The share prices of most infrastructure companies, both on the ASX and global exchanges, have been among the hardest hit from the coronavirus fallout.

And unlike technology shares, most infrastructure shares are still well below their February 2020 highs. For investors with a longer-term horizon (2 or more years), this spells opportunity.

Why infrastructure share prices could be heading much higher

Social distancing, lockdowns and border closures put into place to control the pandemic have seen developed nations around the world fall deeply into recession. That includes the United States — the world’s biggest economy — and most nations across Europe.

Australia is on that list as well, with gross domestic product (GDP) plummeting 7% relative to the previous 3 months in the quarter ending 30 June, the biggest fall on record. Since GDP also contracted 0.3% the previous quarter, that makes it an official recession. The first since mid-1990 to early 1991 for Australia.

To lift their economies out of recession (and keep their jobs), politicians across developed nations are proposing massive government spending on infrastructure projects, possibly reaching into the trillions of dollars globally.

The stimulus plans would sound quite familiar to former US President, Franklin D Roosevelt. He was the one who pioneered the ‘New Deal’ in the 1930s. This opened up the government’s purse strings to fund road, bridge, and construction projects that put millions of people back to work and put an end to the Great Depression.

1 ASX infrastructure share with built in diversification

There are many different global infrastructure shares that stand to gain as government building booms gets underway.

One way to invest across many of these with a single ASX share is through the Vanguard Global Infrastructure Index ETF (ASX: VBLD). This exchange-traded fund (ETF) holds 139 infrastructure shares across the globe.

Its major holdings focus on railways as well as energy and communications infrastructure companies. Furthermore, 66% of its market allocation exposure is in the US with 14% in Canada and 6% in Japan.

The ETF had a great start to 2020, with the share price gaining 12% through to 21 February, while the All Ordinaries Index (ASX: XAO) gained 6% over the same period.

Then the virus hit. And the share price tanked 25% through to its low on 25 March. It has edged higher from that low, but it’s still down 22% from the February highs.

With governments prepared to fund a building boom that could run several years or more, there’s no reason the Vanguard Global Infrastructure ETF couldn’t see a return to its February highs. That would represent a 28% upside from today’s price of $52.65 per share.

More reading

• The pitfalls of investing in infrastructure in 2020

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

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Could the surging e-commerce space position some retail companies as leading ASX growth shares? Here are two Aussie retailers that I think could outperform household ASX growth shares. 

2 retailers that could be top ASX growth shares

1. Kogan.com Ltd (ASX: KGN) 

The Kogan share price has been relentless in 2020 and is up nearly 170% this year. During this period, the company also launched a $100 million capital raising to provide the financial flexibility to act quickly on future value accretive opportunities. Previously, Kogan acquired and integrated iconic Australian retailers such as Dick Smith and Matt Blatt. This is the company’s first capital raising since its initial public offering (IPO) in July 2016 and could open the door for more exciting opportunities. 

Kogan continues to kick goals with its recent business update highlighting its continued success amidst COVID-19. The update reported active customers increased to 2,461,000 as at 31 August 2020. This included an incremental 152,000 customers in the month of August, and the largest monthly increase in the history of the business. Furthermore, Kogan’s gross sales have grown more than 117% year on year, gross profit grew more than 165% and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) has increased more than 466%. 

The Kogan business is firing on all cylinders with a strong balance sheet to explore potential acquisitions. I believe the company is a reasonably valued ASX growth share at its current price, however the recent weakness in the market could also present an opportunity to buy Kogan shares at a cheaper price in the future.

2. Redbubble Ltd (ASX: RBL) 

The Redbubble share price has delivered a staggering 300% increase so far in 2020. The company’s operations are along the same lines as Etsy Inc (NASDAQ: ETSY), a US $13 billion e-commerce marketplace focused on arts and crafts. COVID-19 has accelerated consumers’ appetite for e-commerce and Redbubble believes these structural shifts are likely to endure in the medium to long term. In FY20, the company’s marketplace revenue increased 36% to $349 million, EBITDA increased 358% to $5.1 million and its closing cash balance was $58 million at 30 June 2020. During Q4 FY20, Redbubble’s growth and profitability greatly accelerated with 4Q20 marketplace revenue of $103 million, up 73% on 4Q19. 

From a revenue perspective, Etsy trades at approximately 12 times revenue compared to the 3 times of Redbubble. Even though Redbubble shares have soared 300% this year, I believe there could be more gas in the tank. While the near-term volatility could see some wild swings in the Redbubble share price, I believe its shares could definitely go higher in the medium to long term. 

More reading

• Got $3,000? Buy these exciting ASX growth shares
• 4 unstoppable ASX shares to buy with $4,000
• What you need to know about Tyro’s share price roller coaster today
• Where to invest $10,000 into ASX shares immediately
• Why Mineral Resources, Redbubble, Saracen, & Temple & Webster shares are pushing higher

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) fell by around 0.7% today to 5,784 points.

Share market COVID-19 fears

This followed on from a tough day for the European share market, particularly in the UK as it starts reintroducing restrictions to try to halt the spread of COVID-19.

According to reporting by the BBC, the UK coronavirus alert level is moving to level 4. That means that transmission is ‘high or rising exponentially’. The government’s scientific adviser warned there could be 50,000 new coronavirus cases a day by mid-October without further action.

The number of COVID-19 confirmed cases in the UK on Monday was another 4,368 with the number rapidly rising compared to previous weeks.

Within the ASX 200 the Virgin Money UK CDI (ASX: VUK) share price fell by 5% with investors worrying about what may happen to the UK economy if there’s another lockdown.

Travel shares were also some of the worst performers within the ASX 200.

At the bottom of the performance table was the Corporate Travel Management Ltd (ASX: CTD) share price which fell 5.8% and the Webjet Limited (ASX: WEB) share price dropped 6%.

As a hedge, investors seem to have sent the share price of ventilator business Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) going up by 4%.

The best performing business in the ASX 200 today was the Xero Limited (ASX: XRO) share price which rose 4.4%. Healthcare business Healius Ltd (ASX: HLS) also rose by around 4% today.  

New Hope Corporation Limited (ASX: NHC)

The coal miner reported its FY20 result today.

New Hope is a low-cost coal producer, but it still experienced a tough year.

The business reported that total tonnes produced grew 4% to 11.3Mt with a full year contribution from its Bengalla ownership. Total tonnes sold increased by 6% to 11.5Mt.

It reported that profit after income tax (before non regular items) dropped 69% to $84 million. Revenue from operations dropped 17% to $1.1 billion with operating earnings before interest, tax, depreciation and amortisation (EBITDA) dropping 44% to $290 million.

Earnings per share (EPS) before non regular items also dropped 69% to 10 cents.

The New Hope board decided not to pay a final dividend. This meant that the full year dividend was 6 cents per share, a reduction of 65%.

New Hope Chair Rob Millner explained to investors in the chair review that between March 2020 and July 2020 the Newcastle coal price fell around 33% with weaker demand and a lower US dollar.

The statutory profit after tax was actually a $156.8 million loss. This was due to a large number of impairments relating to coal producing and exploration assets, impairment of goodwill, impairment of oil producing and exploration assets. There were also New Acland ramp down costs, redundancies and ERP implementation costs.

New Hope said that demand for high quality thermal coal remains strong across Asia.

Bubs Australia Ltd (ASX: BUB) share purchase plan (SPP) delay

Bubs said today that due to delays being experienced with Australia Post deliveries during COVID-19 and feedback from shareholders, the closing date for the SPP is being extended by two weeks until 7 October 2020. This will give shareholders enough time to consider the terms and conditions in the SPP.

As a reminder, eligible shareholders can apply for up to $30,000 of new shares at an offer price of $0.80.

Bubs aims to raise $10 million and the offer is not underwritten.

The Bubs share price fell 2.5% today.

More reading

• Telstra (ASX:TLS) share price is one of the latest ASX buy ideas from brokers
• Why the Regional Express (ASX:REX) share price is taking off today
• ASX 200 hits 3-month low! Is it time to buy ASX shares today?
• Why the News Corp (ASX:NWS) share price is plunging today
• 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 Xero. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet 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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The ASX share market is currently going through a correction as fears intensify about COVID-19 spreading in Europe and the UK again. There’s also the US election on the horizon.

The best time to buy shares is when share prices are lower rather than higher. The phrase is ‘buy low, sell high’ not ‘buy high, sell low’.

I think it’s an opportunity to buy ASX shares when most of the market sells off. I think the below businesses are opportunities with share prices going lower:

City Chic Collective Ltd (ASX: CCX)

City Chic is one of the most promising ASX shares in my opinion. At the time of writing the City Chic share price has fallen 2.7% today and it’s down 10% over the past week.

Part of the decline is due to the fact that it was unsuccessful at acquiring Catherines. It has raised capital but doesn’t have any immediate places to invest it.

However, I think the ASX share has plenty of growth potential. The retailer of plus-size clothing, footwear and accessories for women generates a lot of its earnings in the northern hemisphere. Perhaps its earnings will be disrupted again by lockdowns in the UK, however thankfully it sells a large proportion of its items online. In FY20, around 65% of its sales were made online. I think this shows the company is well placed with whatever happens next with COVID-19, whether things get better or worse in its key markets.

The loss in the Catherines auction was disappointing. But I think it’s very pleasing to see that the ASX share isn’t chasing acquisitions just for the sake of it at any price. City Chic expects that there will be other opportunities to add brands and take market share more aggressively. It’s just a temporary setback. 

At the current City Chic share price it’s trading at 21x FY21’s estimated earnings.

BWX Ltd (ASX: BWX)

BWX is a leading natural beauty business. The BWX share price is down 3.6% at the time of writing.

I believe that BWX has really turned the corner after a difficult 2018. In FY20 it grew revenue by 26% and statutory net profit rose 59% to $15.2 million. The gross profit margin increased to 58%.

A lower BWX share price is attractive to me because it is growing its international earnings rapidly. Sukin is expanding in North America and Europe is a particularly attractive idea.

The ASX share has improved its balance sheet position and in FY21 it’s expecting earnings before interest, tax, depreciation and amortisation (EBITDA) growth of at least 10%.

There is growing demand for natural beauty products, I think BWX is well placed to benefit from this.

At the current BWX share price it’s priced at 28x FY22’s estimated earnings.

EML Payments Ltd (ASX: EML)

The EML share price is down 2% right now and it has fallen 20% since the end of August 2020 and it’s down 35% from 10 June 2020.

It provides gift cards and other similar products. There are general purpose reloadable cards, gift and incentive cards and virtual card account numbers.

You’d think that the mass closure of retail stores would be fairly bad news for EML’s physical gift cards segment, but its other divisions could make up for that.

In FY20 it saw group revenue rise 25% to $121.6 million and underlying EBITDA grew 10% to $32.5 million.

The PFS acquisition was a really smart move and getting it for a cheaper price was a wise move.

I think the ASX share is more resilient than some investors think and over the long-term I think it has attractive growth prospects, particularly once COVID-19 fades into history (hopefully sooner rather than later).

Foolish takeaway

I think all three of these ASX shares could be worth buying during this ASX share market downturn. They have good growth prospects and lower share prices are attractive when it’s a selldown of the whole market.

More reading

• 3 ASX growth shares I’d buy today for growth and income
• Why the City Chic (ASX:CCX) share price crashed 15% lower today
• Why City Chic, Fortescue, Nearmap, & Zip shares are dropping lower today
• 3 ASX tech shares that are still in the buy zone
• Where I’d invest $20,000 into ASX shares right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited and Emerchants 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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An investors dream is to find the next A2 Milk Company Ltd (ASX: A2M) in its early days. Here are two microcap ASX shares in the health food and dairy spaces that I think could become giants in the future.

2 ASX shares with huge growth potential

1. Pure Foods Tasmania Ltd (ASX: PFT) 

Pure Foods Tasmania was formed in 2015 with the aim to acquire, grow and develop premium food businesses in Tasmania. The company has a market capitalisation of $42 million with two acquired businesses and a third acquisition in progress. 

The two already acquired businesses are Tasmania Pâté and Woodbridge. Tasmania Pâté is one of Australia’s largest pâté businesses and a supplier to large retail outlets including Costco Wholesale Corporation (NASDAQ: COST), Aldi and Woolworths Group Ltd (ASX: WOW). Woodbridge is a boutique producer of ultra-premium Tasmania smoked salmon and trout with over 60% of its products exported to Asian markets and sold to high-end food service retailers throughout Australia. Finally, earlier this month, Pure Foods announced it is acquiring Daly Potato Company, a producer of premium potato salads which are sold to major supermarket chains. 

In FY20, the company delivered a 13% increase in revenue to $4.27 million, a net loss of $196,500 and $4.13 million in cash as at 30 June. The company plans to target the plant-based cheese market which is forecasted to reach $3.9 billion by 2024. It will launch new, Tasmanian plant-based dairy products into national, independent, direct-to-consumer and export retail channels. Furthermore, the company recently launched its new online store which aims to provide a hub for consumers around Australia looking for premium products from Tasmanian producers. The Pure Foods share price has surged 268% in year-to-date trading. Interestingly, some of the original shareholders of Bellamy’s are also the founders of Pure Foods. Its experienced founders could see this ASX share continue to outperform.  

2. Wide Open Agriculture Ltd (ASX: WOA) 

Wide Open Agriculture offers regeneratively grown animal and plant-based products to Australian and Asian markets. This means that it grows plants and raises animals on farms that regenerate the land – bringing new life to soil health, plants, wildlife and waterways. Its products are therefore free of chemicals and pesticides, high quality and locally sourced with a short, transparent supply chain. The company currently has a market capitalisation of $89 million.

In FY20, the company generated $2.2 million in revenue and a loss of $1.85 million. Its products are currently only sold in Western Australia with limited marketing and a large opportunity to penetrate new domestic territories and launch globally. Wide Open Agriculture believes it has a first mover advantage in the production of lupin-based protein that can be used to create alternative meat, dairy, beverage and convenience food products. 

Moving forward, the company is looking to increase its revenue by penetrating into new domestic markets, expanding its product offering online and exporting to Asian markets. Furthermore, it aims to launch its own new products in lupin protein and build a manufacturing capability to produce oat milk. I believe the company is in its early days with a significant revenue opportunity at hand. The Wide Open Agriculture share price has increased more than 700% year to date but the company’s ability to operationally execute and grow revenues could see its share price run continue well into the future.

More reading

• Why I would buy CBA (ASX:CBA) and this beaten down ASX share
• Is the A2 Milk (ASX:A2M) share price going above $20?
• 5 things to watch on the ASX 200 on Monday
• 3 ASX 200 growth shares to buy right now
• 2 ASX shares I’d buy in a heartbeat

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Costco Wholesale. The Motley Fool Australia owns shares of A2 Milk and Woolworths 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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Don’t be put off by the falls on the S&P/ASX 200 Index (Index:^AXJO). The pull back is still regarded by experts as a buying opportunity and brokers have listed their latest ASX buy ideas.

The top 200 stock benchmark lost ground for the fourth consecutive day as it retreated by 0.7%. Renewed worries about COVID-19 and the November US Presidential Election are giving investors reason to take profit.

But these risks are unlikely to kill the Santa Rally in December, in my view, and the sell-off gives you a chance to buy some beaten down stocks.

Top buy in the telecom sector

One that UBS is urging you to buy now is the Telstra Corporation Ltd (ASX: TLS) share price.

Shares in our largest telco is hovering around a two-year low and the broker is calling it the top pick in the sector.

At its current price, the market is pricing in most (if not all) of the dividend cut and earning per share (EPS) risks.

No good news priced into Telstra’s share price

On the other hand, there is no upside priced in for 5G opportunities, longer-term NBN optionality and possibility that Optus will behave more rationally. On that last point, UBS reckons this could happen in 2021.

“We think risk vs. reward therefore looks very favourable here, and TLS is now our preferred Buy across our TMT coverage,” said UBS.

“We remind that TLS traded at ~$3.50 as recently as Aug-20, after its postpaid mobile price increases.

“However, we believe unfavourable Optus marketing & downgrades to TLS’s long-term ROIC targets have led some investors to lose faith in potential mobile market repair.”

The broker calls Telstra a “high conviction buy” and its 12-month price target on the stock is $3.70 a share.

Senex Energy upgraded

Another “buy” idea from Morgans is the Senex Energy Ltd (ASX: SXY) share price.

The broker upped its price target on the gas company to $0.48 from $0.42 cents and reiterated its “add” recommendation after Senex was picked as the preferred tenderer for two new exploration blocks in the Surat and Bowen Basins.

Trading at a discount

“Of key importance to SXY, the Surat block sits immediately adjoining its flagship Atlas operation. We already consider Atlas to be SXY’s highest value asset,” said Morgans.

“SXY is confident this is low-risk commercial ground given it is surrounded by existing Atlas ground to the west and Shell ground to the north.

“The new block will grow Atlas acreage by 31% to 76km² (from 58km²), and will add an immediate 41 PJ [petajoule] to reserves once a production license is obtained.”

This should support around 15 years of expanded production from Atlas.

As for the Bowen Basin, management considers the ground prospective given it sits on trend between the existing Scotia and Meridian gas fields.

More reading

• Why the Regional Express (ASX:REX) share price is taking off today
• Buy these ASX dividend shares to beat low interest rates
• ASX 200 hits 3-month low! Is it time to buy ASX shares today?
• Why the News Corp (ASX:NWS) share price is plunging today
• Why you should look beyond the second wave to the blue investment skies beyond

Motley Fool contributor Brendon Lau owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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 Afterpay Ltd (ASX: APT) share price has been the most resilient among its buy now, pay later (BNPL) peers. Could the recent strength in the Afterpay share price make it a buy at today’s price? 

Afterpay share price finding its footing 

The Afterpay share price has found its footing around the $75 mark despite this month’s highly volatile trading sessions. The broad tech sell off in the United States market clawed back its losses on Monday and could be the start of a much needed reversal. I believe Afterpay’s tenacity is a good sign for its shares moving forward. 

Are the banks or Paypal a threat? 

The Australian Financial Review outlined the concerns that Paypal could slow Afterpay’s growth in the US. Paypal charges merchants significantly less for sales with a product that is very similar to Afterpay. 

The Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) both launched no interest credit cards to combat BNPL products. CommBank Neo and NAB’s StraightUp card provide customers with up to $3,000 of credit with no interest payments, no late payments and no foreign currency fees but with a fixed, monthly fee. These products are nothing new and, from a cost perspective, much more expensive than BNPL products. 

COVID-19 tailwinds 

COVID-19 has accelerated structural shifts in consumer behaviour and preferences that align with Afterpay’s business model. The increase in e-commerce and online sales is not only good for its business model, but also helps position the company as a platform for retailers, rather than a standalone form of credit.  

Global expansion 

The path to global dominance continues for Afterpay as it announced plans to launch in Canada in August 2020. Furthermore, Afterpay has made an agreement to acquire ‘Pagantis’ to launch in Spain, France and Italy with regulatory approval to also operate in Portugal. These four countries have an addressable e-commerce market worth more than $247 billion. The acquisition will hit the ground running with a fully staffed and experienced team, existing multi-lingual technology stack and IP and a pathway to access other EU member states. 

Afterpay also intends on leveraging its Tencent Holdings relationship to explore opportunities in Asia. It has currently made a small acquisition of a Singapore-based company operating in Indonesia. 

Foolish takeaway

It’s good to see the Afterpay share price settle and ignore the noise of the broader market. There could be good news coming out of the company in the near term to confirm its expansions and acquisitions, which could give the share price a much needed push. With that said, the general market is still looking very weak and more volatility is to be expected following soaring COVID-19 cases in Europe as well as the impending US election. 

More reading

• BrainChip (ASX:BRN) and Afterpay (ASX:APT) were among the most traded shares on the ASX last week
• ASX 200 down 0.9%: Tech shares push higher, gold miners sink, New Hope results
• Up 79% this year, is the NextDC (ASX:NXT) share price the next Afterpay (ASX:APT)?
• Afterpay (ASX:APT) one of top 10 lockdown winners
• What you need to know about Tyro’s share price roller coaster today

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

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On Tuesday the S&P/ASX 200 Index (ASX: XJO) continued its poor run and dropped to a three-month low of 5,763.2 points.

While this is disappointing, I believe it has created a buying opportunity for patient investors.

Two beaten down ASX shares that I think are in the buy zone right now are listed below. Here’s why I like them:

a2 Milk Company Ltd (ASX: A2M)

The a2 Milk share price is down a sizeable 18% from its 52-week high. Investors have been selling the infant formula and dairy company’s shares since the release of its full year results in August. Although a2 Milk delivered strong growth in FY 2020, the market was expecting an even stronger result. In addition to this, this result appears to have been boosted by pantry stocking during the height of the pandemic. As a result, there are concerns that this could have brought forward sales and lead to subdued demand in the first quarter.

While this could prove to be the case, management remains confident that it will still deliver strong revenue growth in FY 2021. After which, I believe a2 Milk is well-positioned for long term growth thanks to the popularity of its products in China, its relatively small market share, and its growth through acquisition opportunities. This could make the recent a2 Milk share price weakness a real buying opportunity.

Commonwealth Bank of Australia (ASX: CBA)

This banking giant’s shares have fallen heavily in 2020 because of the coronavirus crisis. Since peaking at a 52-week high of $91.05 in February, the CBA share price has lost a whopping 31% of its value. Investors appear concerned by a potential spike in bad debts because of the pandemic’s impact on businesses and employment.

Although these concerns are certainly not unwarranted, I believe the selloff has been severely overdone and left CBA’s shares trading at a very attractive level. Especially given its strong balance sheet and decent dividend yield.

More reading

• How ASX shareholders are dudded by quarterly reports
• BrainChip (ASX:BRN) and Afterpay (ASX:APT) were among the most traded shares on the ASX last week
• 2 ASX shares to buy today for house price rise
• CBA, Macquarie face new $167m dirty cash allegations
• Is the A2 Milk (ASX:A2M) share price going above $20?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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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Small cap shares traditionally carry a lot more risk than their large cap counterparts.

However, if you focus on companies with proven business models, positive outlooks, and strong business traction, I believe you can reduce this risk materially.

Three small cap ASX shares which tick a lot of boxes for me at present are listed below. Here’s why I think they are worth watching:  

Bigtincan Holdings Ltd (ASX: BTH)

The first small cap ASX share to look at is Bigtincan. It is a provider of sales enablement software which provides businesses with the information, content, and tools to sell more effectively. Demand for its platform has been growing strongly in recent years and even during the coronavirus crisis. This led to it recording strong recurring revenue growth in FY 2020 and guiding to more of the same in FY 2021.

MNF Group Ltd (ASX: MNF)

Another small cap ASX share I’m a fan of is MNF Group. It is a leading provider of Voice over Internet Protocol (VoIP) technology to businesses and consumers. VoIP technology is used to convert analogue audio signals into digital data so you can use a telephone over the internet. Demand for VoIP services has been growing very strongly this year because of the work from home initiative. The good news is that I don’t believe this is a one-off. I’m confident the pandemic has accelerated a structural shift that MNF Group is in pole position to benefit from. 

People Infrastructure Ltd (ASX: PPE)

A final option to look at is People Infrastructure. It is a leading workforce management company that provides innovative solutions to workforce challenges. Despite being impacted by the pandemic, People Infrastructure was a positive performer in FY 2020. It reported normalised EBITDA of $26.4 million, up 49.2% on the prior corresponding period. And while it hasn’t been able to provide guidance for FY 2021, management remains focused on driving growth both organically and inorganically.

More reading

• 3 ASX tech shares that could take off in FY21
• These exciting small cap ASX shares could be stars of the future
• 3 ASX shares for beginners to buy
• 2 ASX dividend shares to buy after the selloff
• 3 very exciting small cap ASX shares to watch

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

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The Australian Securities and Investments Commission (ASIC) has warned fund managers that the name of their products must resemble the underlying assets.

The watchdog revealed Tuesday it performed surveillance on 37 managed funds that together manage $21 billion.

ASIC deputy chair Karen Chester said the exercise showed up two major problems.

“First, confusing and inappropriate product labels across 14 ‘cash’ funds with under $7 billion in assets,” she said. 

“And second, redemption features not matching the liquidity of underlying assets, with a significant mismatch in 3 funds with under $1 billion in assets.”

When share markets are volatile, retail investors turn to alternative options, according to ASIC. And the name of the fund is often used to judge what they’re investing in.

Funds labelled ‘cash’ were the most problematic, with 14 out of 22 having “confusing or inappropriate” names.

“Some funds that were labelled as ‘cash funds’ had asset holdings more akin to a bond or diversified fund, which have significantly higher risk and less liquidity compared to a traditional cash fund,” stated ASIC. 

“This was especially prominent in funds that use words such as ‘cash enhanced’ and ‘cash plus’ in their labelling.”

The study found those ‘plus’ and ‘enhanced’ products had on average more than 50% and 70% respectively invested in assets other than cash or cash equivalents (like fixed-income securities and mortgages).

Truthful labelling is not optional: ASIC

Chester said managed funds are not regulated or government-guaranteed, so managers must not mislead customers.

“Funds should be ‘true to label’. This is not a nice-to-have,” she said.

“Inappropriate labelling of a fund can mislead investors into believing that the fund is much safer or more liquid than it actually is. Put simply, a fund should not use terms such as ‘cash’ or ‘cash enhanced’ unless its assets are predominantly in cash and cash equivalents.”

Incorrect labelling also punished fund managers that were doing the right thing, according to Chester.

“If consumers cannot rely on product labels, then it is difficult for funds to compete on a fair basis – disadvantaging both compliant fund managers and end-consumers.”

ASIC cracks the whip

After the surveillance, ASIC went to 13 offending fund operators to request remediation.

The authority stated nine funds have voluntarily changed or will change the names to match the actual product. One fund will change the asset allocation to match the existing name.

Three fund operators will review their products and one fund wound itself up.

The authority urged any investors that have suffered losses from incorrect labelling to first contact the fund operator. 

If that doesn’t work out, they can lodge a complaint with the Australian Financial Complaints Authority (AFCA).

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

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