Small cap shares are often regarded as more speculative and higher risk/reward investments due to the size of the company. However, these three small cap ASX growth shares have all taken significant strides forward and, I believe, are worthy of a closer look. 

3 ASX growth shares I’d buy

1. Selfwealth Ltd (ASX: SWF) 

Selfwealth is Australia’s fastest-growing share trading platform for retail investors and leads the market with its $9.50 flat-fee brokerage. Its award-winning flat fee is not only great value but Australia’s only flat-fee broking platform. FY20 has been a significant growth period for Selfwealth with its revenues soaring 313% to $8.6 million and active traders increasing by 235% to 46,445. The company is fast approaching cash flow positive with FY20 cash burn sitting at $147,000, down from $3.4 million. COVID-19 has accelerated tailwinds for brokers with an uptick in general interest for the markets and investing. The platform intends on expanding its services to include United States trading in 1H21. The US market is the most popular international market for Australians. With a clear value proposition for customers, Selfwealth could be a small cap ASX growth share worth looking into. 

2. Bigtincan Holdings Ltd (ASX: BTH) 

Bigtincan is a sales enablement platform that helps organisations grow customer engagements into long-term valued relationships. This involves sales content management, sales training and coaching, document automation and internal communications software. The company continued to deliver on its growth strategy with a 56% increase in revenue to $31 million while annualised recurring revenue increased 53% to $35.8 million. Its key achievements for FY20 include three acquisitions to grow its capability in data science, infrastructure for scale and extended investment into UI/UX. At this point in time, the company expects revenue to be in the range of $41-44 million and ARR to be in the range of $49-53 million for FY21. Despite its market capitalisation of around $450 million, this ASX growth share has a comfortable cash position of $71.9 million which will allow it to explore potential M&A opportunities. 

3. Money3 Corporation Limited (ASX: MNY) 

Money3 is a specialist provider of consumer finance for the purchase or maintenance of a vehicle in Australia and New Zealand. Its unique business model and approach to customer care attracts customers that are often under serviced by mainstream banks. The company has over 50,000 active customers in ANZ with over $1 billion in vehicles financed since inception. Its FY20 performance was solid, with a 35.3% increase in revenue to $124.0 million and 30.1% increase in NPAT. The company has demonstrated a 5-year compound annual growth rate of 33.1% for revenue, 18.4% for EPS and 32.3% for its gross loan book. I believe these growth figures make it good value against the likes of other ASX growth shares, especially taking into consideration its price-to-earnings (P/E) ratio of just 16.

More reading

• New to investing? More ASX growth shares to buy now
• Share price opportunities to buy this week
• 4 exciting small cap ASX tech shares to watch
• 3 small cap ASX shares I’d buy with $1,000
• Why Brainchip and these ASX shares just surged to new highs

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 and recommends BIGTINCAN FPO. The Motley Fool Australia has recommended BIGTINCAN 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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It was another night to forget for the Nasdaq on Tuesday.

U.S. investors returned from the Labor Day holiday and continued to take profit on the famous tech-focused index.

This led to the Nasdaq starting the shortened week with a disappointing 4.1% decline, which means it is now down 10% in the space of the week.

Someone that isn’t panicking is outspoken Barstool Sports founder and captain of stock-market ‘retail bros’, Dave Portnoy.

According to MarketWatch, Mr Portnoy has become the face of the fervour for speculative investing following the COVID-19 pandemic. He is part of a new breed of investors known as retail bros, which believe that stocks only move upwards.

Well that certainly wasn’t the case overnight, with Mr Portnoy acknowledging that he had been hit hard by falling stocks. Though, he doesn’t appear fazed by the pullback.

Commenting on the decline overnight on Twitter, Mr Portnoy said: “Down $700k and cool as the other side of the pillow.”

“It’s ugly out there but this is when the suits want you to panic. I won’t,” he added.

Should you be panicking?

While I would urge you to resist the temptation to trade stocks like Portnoy and instead focus on the long term, I would agree that you shouldn’t panic right now.

Given the strong gains that the Nasdaq index has made this year, it was inevitable that profit taking was going to happen sooner or later.

While this is disappointing, due to the quality of the companies on the index and their positive long term outlooks, I’m confident that it will rebound again in due course and eventually start printing new highs again.

In light of this, I think buying the BetaShares Nasdaq 100 ETF (ASX: NDQ) with a long term view could prove to be a smart move after this recent pullback. Though, you might want to wait for the dust to settle on this selloff before jumping in.

More reading

• 2 ASX shares I would buy for both growth and income today
• Here’s why I think ASX investors should buy these international ETFs
• Afterpay and Brainchip were among the most traded shares on the ASX last week
• New to investing? ASX growth shares to buy now
• I love volatile ASX share market days like today

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 BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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 Xero Limited (ASX: XRO) share price has been surging in 2020. However, the recent tech rout has seen shares in the accounting software group fall lower.

So, is now a good time to buy into the ASX tech share for a cheap price?

What does Xero do?

Xero is a New Zealand based tech company that provides an accounting software platform for small and medium-sized businesses.

The company was founded in 2006 and now boasts a market capitalisation of $13.6 billion on the ASX. It is also part of the ‘WAAAX’ group of top ASX tech shares.

How has the Xero share price performed?

Shares in the Kiwi tech group are up 19.7% this year compared to a 10.2% decline in the S&P/ASX 200 Index (ASX: XJO).

The Xero share price has been rocketing higher in recent years and even peaked above $100 per share. In the last 5 years, shares in the tech group have climbed 651.0% higher to cement Xero as a top growth share.

That came on the back of strong customer acquisition and retention. In fact, Xero continues to grow quickly as it looks to expand both organically and inorganically.

The company recently announced the acquisition of small business lender, Waddle, for $80 million to accelerate its growth.

Xero is also eyeing off further international growth in key offshore markets.

Why is the Xero share price under pressure

Investors are a little jumpy at the moment to say the least. Massive government stimulus and expansionary monetary policy have helped boost share prices higher.

That’s despite the coronavirus pandemic which is weighing on the global and domestic economies. However, market volatility returned late last week as United States tech stocks were hammered on Friday.

That was reflected in the Aussie market as well with the Xero share price falling 7.3% lower since Thursday’s open.

One of the issues facing investors is that these lofty valuations, including Xero’s 4,437.5 price-to-earnings (P/E) ratio, are based on future growth.

That’s hard to value at the moment but no investor wants to bail and miss out on potential gains.

Is now a good time to buy?

The Xero share price is not a great bargain on a relative value basis. When times are tough, I think ASX dividend shares can provide some comfort.

It’s a tough market out there right now and I think the long-term growth story is still good for Xero. If I’m buying and holding for decades ahead, then I think it’s never a bad time to buy a portfolio company.

More reading

• 3 high quality ASX shares for smart investors to buy today
• 3 ASX high-growth ETFs growth investors can’t ignore
• A practical guide on how to invest in ASX shares
• 5 ASX shares I will never sell
• New to investing? More ASX growth shares to buy now

Ken Hall 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 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.

The post Is the Xero (ASX:XRO) share price a cheap buy? appeared first on Motley Fool Australia.

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Wall Street was a sea of red overnight with heavy declines being seen across the board. One stock that stood out with a particularly significant decline was market darling Tesla Motors.

The Tesla share price dropped a massive 21% to finish the session at US$330.21. This was its largest single-day loss in its history.

Though, it is worth noting that the electric vehicle manufacturer’s shares are still up an incredible 284% since the start of the year.

Why did the Tesla share price crash lower?

U.S. investors were taking profit in the tech sector again on Tuesday, leading to the Nasdaq index falling a sizeable 4.1%. Given how high the Tesla share price has climbed in 2020, it isn’t at all surprising to see its shares fall more than most.

But it wasn’t just that weighing on the Tesla share price.

Investors had been expecting the company to be included in the illustrious S&P 500 index at the next rebalance. However, to the surprise of many, Tesla was snubbed by S&P in favour of online retailer Etsy, automatic test equipment company Teradyne, and medical technology firm Catalent.

Ben Kallo from Baird told Bloomberg that the decision to not add Tesla to the index was a “relatively surprising development.”

With an estimated US$4.5 trillion of assets indexed to the S&P 500, he felt that its “shares were reflecting expectations for substantial passive inflows.”

“We think the stock could be under pressure following the delay of S&P 500 inclusion, particularly from investors who bought ahead of the announcement expecting an opportunity to sell to passive funds,” he added.

Michael Dean, an analyst with Bloomberg Intelligence, suggested that Tesla’s failure to make it into the S&P 500 may be due to “question marks about the sustainability of regulatory emission credit sales which are currently underpinning earnings.”

Finally, also potentially adding to the selling pressure was news that General Motors is investing US$2 billion into rival electric vehicle company Nikola Corp. The car giant intends to partner with Nikola Corp to engineer and manufacture the latter’s Badger pickup.

More reading

• 3 ASX high-growth ETFs growth investors can’t ignore
• Why Tesla shares skyrocketed in August
• 4 things learned from Apple and Tesla stock splits
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• After the crash, is it time to buy this Nasdaq ETF?

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 Tesla. 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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Carsales.Com Ltd (ASX: CAR) shares have performed strongly in 2020. The Carsales share price has rocketed 21.3% higher this year despite a slump in the March bear market.

But for all of its success in recent times, is this ASX share a good option to buy for 2021?

Why the Carsales share price is climbing higher

The Carsales share price has been tearing higher thanks to a strong earnings result in August.

The ASX classifieds share hit a new record high after posting a 6% increase in adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA). Adjusted net profit after tax also jumped 6% to $138 million as the company paid a 25 cents per share final dividend.

The coronavirus pandemic has impacted operations but I think there are still some things to like about Carsales next year.

Can it repeat the trick in 2021?

One thing that is in Carsales’ favour is a shift in working behaviours around Australia. COVID-19 restrictions have forced a rethink of the daily commute including work from home arrangements and less public transport usage.

That increases the propensity for consumers to buy a car and potentially move further from CBD hubs.

That’s good news for classifieds businesses like Carsales which could receive an earnings boost.

One other factor is a surging Aussie dollar against the United States dollar. The vast majority of Australian cars are imported which could make them relatively more attractive with a strengthening currency.

In turn, we could see an increase in people trading up to newer models and taking advantage of the dollar increase. That’s good news for the Carsales share price if we see that persist into 2021.

On top of all that, we could also see increased turnover in the secondary market. As times get tough, many Aussies may look to sell their cars given the significant expense they represent.

I think Carsales is therefore well-placed to receive strong earnings from both the upside and downside in the Aussie economy.

Foolish takeaway

The Carsales share price has outperformed the S&P/ASX 200 Index (ASX: XJO) this year and I think it can be repeated in 2021.

More reading

• Why Redbubble and this ASX share just stormed to record highs
• How the rising Aussie dollar could drive the Carsales share price to new all-time highs
• Why the Carsales share price is a recession-proof buy
• On a day when the ASX 200 is going nowhere, these popular “coronavirus shares” are hitting record highs
• 2 of the best ETFs for investing in ASX shares

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com 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 Zip Co Ltd (ASX: Z1P) share price has fallen more than 30% since its record all-time high of $10.65 in late August. Following its exciting US-based ‘QuadPay’ acquisition, expanding geographic footprint and recent partnership with eBay, could now be the time to buy the Zip share price at a discount? 

FY20 highlights 

Zip and Afterpay Ltd (ASX: APT) have emerged at the end of FY20 as leaders in the buy now, pay later (BNPL) sector. Following the acquisition of QuadPay, Zip bolstered its position as a global BNPL player across 5 markets, with a combined annualised TTV of $3.2 billion and 4 million customers. The US opportunity is significant and QuadPay itself has seen a strong start to FY21 with US$70 million+ TTV in July, more than 30% higher than the June quarter average. 

Looking into FY21, Zip will continue to capitalise on the fast growing BNPL market opportunity. It intends on launching in the UK market in 1H21 following a pause due to COVID-19. Zip will also launch its own business BNPL and credit offering to SMEs in Australia. Producing additional products via integrated solutions to its retail partners and channels will increase the breadth of opportunity to include both shoppers and businesses. I believe a continued focus on global expansion and product innovation will see better days for the Zip share price in the medium–long term. 

Is it a buy? 

Given the recent surge in the Zip share price and BNPLs in general, it’s likely that the sector won’t deliver outstanding returns in the near term. It’s ability to push higher is likely subdued without further additional announcements. Furthermore, factors such as PayPal entering the BNPL space, the US market selloff and US elections will add further uncertainty and increase volatility. 

This isn’t the first time that we’ve seen a sharp pullback due to negative news in the BNPL space. Throughout mid–late 2019, a series of announcements including an AUSTRAC investigation, Visa’s intentions on launching a BNPL by January 2020, MasterCard acquiring a consumer financing solutions business ‘Vyze’ and speculation over regulation all resulted in sharp selloffs.  

Notwithstanding the near-term risks and challenges for the Zip share price, the business is growing strongly, is well funded and there is no shortage of opportunities. I wouldn’t be rushing to buy Zip shares, but I believe a buy opportunity will emerge once the near-term volatility cools down. 

More reading

• 3 ASX tech shares to buy for the long term after the Nasdaq selloff
• 5 things to watch on the ASX 200 on Wednesday
• How I’d turn $5,000 into $100,000 with ASX growth shares
• 3 ASX high-growth ETFs growth investors can’t ignore
• Afterpay and Brainchip were among the most traded shares on the ASX last week

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 ZIPCOLTD FPO. 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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The Wesfarmers Ltd (ASX: WES) share price has outperformed in 2020, but what are its prospects in the short to medium term?

What does Wesfarmers do?

Wesfarmers is a Perth-based conglomerate with a diversified portfolio of operations.

The company has interests in retail including home improvement, general merchandise and office supplies. Its well known retail brands include Bunnings, Officeworks, Target and Kmart. Wesfarmers also has an industrials segment with exposure to chemicals, energy, fertilisers and safety products.

The Wesfarmers share price is up 11.5% in 2020 to be strongly outperforming the S&P/ASX 200 Index (ASX: XJO).

The conglomerate has a market capitalisation of $52.4 billion with a 3.3% dividend yield right now.

What is there to like about the Wesfarmers share price?

Despite the challenges arising from the coronavirus pandemic, the Wesfarmers share price is rocketing higher.

That’s good news for shareholders and I think the company’s diversification has been a strong factor.

While some business segments have struggled, demand for home improvement products has surged during the recent lockdown periods.

That means while some units may underperform, the balanced exposure across the broader portfolio has been good for earnings.

I also like that Wesfarmers is currently sitting on a large pile of cash. That has been accumulated from recent sales including another of its stakes in Coles Group Ltd (ASX: COL) for $1.1 billion.

Normally, I’d be concerned about the cash drag on portfolio performance. However, in the current times, that cash could be a very useful tool.

It means the company’s balance sheet is intact and provides operational flexibility. It could also mean Wesfarmers pays a special dividend or looks to snap up undervalued companies for its portfolio.

What are the potential downsides?

One concern I have about the Wesfarmers share price is the conglomerate discount. This is a phenomenon where conglomerates trade lower than specialised businesses as investors dislike the diversification within the business.

For instance, I could choose to diversify my own portfolio without the company doing it for me.

The ongoing COVID-19 restrictions, particularly in Victoria, are also of concern for certain business arms like retail.

Looking ahead, another challenge is finding ways to continue growing and innovating to deliver more shareholder value.

Is the Wesfarmers share price a good buy?

The Wesfarmers share price has been a strong performer in 2020. I think the strong cash balance and low-interest rates could see a buying spree from the conglomerate next year.

It could be a touch overvalued right now given the current market, but I wouldn’t write off Wesfarmers as a good dividend share just yet.

More reading

• New to investing? Here are 5 ASX dividend shares to buy now
• More radical action from RBA likely after Victoria’s extends harsh lockdown
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• 4 ASX shares I’m looking to buy today
• Why a recession shouldn’t matter for the ASX share market

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. 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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Underneath the rhetoric and bluster of global tensions, there is a vastly different story unfolding. In recent months, China has moved away from Saudi Arabian oil in preference for supplies from the United States. This is part of a demand shock that has seen Saudi Arabia cut its official price for oil. This is just the most recent event to have a negative impact on oil and gas ASX shares. Moreover, within the LNG sector, PetroChina has called for meetings with its suppliers to renegotiate prices. 

In many cases, the relationship between markets and the economy is tenuous at best. However, in the resources industries, there is nearly always a direct link.

A permanent change in prices?

In recent months, China has been importing record levels of crude to take advantage of historically low prices. This resulted in record purchasing of cheap US cargoes in May, arriving in June and July. Meanwhile, Saudi exports to the US hit their lowest level in more than three decades in August. In response to this collapse in demand, the Saudi Arabian oil giant, Aramco, has cut its oil prices to a discount against the benchmark. 

In the LNG import market, the big player is PetroChina. It has recently revealed losses in its gas importing facility over many years. As a result, it is squeezing suppliers to curb costs. In March, the company cancelled contracts with Asian exporters and from Qatar and ASX shares. LNG demand has fallen not only due to coronavirus restrictions, but also due to a colder than expected summer in the northern hemisphere.

In addition, Joe M. Kang, President of the International Gas Union, noted in the institute’s 2020 report; 

…70.8 MTPA of liquefaction capacity was sanctioned, and 41.8 MTPA in capacity was brought on-stream in 2019, mostly from Russia, Australia and the US. A huge wave of liquefaction capacity is currently still in pre-Final Investment Decision stages, totalling 907.4 MTPA with most of this capacity in the US and Canada, and a significant proportion in Africa and the Middle East (93.3 MTPA each)

ASX shares impacted

Against this backdrop of falling demand, rising output and the glut in oil prices, the future doesn’t look great for oil and gas companies in Australia. While oil prices may recover in the near future, the LNG price may be permanently lower until supply is cut back significantly. This has some pretty big implications for oil and gas ASX shares. 

First, if you are holding these shares waiting for them to return to their previous levels, in my view, you shouldn’t be. I do not believe they are going to return to previous levels any time soon. Second, if you are investing in them for the first time, then cast a wary eye over them.

Woodside Petroleum Limited (ASX: WPL)

As our largest oil and gas ASX share, the Woodside share price is still down by 44.3% in year-to-date trading. This is at a price-to-earnings (P/E) ratio of 27.95.  Of course, this is from a very low level of earnings due to the pandemic. For the share price to climb to its level on 1 January, it would have to rise by approximately 80%.

Nonetheless, if you are buying into the share price for the first time today, then there is a good chance of moderate share price rises over the next 2 – 3 years. Personally, I find it expensive for a capital intensive company. However, it has demonstrated a very disciplined approach to reducing costs while maintaining risk and workforce safety levels. It is also continuing to expand its production base through its recent move on the Lukoil Upstream Senegal BV project.

Origin Energy Ltd (ASX: ORG)

When it comes to ASX energy shares, I think Origin Energy is the best of the bunch. The company owns 37.5% of Australia Pacific LNG (APLNG). However, it is the retail sales end of the business that interests me the most. Origin is the country’s largest gas retailer.

Furthermore, this ASX share acquired 20% of United Kingdom energy retailer Octopus Energy for $507 million. This strategic partnership also includes an Australian license for the software product Kraken. Moreover, the deal will see Origin exclude any further licenses in Australia. Industry feedback indicates the software will provide Origin with a ‘radical improvement’ in customer experience.

Origin has already reduced costs significantly and permanently, and is, I believe, well positioned for future growth. The Origin share price is currently selling at a P/E ratio of 11.7, with a trailing 12 month dividend yield of 4.9%.

Foolish takeaway

As a gas retailer, Origin has the defensive characteristics of a utility ASX share. Its retail activities operate in a regulated market, therefore there is a level of predictability to its earnings. I think at the current Origin share price of $5.10, at the time of writing, this is a good share to own for long-term growth and income. Woodside, on the other hand, is a good company but still expensive. The market appears to still expect high growth which is going to prove harder for it in the medium term. 

As stated above, if this is your first acquisition of these ASX shares, then I’d recommend buying them based on today’s performance and value. I think they are very unlikely to reach their previous highs anytime soon. 

More reading

• 5 things to watch on the ASX 200 on Wednesday
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week

Motley Fool contributor Daryl Mather 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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The Australian share market was on form on Tuesday and stormed notably higher again.

While a good number of shares climbed higher with the market, a few climbed more than most.

In fact, some climbed so much they reached new highs. Two which did exactly this are listed below. Here’s why they are on fire right now:

BrainChip Holdings Ltd (ASX: BRN)

The BrainChip share price rocketed to a record high of 78 cents on Tuesday. Investors have been buying the artificial intelligence technology company’s shares after it announced a collaboration with VORAGO Technologies at the start of the month. This collaboration could prove to be a very important one for BrainChip as it is intended to support a Phase 1 NASA program for a neuromorphic processor that meets spaceflight requirements.

Management believes its Akida neuromorphic processor is uniquely suited for spaceflight and aerospace applications. The device is a complete neural processor and does not require an external CPU, memory, or Deep Learning Accelerator. While I think BrainChip has some exciting technology, it still has a lot to prove. So with a market capitalisation of over $1.1 billion, I would suggest investors approach with caution.

Recce Pharmaceuticals Ltd (ASX: RCE)

The Recce share price stormed to a record high of $1.88 yesterday. Investors were fighting to get hold of the biotechnology company’s shares after it provided an update on its international COVID-19 in vitro studies being undertaken by Path BioAnalytics and the University of Tennessee’s Health Science Centre.

That update revealed that its Recce 327 (R327) and Recce 529 (R529) compounds have shown concentration-dependent reductions in the COVID-19 virus in an in-vitro study using organoids made from human airway epithelial cells. In light of this, researchers have recommended that the company advance research of both R327 and R529. Although this is very promising, management warned investors not to get too excited just yet. It commented: “Whilst Recce is delighted by the results, further testing must be completed before either (or both) compounds may be deemed safe or effective as a treatment of SARS-CoV-2.”

More reading

• How I’d turn $5,000 into $100,000 with ASX growth shares
• Why the Brainchip (ASX:BRN) share price soared 30% today
• Recce Pharmaceuticals (ASX:RCE) rockets to record high on COVID-19 update
• Afterpay and Brainchip were among the most traded shares on the ASX last week
• ASX All Technology Index swells with new additions

Motley Fool contributor James Mickleboro 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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There are some ASX shares that are really top quality picks for growth in my opinion.

If you’re going to invest into the share market I think you should either go for a great exchange-traded fund (ETF), a great fund manager or quality ASX shares.

I don’t think many ASX blue chips are worth investing in because they offer low growth potential. Names like Westpac Banking Corp (ASX: WBC) and Telstra Corporation Ltd (ASX: TLS) don’t appeal to me.

However, businesses with good growth potential could be great opportunities. That’s why, if I had $2,000, I’d be very happy to invest in these two ASX shares:

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is a digital giving business. It facilitates electronic donations to not-for-profit organisations such as churches. It is the large and medium US church sector that is driving Pushpay higher.

The ASX share is seeing enormous growth as more people donate to their church digitally rather than with cash. Pushpay gets a small slice of this donation. But it’s a huge potential opportunity. Pushpay is aiming for annual revenue of US$1 billion over the long-term. In FY20 it grew its revenue by 32% to ‘just’ US$129.8 million, so there’s a long way to go.  

One of the most exciting things about Pushpay is how scalable the business seems to be. Adding US$31.4 million of revenue to the business over FY20 saw the gross profit margin increase from 60% to 65%. That’s a big increase in just one year. I’m not sure what the gross profit margin can be when it gets to US$250 million of revenue or US$300 million, but it seems it can go a lot higher.

The higher the gross profit margin the more revenue falls to the bottom line. The ASX share is aiming to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) in FY21 to US$50 million.

COVID-19 is causing a lot of pain around the world, but it’s bringing forward the adoption of Pushpay. Before today’s (likely negative) price movement, the Pushpay share price is valued at under 32x FY22’s estimated earnings.

City Chic Collective Ltd (ASX: CCX)

City Chic is another ASX share with global growth aspirations.

The core City Chic business is very attractive. It has a large domestic store network and it has various partnerships in the northern hemisphere to sell products in North America and Europe. City Chic also has effective websites to sell its products.

City Chic has recently been acquiring distressed American competitors and turning them into online-only operations. This means the ASX share bought them at a cheap price, it keeps most of the client base and it lowers annual costs by closing the stores.

This isn’t a typical Australian retail share. In FY20 it saw 65% of sales coming from online and 42% of global sales were from the northern hemisphere. This is good earnings diversification and City Chic offers plenty of growth. The northern hemisphere has a huge addressable market compared to Australia.

City Chic’s recent US acquisitions of Avenue and Hips & Curves were smart. If it acquires Catherines then that could be another clever buy.

The ASX share could become a world leader in plus-size apparel for women if it can continue on its growth trajectory. In FY20 it grew sales by 31% to $194.5 million despite all of the COVID-19 difficulties.

I think that City Chic has a long growth runway, particularly with its powerful ecommerce offering. Before today’s (likely negative) price movement, the City Chic share price is valued at under 23x FY22’s estimated earnings.

Foolish takeaway

I really like both of these ASX growth shares for the long-term. I’d be very happy to invest $1,000 into each of them. Pushpay seems very scalable, so I’d buy it first – particularly if its share price falls further over the coming days and weeks.

More reading

• 3 ASX shares I’d buy to quickly add diversification
• 3 unstoppable ASX shares to invest $2,000 into right now
• Where to invest $500 into ASX shares right now
• Here’s how to make a $1 million portfolio by investing $1,000 a month
• 3 unstoppable ASX shares to hold for the next decade

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 PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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