It may not be the biggest tech sector in the world, but the ANZ region’s tech sector is home to a good number of companies with significant potential.

Three small cap ASX tech shares that have been growing strongly this year are listed below.

Here’s what you need to know about them:

Damstra Holdings Ltd (ASX: DTC)

Damstra is a growing integrated workplace management solutions provider. The company’s cloud-based workplace management platform is used by businesses globally to track, manage, and protect their workers and assets. Demand for its offering has been growing strongly in recent years and this has continued in FY 2021. For example, in the first quarter, Damstra revealed record first quarter revenue, cash receipts, and operating cash flow. This impressed analysts at Morgan Stanley, who put an overweight and $2.00 price target on the company’s shares.

MyDeal.com.au Limited (ASX: MYD)

MyDeal.com.au is a recently listed online retail marketplace provider with a focus on furniture, homewares, appliances, technology, baby products, and hardware. It has been a positive performer in FY 2021, delivering first quarter gross sales growth of 317% to $56.67 million. Management advised that this was underpinned by the shift to online shopping and a 268% increase in active customers to 669,897. Looking ahead, the company intends to use the $40 million raised from its IPO to drive future growth. This includes growing its private label business, investing in its proprietary technology, and investing in advertising to grow its customer base and brand.

Whispir Ltd (ASX: WSP)

Finally, Whispir is a software-as-a-service communications workflow platform provider which allows businesses and governments to deliver two-way interactions at scale using automated multi-channel communication workflows. Its platform was used to great effect during the height of the pandemic when 22 government departments used it for COVID-19 communications. Management estimates that the Workflow Communications platform as a Service market could reach US$8 billion per year by 2024. This compares to the revenue of $39.1 million it recorded in FY 2020, which was up 25.5% year on year.

More reading

• 3 growing small cap ASX shares
• MyDeal.com.au (ASX:MYD) share price up 7% on trading update
• These 3 ASX shares to IPO recently are struggling
• Are these small cap ASX shares the next Kogan (ASX:KGN) and Nearmap (ASX:NEA)?
• 3 of the best mid cap ASX shares to buy right now

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 Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Damstra Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Damstra Holdings Ltd. The Motley Fool Australia has recommended Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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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:

Corporate Travel Management Ltd (ASX: CTD)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and $21.50 price target on this travel booking company’s shares. The broker notes that one of its rivals is forecasting a quicker than expected recovery in the corporate travel market. This bodes well for Corporate Travel Management and the broker believes its pathway to profitability is much clearer than other ASX travel booking shares. The Corporate Travel Management share price ended the week at $16.74, which implies potential upside of over 24%.

Nanosonics Ltd (ASX: NAN)

Analysts at UBS have retained their buy rating and $7.20 price target on this infection control company’s shares following the release of its trading update. The broker notes that Nanosonics’ has had a better start to FY 2021 than it was expecting, with strong quarter on quarter growth in consumables. And while the broker expects its first half result to be soft, it remains positive on its long term prospects. The broker believes Nanosonics is an example of a high-quality structural growth story, particularly in a post-COVID world which is likely to have a greater focus on infection prevention. This price target implies potential upside of almost 26%.

National Australia Bank Ltd (ASX: NAB)

A note out of Citi reveals that its analysts have retained their buy rating and $23.50 price target on this banking giant’s shares following its full year results. Although NAB fell short of its estimates in FY 2020, it notes that this was due to an increase in its loan loss provisions. It feels these have been brought forward from the new financial year and has thus reduced its loan loss forecasts for FY 2021. In addition to this, it likes the bank above the rest of the big four due to its revenue growth prospects and strong cost control. The NAB share price was changing hands for $19.57 on Friday afternoon. This means there’s potential upside of 20% (excluding dividends) based on this price target.

More reading

• Is the NAB (ASX:NAB) share price a buy for dividends?
• Here’s how much NAB (ASX:NAB)’s new dividend is worth
• Big 4 banks’ own customers don’t trust them
• ASX 200 shoots 1.3% higher on Thursday
• When ‘cutting rates’ doesn’t mean what you think it means

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 Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While most companies on the Australian share market have resisted giving guidance in FY 2021 because of the uncertainty caused by the pandemic, a number have reaffirmed their longer term aspirational targets.

Three ASX shares which have bold growth plans over the next five years or so are listed below. Here’s what they are trying to achieve in the 2020s:

Altium Limited (ASX: ALU)

Altium is a leading electronic design software company best-known for its eponymous Altium Designer product. Demand for its software has been increasing over the last few years thanks to the rapidly growing Internet of Things and artificial intelligence markets. Pleasingly, management appears confident in its growth trajectory and is aiming to grow its revenue to US$500 million by 2025-2026. This will be an increase of over 150% from the revenue of US$189 million it achieved in FY 2020.

Bubs Australia Ltd (ASX: BUB)

Another company targeting huge growth over the next five years is Bubs. It is a growing infant formula, baby food, and vitamins company. In FY 2020, the company’s revenue grew by 32% to $62 million. This was driven largely by a 58% increase in Bubs infant formula sales to $30 million. Management is now aiming to grow its revenue to $400 million by 2025, with a gross margin floor of 40%. FY 2021 has started slowly because of the pandemic, though. This means Bubs has a uphill struggle to achieve its goals.

SEEK Limited (ASX: SEK)

Finally, another company intent on growing its sales materially in the 2020s is SEEK. In FY 2020, the job listings giant reported revenue of $1,577.4 million. It is now aiming to increase this to $5 billion later this decade. This growth is expected to be driven by its dominant position in the ANZ market, its growing China-based Zhaopin business, and its investments in growth opportunities.

More reading

• Rising jobs and house loans place these ASX shares in focus
• Why the SEEK (ASX:SEK) share price rebounded after being 8% down
• Westpac (ASX:WBC) reports FY20 result, ASX 200 up 0.4% today
• Why 5G Networks, Cedar Woods, SEEK, & Tyro shares tumbled lower today
• SEEK (ASX:SEK) share price drops 5% after responding to Blue Orca short seller attack

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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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:

Afterpay Ltd (ASX: APT)

According to a note out of UBS, its analysts have retained their sell rating but lifted their price target on this payments company’s shares to $30.00. While it has lifted its sales forecasts to reflect Afterpay’s strong start to FY 2021 and its high customer growth and transaction frequency, it still believes its shares are vastly overvalued and has held firm with its sell rating. The Afterpay share price ended the week at $100.50.

Ansell Limited (ASX: ANN)

A note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating but increased the price target on this safety products company’s shares to $33.35. The broker has been impressed with Ansell’s strong start to FY 2021 and believes it is well-placed to benefit from increased demand for personal protective equipment because of COVID-19. However, over the medium term it isn’t as positive on its prospects and thus feels its shares are reasonably expensive because of this. The Ansell share price last traded at $41.70.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Analysts at Credit Suisse have retained their underperform rating and reduced the price target on this pizza chain operator’s shares to $58.71. The broker notes that its same store sales growth slowed towards the end of the last three months. However, positively, its new store openings are running ahead of expectations. Whether or not this can be maintained, though, is the big question according to the broker. It fears it could be harder to open stores in the European market in the current environment. In light of this, it doesn’t believe its shares offer good value at the current level. The Domino’s share price ended the week at $84.48.

More reading

• Why ASX 200 technology shares are again racing higher
• Ansell (ASX:ANN) share price climbs after upbeat AGM update
• Why share markets are shrugging off this uncertainty, and what to expect next
• Why Domino’s, Estia Health, Pendal, & Treasury Wine shares are dropping lower
• Domino’s Pizza (ASX:DMP) share price falls after brokers respond to trading update

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Ansell Ltd. and Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The three ASX shares I’m going to mention in this article are rated as ‘buys’ by several brokers.

Broker recommendations give an indication where market analysts think there are buying opportunities for investors. Share prices change all the time, so sometimes a broker could think an ASX share is a buy at one price and perhaps a sell if it were significantly higher.

Investment site MarketIndex regularly collates the ratings of brokers together to assess what the broker community collectively think are opportunities. Just because several brokers think something is a buy doesn’t mean it’s guaranteed to do well, but it may reveal some insights.

With that in mind, here are three ASX shares that brokers like:

Cleanaway Waste Management Ltd (ASX: CWY)

As the name suggests, it’s a business involved with waste management. It’s actually one of the biggest in the country – your weekly bin collection may be done by Cleanaway.

Cleanaway is rated as a buy by at least five analysts. Since 3 September 2020 the Cleanaway share price has fallen by 13.5%. That peak of the share price was just after the release of its FY20 result.

In that result, the ASX share reported underlying net profit growth of 8.7% to $152.9 million with free cashflow of $230.1 million, up 11.5%. Cleanaway said that its defensive characteristics were once again demonstrated during COVID-19.

At the current Cleanaway share price, it’s trading at 20x FY23’s estimated earnings according to Commsec.

Challenger Ltd (ASX: CGF)

Challenger is the market leader (by market share) of annuities in Australia. An annuity is when a person gives their capital to a business like Challenger in return for a guaranteed source of income – either for a fixed term or for the rest of their life.

It’s rated as a buy by at least six analysts. The Challenger share price is down 52% since the pre-COVID-19 crash price of $10.38.

Challenger recently told investors about its performance in the first quarter of FY21. The annuity business said that its group assets under management (AUM) went up 4% for the quarter to $89 billion. ‘Life’ investment assets also went up for the quarter, benefiting from annuity sales growth of 46% compared to the prior corresponding period, total book growth of 0.8% for the quarter and positive investment returns.

The ASX share’s funds under management (FUM) went up 5% for the quarter, which included $3.6 billion of net inflows. Challenger also said that significant progress has been made deploying the life cash balance into higher yielding investments.

At the current Challenger share price it’s priced at under 11x FY22’s estimated earnings according to Commsec.

Metcash Limited (ASX: MTS)

Metcash is a diversified retail business operating through a variety of brands.

Its food pillar supports over 1,600 independently owned stores including IGA and Foodland brands. In liquor it supplies independent retailers under brands like Cellarbrations, The Bottle-O, IGA Liquor, Duncan’s, Thirsty Camel and Porters Liquor.

In hardware the ASX share has operations including Mitre 10 and Home Timber & Hardware. It is also acquiring franchisor Total Tools.

It’s rated as a buy by nine analysts. Since 2 October 2020, it has risen by 13.6%.

Metcash recently held its AGM and gave a trading update as part of that. It said that food sales continue to benefit from COVID-19 effects. Total food sales in the first quarter were up 11.4% on the prior corresponding period. Excluding the loss of Drakes, total food sales excluding tobacco went up 18.4%.

In liquor, Metcash said its trading continues to perform well as restrictions lift. Sales in the first quarter of FY21 increased by 11.4%. Excluding regions impacted by trading restrictions, sales went up 23.2%.

At the current Metcash share price it’s valued at 15x FY21’s estimated earnings, according to Commsec.

More reading

• These are the 10 most shorted shares on the ASX
• These were the best performing shares on the ASX 200 in October
• Are Coles (ASX:COL) or Woolworths (ASX:WOW) shares a better ASX dividend buy today?
• These are the 10 most shorted shares on the ASX
• ASX 200 Weekly Wrap: ASX snaps winning streak… just

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With term deposits and savings accounts offering just paltry interest rates, a growing number of people are turning to the share market for a source of income.

And given the high quality options on offer, I don’t find this surprising at all.

For example, listed below are two popular blue chips that are sharing their profits with shareholders. Here’s what you need to know about their dividend prospects:

Telstra Corporation Ltd (ASX: TLS)

Times have been hard for Telstra over the last few years due to the arrival of the NBN. This rollout saw the company’s lucrative telephone lines ripped out, leading to a significant gap in its earnings. The good news for its long-suffering shareholders is that the telco giant is hoping that its T22 strategy is the catalyst to a resurgence in its fortunes over the 2020s. This strategy is stripping out costs, simplifying its business, and aiming to extend its network superiority and 5G leadership.

However, FY 2021 still looks set to be another difficult year for Telstra because of the pandemic and the NBN rollout. Management expects the latter to result in an in-year underlying EBITDA headwind of approximately $700 million. In light of this, it is forecasting underlying EBITDA in the range of $6.5 billion to $7 billion this year, down from $7.4 billion last year.

Nevertheless, the Telstra board has recently advised that it is doing what it can to maintain its dividend in FY 2021. This would mean a fully franked dividend of 16 cents per share, which is the equivalent of a 5.7% dividend yield.

Wesfarmers Ltd (ASX: WES)

Another blue chip that shares a large portion of its profits with shareholders is Wesfarmers. This is the conglomerate behind popular brands such as Kmart, Target, Officeworks, Catch, and Bunnings. The latter is now the biggest contributor of earnings following the divestment of Coles Group Ltd (ASX: COL) in 2019.

The good news for its shareholders is that the Bunnings business has been on fire in 2020 despite the pandemic. In FY 2020, Bunnings reported a 13.9% increase in revenue to $14,999 million and a 13.9% lift in earnings to $1,852 million.

One broker that is confident there will be more of the same in FY 2021, thanks partly to a favourable Federal Budget, is Macquarie. Last month it upgraded Wesfarmers’ shares to an outperform rating with a price target of $51.00. It has also pencilled in a dividend of approximately 141 cents per share. This represents a fully franked ~3% dividend yield.

More reading

• 2 ASX dividend shares with yields over 8% today
• Government declares 2021 as ‘Year of 5G’
• Why the Novatti (ASX:NOV) share price jumped 10% on open today
• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches
• 3 ASX blue chip shares to buy for dividends

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 Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There are some exchange-traded funds (ETFs) available to ASX investors which can provide access to global returns.

What’s an exchange-traded fund?

ETFs allow investors to buy a large group of businesses in a single investment, rather needing to go out and buy every single one yourself.

Some ETFs are focused on ASX shares like Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC). However, the ASX only makes up 2% of the global share market.

Here are two that have been rated as buys by a Motley Fool service:

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

According to VanEck, this ETF gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.

The businesses in this ETF are rated as having “wide economic moats” and are priced at attractive value compared to Morningstar’s estimate of fair value.

This ETF is invested in a variety of sectors, though the biggest two make up a substantial portion of it. Information technology businesses have a 21.3% weighting in the ETF’s holdings, health care has a 19.6% weighting, financials have a 16.5% position, consumer staples have a 10.5% weighting and consumer discretionary has an 8.2% portfolio weighting.

I’m sure you want to know what some of its holdings are. It has a total of 48 positions. These are the positions that have a weighting of more than 2.5% of the portfolio: Applied Materials Inc, Corteva Inc, Biogen Idec Inc, Salesforce.com Inc, Microchip Technology Inc, Schwab (Charles) Corp, Yum! Brands Inc, Bristol Myers Squibb Co, Compass Minerals Internation, US Bancorp, Aspen Technology Inc, Berkshire Hathaway Inc, Pfizer Inc and Zimmer Biomet Holdings Inc.

Over 90% of its holdings are worth more than $5 billion and none are worth under $1 billion.

ETF investors like to know the annual management fee cost of an ETF as the higher the fee, the more it hurts the net returns. VanEck charges an annual management fee 0.49% per annum.

In terms of performance, this investment has generated net returns of 18.6% per annum since inception, slightly outperforming the S&P 500.

VanEck Vectors Morningstar Wide Moat ETF is still rated as a buy by Motley Fool’s Share Advisor service which liked the exposure to quality businesses, the growth potential and the diversification on offer.

Betashares Global Cybersecurity ETF (ASX: HACK)

BetaShares operates this ETF as a way for investors to get exposure to the leading companies in the global cybersecurity sector. It has an annual management fee of 0.67%.

Some of the biggest holdings in this ETF include Crowdstrike, Okta, Zscaler, Accenture, Cisco Systems, Cloudflare, F5 Networks, Fireeye, Leidos and Booz Allen Hamilton.

Overall, it has around 40 positions which largely come from the US, though there are also holdings in the UK, Israel, Japan and so on.

Since inception in August 2016, the ETF has generated net returns of 16.8% per annum.

Betashares Global Cybersecurity ETF is still rated as a buy by the Pro Motley Fool service.

Pro was attracted to the this investment because larger amounts of important information is being stored online and hackers are becoming more sophisticated, so cyber defence is becoming more critical than ever, which should help the earnings of businesses in the ETF. The team at Pro expects this to be a long-term secular trend. Pro thought it was helpful that the ETF gives diversification away from Australian-based companies and the fact that it’s hard to find access to the cybersecurity growth theme on the ASX. Pro said that of those businesses listed on the ASX, most are small, highly illiquid and burning through cash (and often all three).

More reading

• 2 ASX exotic ETFs I would buy today
• 2 high-quality ETFs to buy for any portfolio

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. 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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Is the Rural Funds Group (ASX: RFF) share price a buy for its dividend yield?

An overview of Rural Funds

Rural Funds is an agricultural real estate investment trust (REIT). That means it owns commercial properties that are leased out and generate rental income.

Specifically, Rural Funds owns a variety of farmland properties across five sectors: cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

It has 22 cattle properties, seven vineyards, 23 cropping properties, six macadamia properties and three almond properties. These properties are spread across a variety of states and climactic conditions for diversification.

The split between the income sources isn’t even. Rural Funds has provided an estimate for its FY21 revenue. Around 45% is expected to come from almonds, 36% from cattle, 6% from vineyards, 6% from cropping, 2% from macadamias and 6% from ‘other’.

Rural Funds has rental indexation built in to all of its contracts with tenants. The rental increases are largely either a fixed 2.5% increase with market reviews, or linked to CPI inflation.

More than three quarters of revenue from Rural Funds’ tenants are large farming enterprises such as JBS, Select Harvests Limited (ASX: SHV), Olam, Australian Agricultural Company Ltd (ASX: AAC), Queensland Cotton, Treasury Wine Estates Ltd (ASX: TWE) and Stone Axe.

How is income generated for shareholders?

The REIT receives rental income from its tenants. The farmland REIT then pays for all of the operating expenses of the farms that Rural Funds pays like insurance cost recoveries, as well as other expenses like ASX fees, bank fees, audit fees, bank interest and so on.

What’s left is called AFFO.

‘AFFO’ which stands for adjusted funds from operations (AFFO). This is a financial metric used in the REIT sector to measure available cashflow from operations (the adjustment relates to a non-cash tax expense).

Rural Funds pays its distribution from the AFFO. In FY20 it generated 13.5 cents of AFFO per unit/share. It allowed Rural Funds to pay a distribution of 10.85 cents per unit, which was a 4% increase despite COVID-19.

The REIT aims to grow its distribution by 4% per annum for investors, which is funded by excess AFFO generation.

What’s the prediction for FY21?

In FY21 Rural Funds is expecting to make 11.7 cents of AFFO per unit and the distribution is expected to be 11.28 cents, which is in line with its 4% growth target. That represents a payout ratio of 96.4%.

The AFFO is expected to decrease as funds are re-invested into macadamia orchard developments which are expected to produce higher income when leased.

Maryborough macadamia plantings are to commence in late FY21. The REIT said that it will take several years to fully develop Maryborough and Rockhampton properties. In the meantime, the majority of the Maryborough farms are expected to be leased as cropping operations (primarily sugar cane) whilst Rockhampton assets are expected to be leased as cattle properties.

At the current Rural Funds share price, that means it has a FY21 distribution yield of 4.7%.

Is the Rural Funds share price a buy for dividends?

Rural Funds is currently rated as a buy by Motley Fool’s Dividend Investor’s Edward Vesely and the pick has performed well since the first buy recommendation in August 2017 when the share price was $1.64.

In FY20, its adjusted net asset value per unit – the underlying ‘book’ value per unit – grew by 8% to $1.94. That means the current share price is valued at a 24% premium to the adjusted NAV.

More reading

• 2 ASX dividend shares with 4% yields
• Top ASX shares to buy in November 2020
• 3 ASX 200 shares that every investor should own
• How ASX investors can capture these ‘billionaire trends’
• Why market crashes are useful for buying ASX dividend shares

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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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Buy and hold investing is one of the most popular investment strategies and used (to great effect) by legendary investor Warren Buffett.

The strategy sees investors buy quality shares and then hold onto them for the long term, allowing compound interest to work its magic.

To demonstrate how successful it can be, every so often 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.

With that in mind, here’s how $20,000 investments in these ASX shares would have fared:

Aristocrat Leisure Limited (ASX: ALL)

Thanks to its industry-leading pokie machines and its expansion into digital and mobile gaming via some very successful acquisitions, Aristocrat Leisure has been a strong performer over the last 10 years. This has led to above-average sales and earnings growth, which has underpinned market-beating returns for investors. Over the last decade, the Aristocrat Leisure share price has generated an average total return of 25% per annum. This would have turned a $20,000 in 2010 into $186,000 today.

REA Group Limited (ASX: REA)

Over the last decade this property listings company has benefited greatly from the shift online and carved out a leadership position in the industry for itself. Unsurprisingly, this has supported very strong earnings growth since 2010, much to the delight of long term shareholders. Over the 10 years, the REA Group share price has generated an average annual total return of 29.2%. This means that a $20,000 investment would be worth $259,000 today.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Despite losing almost a third of its value over the last 12 months due to the impact of the pandemic on the travel industry, this airport operator’s shares have still smashed the market since 2010. Thanks to its position as the busiest airport in Australia and the global tourism boom, Sydney Airport shares have provided investors with an average total return of 11.9% per annum over the last 10 years. This would have turned a $20,000 investment into almost $62,000.

More reading

• Which 5 ASX shares hit 52-week highs on Friday?
• ASX 200 rises again on Friday
• All eyes on the REA Group (ASX:REA) share price after Q1 results
• Travel shares are flying higher today. Here’s why.
• 3 ASX shares rated as buys by brokers

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How you could have turned $20,000 into $250,000 in 10 years with ASX shares appeared first on Motley Fool Australia.

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There are some ASX small cap shares worth buying and owning according to fund manager Naos Asset Management.

What is Naos Asset Management’s investment approach?

Naos is led by chief investment officer (CIO) Sebastian Evans. NAOS Small Cap Opportunities Company Ltd (ASX: NSC) is one of the listed investment companies (LIC) operated by Naos.

That particular LIC looks at businesses with market capitalisations between $100 million and $1 billion.

The fund manager has a number of investment focuses. It looks for businesses that are good value with long term growth potential. With its portfolio, Naos believes it’s better to have a quality portfolio rather than numerous holdings. That’s why it only holds around 10 positions in each fund, with each ASX share representing a high-conviction position.

Naos invests in those ASX shares for the long-term. It considers the performance and the liquidity of its positions whilst ignoring the index. So performance can sometimes be quite variable when compared to the index.

It looks to invest purely in industrial companies whilst considering the ESG factors (environmental, social and governance).

What are some of the ASX small cap shares that it thinks are opportunities?

In its latest monthly update for 30 September 2020, Naos gave the latest commentary for some of its positions.

Over The Wire Holdings Ltd (ASX: OTW)

Naos describes Over The Wire as a founder led, ‘B2B’ (business to business) provider for IT and telecommunications systems. The ASX small cap share’s purpose, according to Naos, is to simplify technology to empower business through service offerings such as a national voice network, public cloud, cyber security services and on-demand cloud connectivity.

Naos explained that Over The Wire recently announced the acquisition of cloud business Digital Sense Hosting, which provides most of its services to enterprise and government clients. The fund manager believes that this is an excellent strategic fit for the business for numerous reasons.

Firstly, the founders of Digital Sense will be taking a significant portion of Over The Wire shares. The business has a revenue profile that is 90% recurring in nature. The offering of Digital Sense will increase Over The Wire’s capability in that sector of the market and bring with it a sophisticated client base.

Naos pointed out that the small cap ASX share has now made two significant acquisitions in a short period of time that could potentially increase the earnings before interest, tax, depreciation and amortisation (EBITDA) by $14 million over the next 24 hours. The fundie firmly believes that the ASX share has the potential to generate a normalised run-rate of more than $35 million of EBITDA in FY22, which together with significant free cash flow generation, “should” see Over The Wire command a premium EBITDA multiple.

BSA Limited (ASX: BSA)

Naos describes this small cap ASX share as a solutions-focused technical services organisation. BSA assists clients in implementing their physical assets, needs and goals in the areas of building services, infrastructure and telecommunications. Some of BSA’s clients include the NBN, Aldi. Foxtel and the Fiona Stanley Hospital.

Although no company specific announcement was released by BSA, the NBN – BSA’s largest customer – announced plans to upgrade the existing network by spending up to $4.5 billion over the next two or three years. Naos said the upgrade will focus on providing fibre to homes that are currently on the fibre to the node technology as well as spending around $400 million on upgrading HFC connections.

Naos believes this is a “significant” opportunity for the small cap ASX share to secure further works with the NBN, as the vast majority of all BSA work with the NBN to date has been around the so called ‘last mile’ between the node and the connection to the home.

The fundie said that if BSA can secure some of this work, it is not inconceivable that it could present an opportunity worth $100 million to $250 million per annum over the next two to three years. Just as importantly, Naos believes the renewal process for the operations and maintain master agreement (OMMA) is underway and an outcome is expected before Christmas. If BSA can secure an extension to this contract as well as new works under the upgrade plan, then there is potentially a period of “significant revenue growth ahead”.

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Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd. The Motley Fool Australia has recommended Over The Wire Holdings 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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