For the same reason, fellow mining giants BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) were the next worst performers with declines of 6.4% and 5.9%, respectively.

Perenti Global Ltd (ASX: PRN)

The Perenti share price was a poor performer and fell 5.8% over the five days. As with Austal, some of this decline is attributable to the engineering company’s shares trading ex-dividend last week for its interim dividend. Eligible shareholders will receive its 3.5 cents per share dividend next month on 7 April.

More reading

• ASX 200 dips, Sydney Airport falls, AGL rises
• ASX stock of the day: Audio Pixels (ASX:AKP) shares shoot up 8%
• Woodside (ASX:WPL) share price falls during investor-led climate change charge
• ASX 200 down 0.3%: Afterpay & Zip lower, AGL signs Portland Smelter deal
• ASX weakness could be met with $19bn “dividend bonanza”

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 Austal 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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Software as a service (SaaS) ASX shares could be compelling businesses to consider for a portfolio.

These companies are in the software space and these businesses can often display attractive features including regular revenue from loyal customers.

Just because a business is a SaaS company, doesn’t mean it’s automatically worth owning. But these two SaaS ASX shares could be good long-term ideas:

TechnologyOne Ltd (ASX: TNE)

TechnologyOne is a software business that says it has spent hundreds of millions of dollars building the world’s most trusted SaaS enterprise resource planning (ERP) software.

The company is currently rated as a buy by the broker Morgans with a price target of around $10.

A key benefit of its software for customers is that the entire suite of enterprise software can be accessed from any device to utilise their mission critical systems. The company said that this was very helpful for the shift from the office to remote working.

It offers software for different sectors including education, local government, government, health and community services, asset management and project delivery, corporate and financial services.

A few months ago, TechnologyOne reported its full year result for the period ending 30 September 2020.

The SaaS ASX share said that in the FY21 result, total revenue grew 4%, whilst expenses rose 3%. Underlying profit before tax grew 13% to $86.1 million and reported profit before tax grew 8% to $82.5 million.

Revenue from the SaaS and continuing business rose 12% to $269.8 million whilst the SaaS annual recurring revenue (ARR) went up 32% to $134.6 million.

The broker said that the shift to SaaS revenue means that it’s turning into higher quality revenue.

One of the main ways that TechnologyOne ensures it stays ahead of the game is its large investment into research and development. Its R&D spending before capitalisation was up 13% to $68.1 million in the last financial year, which represented 22% of revenue.

This result allowed the board to implement an 8% increase to the full year dividend to 12.88 cents.

On Morgans’ numbers, the TechnologyOne share price is valued at 36x FY21’s estimated earnings.

Altium Limited (ASX: ALU)

Altium counts as a SaaS ASX share with a growing division called Altium 365 which is the company’s cloud offering.

The business says that Altium 365 is the electronics product design platform that unites PCB design, MCAD, data management, and teamwork. It allows software engineers to collaborate on projects wherever they need to. This is a particularly useful tool in a world affected by the COVID-19 pandemic.

Altium has a very high quality client list including Tesla X, Space X, NASA, John Deere, Toyota, Cochlear Limited (ASX: COH), ResMed Inc (ASX: RMD), CSIRO, Honeywell, Qualcomm, Broadcom, Texas Instruments, Siemens, Boeing, Lockheed Martin, Amazon, Google, Disney, Apple and Microsoft.

The electronic PCB software business says that it’s confident of achieving its updated flight path to the 2025 target of US$500 million revenue and 100,000 subscribers for dominance (excluding TASKING, with 10% to 20% of revenue to come from future acquisitions). That’s despite the impacts of COVID-19. 

A key part of the allure of Altium 365 is the potential for direct monetisation. It could generate transaction fees on manufacturing, such as the Airbnb model and also through premium services, such as the Amazon Prime model.

More reading

• 3 stellar ASX tech shares to buy for the long term
• 2 of the best ASX growth shares to buy immediately
• ASX 200 down 0.1%: Afterpay sinks, Evolution announces acquisition
• The Altium (ASX:ALU) share price is nearing its 52-week low
• 10 of the best ASX shares to buy in March

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 Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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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Most ASX investors think of dividends as a wonderful thing, almost mana from heaven. What’s not to like?

‘Free’ money just for owning something. Passive income. Cash flow. All of those things are true. But nothing in life is free. Or perhaps more pertinently, nothing in life comes without a cost.

So let’s look at what a dividend truly is. And why it may not be as good as you’d think.

So, as we probably all know, a dividend is a cash payment from a company to its owners, aka shareholders. It’s a ‘thank you for owning our company’s shares’ of sorts from management.

Normally, dividends are paid out of a company’s after-tax profits. If they are not, you might have a serious problem with your company. Some companies have been known to borrow money to pay dividends, but this is not normally a good sign.

So far, so good?

But here’s the problem – opportunity cost. If a company sends a dividend out the door, that money is as good as gone for the company. It can’t ever bring it back or invest it in something else. That’s why a company’s share price will almost always drop when it goes ex-dividend.

The company is less valuable because it literally has less money in its bank account. Every dividend weakens a company. Now some companies do this deliberately. US tobacco companies are famous for paying out as much of their cash as dividends as possible, so they are less of a regulatory target.

But many other US companies choose not to pay a dividend at all, even though they easily could. Think of Facebook Inc (NASDAQ: FB). Or Amazon.com Inc (NASDAQ: AMZN).

These companies are sitting on mountains of cash, which they choose to hold on to. Even Warren Buffett’s Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) hasn’t paid a dividend in almost 60 years.

When is no dividend is a good dividend?

Why? Opportunity cost. If a company’s management thinks it can achieve a decent return on capital, why would it give that up? Say a company can return 15% on every dollar it invests. Why would its shareholders prefer the company to waste that opportunity by giving the money away as a dividend when it could be put to work earning 15% for its owners?

There is no franking system in the US, so usually, shareholders don’t mind this paradigm. But here in Australia, companies start getting asked ‘where’s my dividend’ as soon as they start turning a profit. If I were a shareholder of a company that could get a 15% return on its dollars, I would be telling the company to reinvest every cent.

Now many of the ASX’s most famous dividend payers can’t get a knockout return on their investment anymore. Think of the ASX banks like Westpac Banking Corp (ASX: WBC). Or Woolworths Group Ltd (ASX: WOW).

These companies are playing in a saturated market. Almost everyone in the country lives near a Woolies. Or can access a Westpac account if they so chose. Thus it might not be a great idea for Woolworths to open 50 new stores next year instead of paying a dividend. Or Westpac to open another 20 branches. But if I were a Xero Limited (ASX: XRO) shareholder, I would have a very different opinion.

Foolish takeaway

Everything comes at a cost in this world, and dividends, great as they may be, are no different, Something to keep in mind when you’re on the hunt for your next ASX share.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Berkshire Hathaway (B shares), and Facebook and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), long January 2022 $1920 calls on Amazon, 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 Woolworths Limited and Xero. The Motley Fool Australia has recommended Amazon, Berkshire Hathaway (B shares), and Facebook. 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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