Are you a fan of small cap shares? If you are, the good news is that there are a number of promising companies at the small side of the Australian share market.

Three that you might want to look closely at are listed below. Here’s what you need to know about them:

Damstra Holdings Ltd (ASX: DTC)

The first ASX small cap share to watch is Damstra. It is a growing integrated workplace management solutions provider. Its cloud-based workplace management platform is used by businesses globally to track, manage, and protect their workers and assets. Demand has been growing strongly in recent years and has continued in FY 2021. For example, it recently released its second quarter update. Over the three months, Damstra delivered a record quarter for revenue and cash receipts. Key drivers of its growth were a 49% jump in user numbers to 623,000, the doubling of its client numbers to 670, and its low churn level of <0.5%. Management believes this validates its recent acquisitions. 

MyDeal.com.au Limited (ASX: MYD)

MyDeal.com.au is an online retail marketplace. Thanks to the shift to online shopping, which has accelerated because of the pandemic, the company has been growing very strongly over the last 12 months. This certainly has been the case in FY 2021. MyDeal recently revealed that it first half gross sales increased 217% over the same period last year to $126.7 million. This was driven by a strong increase in active customers to a record 813,764 and repeat use. Looking ahead, the company appears well-placed for growth thanks to growing online spending and the $40 million it raised from its IPO. These funds will be used to drive future growth. This includes growing its private label business and investing in advertising to grow its customer base and brand.

Nitro Software Ltd (ASX: NTO)

A third and final small cap ASX share to watch is Nitro Software. It is a growing software company driving digital transformation in businesses around the world across multiple industries. The company’s key solution is the Nitro Productivity Suite. This solution provides businesses with integrated PDF productivity and electronic signature tools via a software-as-a-service and desktop-based software solution. Demand for its offering has been stronger than expected in FY 2020, leading to management recently upgrading its guidance. Nitro expects its subscription ARR to come in at $26 million to $27 million in FY 2020. This compares to the $24.4 million ARR it guided to in its IPO prospectus.

More reading

• 3 fast-growing small cap ASX shares to watch
• 3 growing small cap ASX shares to watch
• Top brokers name 3 ASX shares to buy next week
• 2 explosive ASX tech shares to buy in February
• 3 very impressive ASX quarterly updates from last week

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. The Motley Fool Australia has recommended Damstra Holdings Ltd and Nitro Software 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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Are you looking for growth shares with the potential to beat the market? Then you might want to take a look at the ones listed below.

They have been tipped both as buys and for big things in the future. Here’s what you need to know about them:

Pushpay Holdings Group Ltd (ASX: PPH)

The first ASX growth share to consider is Pushpay. It is a leading donor management and community engagement platform provider for the faith sector. 

Pushpay has a significant runway for growth over the next decade. In FY 2020, it delivered a 32% increase in revenue to US$129.8 million. Whereas it has now set itself a long term target of growing its share of the US medium to large church market to 50%, which represents a US$1 billion opportunity. That’s a massive ~eight times greater than FY 2020’s revenue.

One of the keys to achieving this will be the US$87.5 million acquisition of church management system provider Church Community Builder. This acquisition has bolstered its offering and led to the launch of ChurchStaq.

Churchstaq is the combination of its Pushpay and Church Community Builder software. It brings together digital giving, donor development, church apps, and church management software (ChMS) to deliver a fully integrated engagement platform. Demand has been strong for the offering and looks set to underpin further stellar sales and earnings growth in FY 2021.

Goldman Sachs is a fan of Pushpay and believes it is well-placed for growth. It has a buy rating and ~$2.59 price target on its shares.

ResMed Inc. (ASX: RMD)

Another ASX growth share to look at is ResMed. This medical device company has been a very strong performer over the last decade thanks to increasing demand for its industry-leading products in the growing sleep treatment market.

The company has also benefitted during the pandemic from demand for ventilators. This helped underpin a very strong result in FY 2020 and equally robust first and second quarters of FY 2021. 

In respect to the latter, the company recently revealed a 9% increase in second quarter revenue to US$800 million and a 17% increase in quarterly net profit to US$206.4 million.

In response to this update, analysts at Credit Suisse retained their outperform rating and $29.50 price target on the company’s shares. According to the note, the broker believes ResMed is well-placed to benefit from a shift to home healthcare. This follows the company’s investment in the out of hospital space over the last few years. This includes its US$800 million acquisition of Brightree in 2016.

More reading

• Here’s why the Altium (ASX:ALU) share price could be a buy
• 2 high quality blue chip ASX shares to buy
• 2 great ASX growth shares to buy
• 2 extraordinary ASX shares to buy in 2021
• Got cash to invest? Here are 3 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 PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX 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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Are you looking for some reliable ASX dividend shares to add to your income portfolio? 

Then you might want to take a look at the dividend shares listed below. Here’s what you need to know about them:

BWP Trust (ASX: BWP)

The first ASX dividend share to look at is commercial property company BWP Trust. It is the largest owner of Bunnings Warehouse sites across Australia with 68 properties leased to the home improvement giant.

Thanks to the strong performance of the Bunnings business during the pandemic, BWP has been able to collect the majority of its rent as normal over the last 12 months.

This and favourable property revaluations led to BWP’s overall profit climbing 6% over the prior corresponding period to $144 million during the first half of FY 2021.

With the results release, management reaffirmed plans to pay a full year distribution of ~18.3 cents per share. Based on the current BWP share price, this represents a generous 4.65% dividend yield.

Rural Funds Group (ASX: RFF)

Another reliable ASX dividend share to look at is Rural Funds. It owns a diverse portfolio of high quality Australian agricultural assets which are leased to highly experienced operators.

At the end of FY 2020, Rural Funds owned a total of 61 properties with a combined value of $1 billion and a very long weighted average lease expiry (WALE) of 10.9 years.

Thanks to built in rental increases and these long leases, management believes it can grow its distribution by 4% per annum over the long term. This is expected to be the case this year, with the company intending to pay shareholders a distribution of 11.28 cents per share.

Based on the current Rural Funds share price, this works out to be an attractive 4.5% yield for income investors.

More reading

• 2 quality ASX dividend shares to buy and hold
• 3 top ASX dividend shares to buy
• 2 reliable ASX dividend shares to buy
• Beat deposit rate cuts with these ASX dividend shares
• 3 ASX dividend shares to own for retirement income

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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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There are a few exchange-traded funds (ETFs) out there that provide specific and fairly unique diversification for investors.

Here are two to think about:

Betashares Global Cybersecurity ETF (ASX: HACK)

This ETF is provided by BetaShares. The idea is that it provides a simple and cost-effective way to gain exposure to the world’s leading cybersecurity companies in a single ASX trade.

The portfolio of the fund includes global cybersecurity giants, as well as emerging players, from a range of global locations.

Why could this ETF be an interesting one to consider? BetaShares says that with cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future.

When you look at the returns after fees over the last few years, you’ll see that it has outperformed the ASX over the shorter-term and the longer-term. At the end of January it had returned 20.8% over the prior three months, 25.2% over the past year, an average of 25.1% per annum over the last three years and it had delivered an average of 20.9% per annum since inception in August 2016.

These returns are after the annual management fee of 0.67% per annum

In terms of the businesses that make up the portfolio, these are the biggest 10 exposures: Crowdstrike, Zscaler, Cisco Systems, Accenture, Splunk, Fireeye, Sailpoint Technologies, Palo Alto Networks, Fortinet and Proofpoint.

A vast majority of the holdings are listed in the US, with an 88.8% allocation. Another 3.5% is based in the UK, 3.4% is listed in Israel, a further 1.9% is listed in Japan, France is home to 1.8%, South Korea is responsible for 0.5% of the ETF and the final 0.1% is from ‘other’.

iShares Global Consumer Staples ETF (ASX: IXI)

This ETF is about providing investors exposure to around 1,200 businesses around the world that are classified as ‘consumer staples’.

Just over half of the ETF is invested in American-listed businesses, with the UK (13.1%), Switzerland (9.3%), Japan (7.2%) and France (5.2%) being the other countries with a weighting of more than 5%.

What businesses make up sizeable positions in the portfolio? These are the companies with a weighting of more than 2%: Nestle, Proctor & Gamble, Coca Cola, Walmart, Costco, Pepsico, Unilever, Philip Morris International, Diageo and L’Oreal.

This ETF has an annual management fee of 0.46% per annum.

The average return per annum over the last three years, five years and ten years has been 5.3%, 4.3% and 11.6% per annum, respectively.

According to Blackrock, this ETF has a 12-month trailing dividend yield of 2.3% and the price/earnings ratio is almost 24 times.

More reading

• 2 excellent ASX ETFs to buy
• 2 fantastic ETFs to buy for strong potential returns
• 2 great ETFs to buy for growth potential
• These top ETFs could be great options for ASX investors right now
• 2 quality ETFs to buy that are making big returns

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 and iShares Global Consumer Staples ETF. 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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Respected fund manager Wilson Asset Management (WAM) has recently identified two small cap ASX shares that it owns in its portfolio.

WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Capital Limited (ASX: WAM).

There’s also one called WAM Microcap Limited (ASX: WMI) which targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.

WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.

The WAM Microcap portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 23.8% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 10.3%.

These are the two small cap ASX shares that WAM outlined in its most recent monthly update:

National Tyre & Wheel Ltd (ASX: NTD)

WAM Microcap explained that National Tyre & Wheel operates entities in Australia, New Zealand and South Africa, supplying tyres and wheels to retailers and wholesalers. According to the ASX, National Tyre & Wheel has a market capitalisation of $122 million.

In January, the company announced that all business units were exceeding expectations and increased earnings guidance for its FY21 interim results, with operating earnings before interest, tax, depreciation and amortisation (EBITDA) expected to be between $15 million to $15.5 million, up from $11.5 million to $12.5 million.

After the acquisition of competitor Tyres4U in July, WAM expects the small cap ASX share will deliver substantial synergies over the next few years.

Seven West Media Ltd (ASX: SWM)

The fund manager said that this ASX share is the company that owns the Seven Network, which produces popular television shows such as Home and Away and newspapers such as The West Australian. According to the ASX, Seven West Media has a market capitalisation of $684 million.

WAM Microcap is positive about the company’s recent appointment of the CEO, James Warburton.

Mr Warburton has a strategy for the company to improve the ratings and sell non-core assets of the small cap ASX share.

The fund manager said that Seven West Media has also benefited from a cost out program implemented during the onset of the COVID-19 pandemic, which will support earnings given the increase in television advertising expenditure.

Wilson Asset Management is expecting earnings upgrades and divestments to be key catalysts for the company in its half year result.

At the company’s annual general meeting (AGM), Seven West Media gave a trading update that said that the market has improved since the August results, but remains volatile. The metro free to air (FTA) market was down 5% year on year for the period from July to October. Over the same period, the broadcaster video on demand (BVOD) market continues to strongly, up 37%, with 7plus capturing share and growing 62% in that period.

The small cap ASX share said that forward bookings suggest Seven’s advertising revenue for the first half could be down approximately 5%. However, cost savings (excluding jobkeeper) has more than offset this revenue decline.

At the end of October it had reduced net debt to $425 million with $750 million in drawn facilities and $325 million cash after a “relentless focus” on cashflow.

More reading

• This ASX growth share is cheap like a value stock
• 2 ASX shares that this fundie really likes right now
• Revealed: ASX company underpaid staff $2.3 million
• Wilson Asset Management thinks these 2 small cap ASX shares are a buy

Motley Fool contributor Tristan Harrison owns shares of WAM MICRO 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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On Friday the S&P/ASX 200 Index (ASX: XJO) finished the week with a disappointing decline. The benchmark index fell 0.6% to 6,806.7 points.

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

ASX futures pointing higher

It looks set to be a positive start to the week for the Australian share market. According to the latest SPI futures, the ASX 200 is expected to open the day 37 points or 0.55% higher this morning. This follows a positive finish to the week on Wall Street. On Friday night the Dow Jones rose 0.1%, the S&P 500 climbed 0.5%, and the Nasdaq index also rose 0.5%.

Oil prices push higher

Energy producers Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could start the week in a positive fashion after oil prices stormed higher on Friday night. According to Bloomberg, the WTI crude oil price rose 2.1% to US$59.47 a barrel and the Brent crude oil price also climbed 2.1% to US$62.43 a barrel. Oil prices have now posted gains in nine out of the last ten trading sessions.

Nearmap short seller response and half year update

The Nearmap Ltd (ASX: NEA) share price will be one to watch this morning when it returns from its trading halt. The aerial imagery technology and location data company requested a trading halt on Thursday in order to respond to a short seller attack. Hong Kong-based J Capital alleges that Nearmap is struggling in the U.S. market and using accounting tricks to hide this. Nearmap intends to bring forward the release of its half year results and release both together today.

Gold price softens

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could edge lower after the gold price softened on Friday. According to CNBC, the spot gold price dropped 0.2% to US$1,823.20 an ounce. The gold price declined after the US dollar strengthened.

Altium half year results

The Altium Limited (ASX: ALU) share price will be one to watch this morning when it hands in its half year results. Last month the electronic design software provider released an update which revealed that it expects to report a 3% decline in to US$89.6 million. All eyes will be on its guidance for FY 2021, which was maintained at that point.

More reading

• Here’s why the Altium (ASX:ALU) share price could be a buy
• 5 things to watch on the ASX 200 next week
• 2 standout ASX results from last week
• 2 of the best ASX growth shares to buy now
• These were the best performing ASX 200 shares last week

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 Nearmap Ltd. 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 Nearmap 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 you’re currently searching for a few shares to add to your portfolio, then you could do a lot worse than the ones listed below.

Here’s why these ASX shares come highly rated right now:

Adore Beauty Group Limited (ASX: ABY)

The first ASX share to look at is Adore Beauty. It is Australia’s number one pureplay online beauty retailer with almost 600,000 active customers. It is expecting to report revenue of $158.2 million for calendar year 2020. This will be a sizeable increase on the prior corresponding period. While this is a large number, it is still only a fraction of its market opportunity. Management estimates that it has an ~$11 billion a year opportunity in the Australian beauty and personal market. Morgan Stanley is positive on the company. It currently has an overweight rating and $8.35 price target on its shares.

NEXTDC Ltd (ASX: NXT)

Another ASX share to look at is NEXTDC. It is a leading data centre-as-a-service provider with 11 centres in key locations across Australia. From these Tier III and Tier IV facilities, it provides world-class colocation services to local and international organisations. It has been a big winner from the acceleration of the shift to the cloud caused by the pandemic. This has underpinned a significant increase in demand for capacity in its data centres and strong sales and earnings growth. Looking ahead, NEXTDC now has its eyes on the Asian market and has opened up offices in a number of key locations. If this expansion is a success, it could give it a very long runway for growth. Morgans is a fan of the company. It currently has an add rating and $13.89 price target on its shares.

Xero Limited (ASX: XRO)

A final ASX share to look at is this cloud-based business and accounting software provider. Despite the pandemic’s impact on small businesses, Xero has continued to perform strongly in FY 2021. For example, in November, it released its half year results and revealed operating revenue growth of 21% to NZ$409.8 million. This was driven partly by a 19% increase in total subscribers to 2.45 million. Goldman Sachs is very bullish on the company and has a buy rating and $157.00 price target on its shares. The broker believes Xero has a multi-decade runway for strong revenue growth.

More reading

• 3 reasons why the Xero (ASX:XRO) share price could be a buy
• Is HyperOne listed on the ASX?
• Take a look at the ASX’s new cloud ETF
• 2 ASX tech shares to buy for cloud computing exposure
• 2 extraordinary ASX shares to buy in 2021

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of Xero. 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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There are a few different reasons why the Altium Limited (ASX: ALU) share price could be worth looking at.

What is Altium?

Altium describes itself as a multinational software business that focuses on electronic design systems for 3D PCB design and embedded system development. The company says that its products are found everywhere from world leading electronics design systems to the grassroots electronic design community.

It has a number of different products for different clients such as Altium Designer, Altium NEXUS, Octopart and Altium 365.

Whilst the company is headquartered in San Diego, California, it has locations around the world in the US, Europe and the Asia Pacific regions.

Here’s why the Altium share price could be worth looking at

The Altium business has grown a lot over the past decade and it has become a major player in the electronic PCB software world. It has been falling in recent months due to COVID-19 impacts. 

Here are some reasons why investors may wish to consider Altium shares:

1: Growing market share

Altium management have a long-term goal of dominating the global electronic PCB software space and transforming it.

The company has previously referred to Microsoft as an example of how it gained a huge market position in the office software space. Microsoft was able to dictate what to focus development on, and it also had strong market power.

In every financial result, Altium reveals that it has grown its number of subscribers. The company has a long-term goal of 100,000 Altium Designer subscribers. In FY20 it said that its Altium Designer subscriber numbers increased by 17% to 51,006, with the number of new Altium Designer seats sold increased by 15%.

Altium says that over 30,000 companies use its software. Some of the world’s leading organisations and businesses use Altium software like Tesla, Space X, Boeing, Lockheed Martin, John Deere, Google, Bosch, CSIRO, Honeywell, Microsoft, Cochlear Limited (ASX: COH), ResMed Inc (ASX: RMD), Siemens, Amazon, Disney, Apple, Qualcomm, Broadcom and Texas Instruments.

The growing market share is a contributing reason why the Altium share price has risen over the years. 

2: Altium 365

Altium 365 is an online platform for engineers to work online together as a team and access the software. Management call this shift the ‘Netflix moment’ when a company shifts to an online model – Netflix used to just be a DVD mailing service.

The company says that Altium 365 provides opportunities for significant addressable market expansion. Not only does it modernise the electronic PCB design process and make it more likely to win more clients, through the cloud, but it also it opens up revenue opportunities.

One possibility for direct monetisation is generating transaction fees on manufacturing (like the Airbnb model) and the other option is offering premium services (like the Amazon Prime model).

Altium is shifting its whole business and operational model towards the cloud with Altium 365 being the main focus of future growth.

3: Strong balance sheet

Altium is debt free and it has been steadily growing its cash pile. In FY20 it finished with a cash balance of $91.3 million, which was 16% higher than the previous year.

That was before Altium announced the US$110 million sale of its TASKING business which will improve its balance sheet further. The sale will free up organisational capacity and allow leadership to focus on expanding Altium 365.

Altium’s cashflow and balance sheet has allowed the company to keep growing the dividend for shareholders whilst the Altium share price acts with volatility just like every other share. 

Altium valuation

According to Commsec, the Altium share price is valued at 44x FY23’s estimated earnings. That’s after a 23% fall from 21 October 2020.

More reading

• Top brokers name 3 ASX shares to buy next week
• 2 of the best ASX growth shares to buy now
• 2 high quality blue chip ASX shares to buy
• 5 fantastic ASX shares to buy right now
• Leading brokers name 3 ASX shares to sell today

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 Cochlear Ltd. 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 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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If you’re planning to add a dividend share or two to your portfolio in the near future, then you may want to check out the ones listed below.

Here’s why these ASX dividend shares come highly rated right now:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

The first ASX dividend share to look is ANZ Bank. While its shares have performed strongly in recent few months, it may not be too late to invest. Especially given the ever-improving outlook for the banking sector and the generous dividends on offer with its shares.

Morgans recently reiterated its add rating and lifted its price target on the bank’s shares to $28.50. Its analysts are forecasting a $1.27 per share dividend in FY 2021 and then a $1.50 per share dividend in FY 2022.

Based on the latest ANZ share price of $24.83, this will mean 5.1% and 6% dividend yields, respectively, over the next two years.

Aventus Group (ASX: AVN)

A second ASX dividend share to look at is Aventus. It is the largest fully-integrated owner, manager, and developer of retail parks in Australia. At the last count, its portfolio comprised 20 centres valued at $2.2 billion and covering 536,000m2 in gross leasable area.

Aventus’ portfolio features a diverse tenant base of 593 quality tenancies. From these, national retailers such as ALDI, Bunnings, and Officeworks represent an estimated ~87% of the portfolio.

One broker that is a fan of Aventus is Goldman Sachs. It has a buy rating and $2.79 price target on its shares. Goldman notes that almost two-thirds of its tenants are exposed to the household goods sector. It sees this as a big positive, as this side of the retail sector has been performing strongly during the pandemic.

Goldman is forecasting a~16.5 cents per share distribution in FY 2021. Based on the current Aventus share price, this represents a 5.9% yield.

More reading

• How big will the ASX bank dividends be in 2021 and beyond?
• CBA, Westpac, ANZ adopt same tech as Bitcoin
• 2 blue chip ASX dividend shares to buy
• ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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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Buying value shares and holding them for the long run has been a relatively successfully strategy over many decades.

It allows an investor to capitalise on low prices that provide capital growth potential, while benefitting from owning high-quality businesses that may have relatively low risks.

Since many strong businesses currently trade at low prices, it could be a good time to purchase value stocks. They could benefit from a long-term stock market recovery.

The appeal of value shares

Clearly, deciding which companies should be classed as value shares is open to debate. However, they are likely to include businesses that have dominant market positions in their respective industries that may allow them to deliver stronger profit growth than their peers. They are also likely to have solid balance sheets that can provide the required level of investment to expand into new growth areas to further enhance their financial prospects.

When such companies trade at prices that do not fully reflect their long-term financial capabilities, they could offer good value for money. Often, low share prices for high-quality businesses do not last for long, since industry or economic disruption has often given way to stronger operating conditions. Therefore, at a time when many companies could be classed as value shares following the 2020 stock market crash, there may be opportunities to build a portfolio that includes them.

A long-term stock market recovery

While many companies have posted strong share price growth in the stock market rally over recent months, a number of stocks continue to trade at low price levels. This could be because they continue to face major disruption from coronavirus or economic uncertainty. Buying them now could prove to be a sound move because of the stock market recovery that is likely to take place in the coming years.

History suggests that a strategy that aims to purchase high-quality companies when they trade at low prices has been very successful. Investors such as Warren Buffett have used such a plan to take advantage of the market cycle, where downturns have always been followed by rallies that lead the stock market to new record highs. As such, today’s value shares could gain momentum as investor sentiment improves and a global economic recovery takes hold.

Adopting a patient approach

Of course, it could take many years for some of today’s most attractive shares to deliver on their potential. The future is always unknown, but at the present time it is arguably more unpredictable than is usually the case due to uncertainty caused by coronavirus.

As such, adopting a long-term approach when buying value shares could be a prudent move. It may enable high-quality companies to deliver on their potential. Over time, a patient approach could be rewarded with market-beating returns that significantly improve an investor’s financial prospects.

More reading

• Top brokers name 3 ASX shares to buy next week
• 3 reasons why the Xero (ASX:XRO) share price could be a buy
• Top brokers name 3 ASX shares to sell next week
• Is the Fortescue (ASX:FMG) share price a buy for dividends?
• 5 things to watch on the ASX 200 next week

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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