The Bravura Solutions Ltd (ASX: BVS) share price will be one to watch on Monday after the announcement of a new acquisition.

What did Bravura announce?

This morning Bravura announced the acquisition of Delta Financial Systems for a total consideration of up to 23 million pounds (A$41.5 million). This will be funded from its existing cash reserves.

According to the release, Delta is a UK-based software company that provides technology to power complex pensions administration in the UK market. Its highly regarded products support the administration of self-invested personal pensions (SIPPs) and Small Self-Administered Schemes (SSASs). These include the full range of complex client drawdown options available under the pension freedoms legislation.

Delta’s technology currently supports the needs of more than 30 UK clients and generated pro forma revenue of 6 million pounds in FY 2020. It is forecast to achieve revenue growth in the range of 20% to 30% this year, with margins similar to Bravura’s Wealth Management segment.

In light of this, the acquisition is expected to be earnings per share accretive in FY 2021.

Why acquire Delta?

Management notes that the acquisition broadens its product suite. Furthermore, it feels Delta’s products represent a natural extension to Bravura’s core Sonata offering and expand its ecosystem of products and services. The acquisition will also provide an opportunity to cross-sell Bravura’s other products to Delta’s client base.

The company’s Chief Executive Officer, Tony Klim, commented: “We are delighted that Delta is joining Bravura. Both businesses have complementary products that together, provide a compelling offering to support the mission-critical operations of wealth management firms in the UK.”

Delta’s Chief Executive Officer, Michael Power, is looking forward to working with Bravura.

He said “Bravura is a leader in the UK wealth management marketplace and Delta’s products sit perfectly alongside Bravura’s offering. The Delta management team look forward to working together with Bravura to deliver outstanding service to both Bravura’s clients and Delta’s clients.”

Bravura expects the acquisition to complete by the end of October 2020, subject to regulatory approvals.

More reading

• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• These were the worst performing shares on the ASX 200 last week
• 2 growing ASX dividend shares to buy before it’s too late
• 2 great value ASX dividend shares to buy right now
• Where should you invest your Wesfarmers (ASX:WES) dividends?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions 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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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) remains the most shorted share on the ASX by some distance despite a reduction in its short interest to 15.2%. The online travel agent’s shares have fallen heavily this year because of the pandemic. Short sellers don’t appear to believe the declines are over.
• Speedcast International Ltd (ASX: SDA) has short interest of 10.6%. This embattled communications satellite technology provider’s shares have been suspended for most of 2020 whilst it undertakes a recapitalisation.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest fall to 10.35%. Last month the department store operator released its full year results and revealed a 41.6% decline in EBITDA to $305.3 million for FY 2020. It appears as though short sellers expect a similarly weak result in FY 2021.
• InvoCare Limited (ASX: IVC) has short interest of 10.1%, which is up slightly week on week. Short sellers may believe that social distancing initiatives will weigh on this funerals company’s performance in 2020 and 2021.
• Galaxy Resources Limited (ASX: GXY) has seen its short interest rise to 9.2%. Concerns over Tesla’s plans to mine its own battery materials has been weighing on Australian lithium miners in recent weeks.
• Mesoblast Limited (ASX: MSB) has entered the top 10 with short interest of 8.6%. The biotech company’s short interest has surged after the US FDA didn’t approve its remestemcel-L application for steroid-refractory acute graft versus host disease (SR-aGVHD). Instead, the company must undertake further trials to prove its efficacy.
• Inghams Group Ltd (ASX: ING) has 8.6% of its shares held short, which is up slightly week on week once again. This poultry producer has been struggling in 2020 due to higher input costs and an unfavourable shift in its sales mix.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest rise to 8.1%. This regional bank will be releasing its full year results later this week. Judging by its high level of short interest, short sellers are not expecting a strong result.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has seen its short interest fall once again to 7.5%. Short sellers have been exiting their positions since the biopharmaceutical company announced plans to extend the use of its SCENESSE product. It is looking to treat xeroderma pigmentosum with it as well.
• Freedom Foods Group Ltd (ASX: FNP) continues to have short interest of 6.95%. This diversified food company’s shares are scheduled to return to trade at the end of the month following a lengthy suspension.

More reading

• Why it is important to diversify your ASX portfolio and how you can do it
• 5 things to watch on the ASX 200 next week
• A2 Milk and Mesoblast were among the most traded shares on the ASX last week
• Why IAG, Mayne Pharma, Mesoblast, & Temple & Webster shares are tumbling lower
• ASX 200 jumps 2.6%, big 4 banks surge

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Freedom Foods Group Limited and InvoCare 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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At the current A2 Milk Company Ltd (ASX: A2M) share price I think it looks like a great buy this week.

The A2 Milk share price has dropped 16.4% since 25 September 2020. It has fallen by 28% since 30 July 2020.

When a great business falls by that much I think it can open up a really good buying opportunity.

What has been going on?

When A2 Milk delivered its FY20 result the company noted that there was continuing uncertainty because of COVID-19. It warned that were was the potential for a moderation of economic activity. A2 Milk said there could be an impact on consumer behaviour in its core markets, as well as participants within the supply chain, most notably in China.

The A2 Milk share price has been dropping from its height since then.

A couple of weeks A2 Milk gave an updated FY21 outlook. It said that it has seen flow-on effects from pantry destocking continuing into FY21 and disruptions to the corporate daigou and reseller channels. There has been reduced tourism from China and international student numbers, particularly due to the stage 4 lockdown in Melbourne.

A2 Milk is expecting infant formula sales in Australia and New Zealand to continue to be disrupted for the rest of the first half of FY21 because daigou represent a significant portion of sales. That’s why the company is expected domestic revenue to be materially below expectations in the first half.

In the first half of FY21, revenue is expected to be between NZ$725 million and NZ$775 million. That would be a revenue drop of 4% to 10%. A prediction of a revenue decline is quite disappointing.

However, A2 Milk is still expecting revenue growth for the full year. It provided FY21 revenue guidance of NZ$1.8 billion to NZ$1.9 billion. That would be annual growth of 4% to 10%.

But the market was expecting more, which is why the A2 Milk share price is down.

Why I think the A2 Milk share price is a buy

A2 Milk is one of the best businesses on the ASX. It has a growing distribution network, particularly in the US and China.

In the recent sales update, A2 Milk said that the underlying growth of its China infant formula brand is strong. Consumers in China still want A2 Milk products, it’s just taking a bit of time to get the products to them.

I don’t think a business should be sold down because of short-term issues. The Melbourne stage 4 lockdowns are getting close to being ended, which should help things. A2 Milk is growing its distribution to help direct sales in the countries that it’s selling in.

Remember, A2 Milk is still rapidly growing the number of stores that its products are being sold in throughout China and the US. Indeed, thousands of stores are getting added every year.

The fact that A2 Milk continues to grow its market share is compelling for long-term growth because it can take a while to win over new customers.

A2 Milk is now starting to sell products in Canada through its agreement with Agrifoods. Canada has a bigger population than Australia and New Zealand combined, so it’s a sizeable market for it to expand into. Further geographical growth is exciting in my opinion. 

Foolish takeaway

The A2 Milk share price looks attractively cheap to me. It’s trading at just 23x FY23’s estimated earnings. It looks even cheaper when you include the large cash balance. Comparing that valuation to other popular ASX growth shares makes A2 Milk look like a much better buy in my opinion. I’d be happy to buy A2 Milk shares this week.

More reading

• How vulnerable is the A2 Milk share price amid the trade stoush?
• Why I would buy Afterpay (ASX:APT) and these ASX growth shares
• 2 top ASX 200 blue chip shares worth a spot in your portfolio
• Why a2 Milk, Afterpay, ARB, & SEEK shares are pushing higher today
• A2 Milk and Mesoblast were among the most traded shares on the ASX last week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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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One side of the technology sector which I think is a great place to invest is the payments industry.

Due to the proliferation of smart phones, changing consumer habits, and the meteoric rise of online shopping, a number of companies have been disrupting the industry.

Two payments companies that have really caught the eye in recent years are listed below. Here’s why I think they could be great long-term investment options:

Afterpay Ltd (ASX: APT)

The first payments company to look at is Afterpay. I believe it could be a great long term option for investors due to its leadership position in a buy now pay later industry growing very quickly thanks to the increasing popularity of the payment method with both consumers and merchants. Another big positive is the ongoing shift to online shopping which has been accelerated by the pandemic. 

In light of these factors, I’m expecting another very strong performance in FY 2021. After which, I expect Afterpay to continue its positive growth trajectory over the coming years due to its international expansion. The company has recently entered the European market, has its eyes on a potential expansion in Asia, and moved in-store in the $5 trillion United States market. Overall, I continue to believe Afterpay has the potential to become a payments giant in the future.

Pushpay Holdings Group Ltd (ASX: PPH)

Gone are the days of buckets being passed around in churches by pastors for donations. Today, Pushpay’s donor management platform makes donating a seamless experience for both the giver and the receiver. Unsurprisingly, this and its community engagement solution have been well-received by churches in the United States and led to a surge in customer numbers over the last few years.

This has underpinned exceptionally strong sales and earnings growth. Pleasingly, more of the same is expected in FY 2021, with Pushpay expecting to more than double its operating earnings once again. The even better news is that this growth isn’t expected to end any time soon. Pushpay is aiming to capture a 50% share of the medium to large church market in the future. This represents a US$1 billion opportunity, which is almost 7 times greater than the revenue it generated in FY 2020.

More reading

• 5 things to watch on the ASX 200 on Monday
• 3 excellent ASX growth shares to invest $3,000 immediately
• 5 things to watch on the ASX 200 next week
• 3 five-star ASX shares to buy next week
• This is where I’d invest $1,000 right now into ASX shares

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 owns shares of AFTERPAY T FPO. 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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On Friday the S&P/ASX 200 Index (ASX: XJO) ended an incredible week with the smallest of gains. The benchmark index rose slightly to 6,102.2 points.

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

ASX 200 expected to edge lower.

The Australian share market looks set to start the week in a subdued fashion on Monday. According to the latest SPI futures, the ASX 200 is expected to fall 5 points or 0.1% at the open. This is despite Wall Street ending the week positively, with the Dow Jones rising 0.6%, the S&P 500 climbing 0.9%, and the Nasdaq index storming 1.4% higher.

Gold price surges higher.

It looks set to be a great day of trade for gold miners including Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) on Monday. According to CNBC, the spot gold price surged 1.65% to US$1,926.20 an ounce on Friday night. This was driven by a weakening U.S. dollar and hopes that a U.S. stimulus deal will soon be reached. The silver price was even stronger and jumped 5.2%.

Coles outage.

The Coles Group Ltd (ASX: COL) share price could be one to watch after the supermarket giant was forced to shut its stores on Friday afternoon after suffering from a major outage. The company advised that a technical issue meant it was unable to process transactions for a period of time. This led to customers having to dump their trolleys and leave empty handed.

Tech shares on watch.

Tech shares such as Afterpay Ltd (ASX: APT) and Zip Co Limited (ASX: Z1P) could start the week on a high after their U.S. peers stormed higher on Friday night. The tech-heavy Nasdaq index finished the week with a sizeable 1.4% gain. The local tech sector has a habit of following the lead of the Nasdaq index.

Oil prices sink lower.

Energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could come under pressure today after oil prices dropped lower on Friday night. According to Bloomberg, the WTI crude oil price fell 1.4% to US$40.60 a barrel and the Brent crude oil price dropped 1.15% to US$42.85 a barrel. News that an oil worker strike in Norway ended weighed on prices. Though, this couldn’t stop oil from recording a gain of 9% for the week.

More reading

• 2 exciting ASX payments shares to buy
• 3 excellent ASX growth shares to invest $3,000 immediately
• Why I would buy these ASX dividend shares in October
• 5 things to watch on the ASX 200 next week
• These were the worst performing shares on the ASX 200 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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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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In order to maximise your potential returns and limit the damage of market shocks, I believe investors should ensure that their portfolio is diversified.

A good example of why this is important is the travel sector. If the COVID-19 pandemic had never occurred, I suspect Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) shares would have generated strong returns for investors in 2020.

However, with the pandemic coming out of nowhere and bringing global travel markets to their knees, both Flight Centre and Webjet shares are down materially this year. 

This means that if your portfolio had a high weighting to the travel sector, it would have been impacted significantly more than a balanced portfolio.

How can you diversify?

There are a number of ways to diversify your portfolio. The first is to maintain a decent sized portfolio with exposure to different industries and sectors.

A company such as Wesfarmers Ltd (ASX: WES) could be a good option as gives investors exposure to a number of industries through the one company.

But perhaps an easier way to achieve this is through exchange traded funds (ETFs). These funds give investors the option of investing in whole indices, countries, sectors, or even themes through a single investment.

But which ETFs should you buy? Listed below are two that I think would be great for diversification:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

If you don’t have meaningful exposure to the tech sector, then the BetaShares NASDAQ 100 ETF could be a great option. It gives investors access to 100 of the largest non-financial companies on the famous Nasdaq index. This includes some of the biggest tech companies in the world such as Amazon, Apple, Facebook, and Microsoft.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Another great option to consider buying the Vanguard MSCI Index International Shares ETF. This ETF is arguably as diverse as it gets. It provides investors with exposure to some of the world’s largest companies listed in major developed countries. Among its largest holdings are the likes of Amazon, Apple, Microsoft, Nestle, and Visa.

More reading

• 3 five-star ASX shares to buy next week
• How to replace your entire wage with ASX dividend shares
• Which ASX ETFs offer the most diversification?
• Brokers name 3 ASX shares to buy right now
• ASX 200 finishes 1.3% higher after federal budget

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 owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, Flight Centre Travel Group Limited, and Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re a growth investor, then you might want to take a look at the ASX shares listed below.

I believe these companies are well positioned to grow their earnings at an above-average rate for many years to come.

This could potentially lead to their shares outperforming the market over the long term.

Here’s why I would invest $3,000 into these ASX growth shares once the market reopens:

Afterpay Ltd (ASX: APT)

The first growth share to consider buying is Afterpay. Although its valuation makes it a reasonably high risk option, I believe its exceptionally strong growth potential justifies the premium its shares trade at. I think the payments company is destined for big things due to the continued success of its international expansion and the growing popularity of the payment method with consumers and retailers.

Aristocrat Leisure Limited (ASX: ALL)

Another growth share I would suggest you consider buying is Aristocrat Leisure. This gaming technology company is best known for designing and manufacturing many of the poker machines you’ll find in Crown Resorts Ltd (ASX: CWN) and countless casinos across the world. However, there is more to it than just that. Aristocrat Leisure also has a very lucrative and growing digital business which is generating significant recurring revenues from its millions of daily active users. I believe this side of the business has significant growth potential and could become the company’s biggest earner in the not so distant future. 

Cochlear Limited (ASX: COH)

A final growth share to consider buying is Cochlear. I think the hearing solutions company is a great option due to the quality of its products, its strong long term growth prospects, and high level of investment in research and development. I’m confident the latter will help maintain its leadership position and underpin solid earnings growth over the next decade and beyond. Another big positive is its sizeable market opportunity. Management estimates that less than 10% of people who would benefit from an implantable hearing solution have been treated.

More reading

• 5 things to watch on the ASX 200 next week
• Why I would invest $10,000 into these fantastic ASX shares today
• BNPL ASX shares are running hot today
• Top ASX growth shares to buy in October 2020
• Why I would buy Afterpay (ASX:APT) and these ASX growth shares

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 Cochlear Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Cochlear 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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Bargain shares could produce impressive returns over the long run. Although they face short-term risks such as Brexit and coronavirus, their low valuations suggest there is significant scope for capital growth in the 2020s.

With past recoveries from economic downturns having led to rising stock prices, the same outcome appears likely in the coming years. Furthermore, the scale of monetary policy stimulus being put in place across major economies could strengthen the outlook for many businesses that currently trade at cheap prices.

Low valuations across the stock market

The capital growth potential of bargain shares appears to be high. Although the share prices of some companies have rebounded following the stock market crash, many other businesses trade at prices that are substantially below their historic values. Investors may be significantly underestimating their capacity to survive a difficult set of trading conditions, as well as their potential to deliver improving profitability in the long run.

This may provide long-term investors with a wide range of buying opportunities today. Those businesses that are trading at low prices because of wider challenges could present particularly attractive buying opportunities. They may even be able to expand their market positions at the expense of weaker rivals. This may put them in a strong position to produce rising profitability, and share prices, in the coming years.

The past recoveries of bargain shares

Bargain shares may struggle to post capital growth in the short run due to an uncertain economic outlook. However, the past performance of the stock market suggests that a return to growth is very likely. Even after the most severe bear markets, such as the global financial crisis, indexes such as the FTSE 100 Index (FTSE: UKX) and S&P 500 Index (SP: .INX) have recovered. This has allowed them to produce annual total returns of around 8% per annum.

Therefore, this level of return seems to be very achievable during the 2020s. Certainly, some years, such as 2020 itself, may lower the average return for the decade. But on a long-term basis, the stock market has the capacity to deliver high single-digit annual returns that catalyse your financial prospects.

Stimulus packages can encourage growth

Many bargain shares recovered after their March lows due in part to the monetary policy stimulus packages announced in major economies in North America and Europe. They have had a positive impact on asset prices this year, just as they did when they were implemented following the global financial crisis over a decade ago.

In fact, a loose monetary policy led to a decade-long bull market following the 2008/09 crash. A period of low interest rates and asset repurchase programmes now looks set to remain in place in the coming years. It could have an equally positive effect on share prices, and cause a boom period that lasts throughout much of the 2020s. As such, now could be the right time to buy undervalued stocks and hold them over the next decade.

More reading

• 3 reasons why I’d buy the best bargain shares right now
• 3 top ASX shares to buy and cash in on the Federal Budget
• Is the Westpac (ASX:WBC) share price a buy?
• Would Warren Buffett buy SEEK (ASX:SEK) shares?
• Why I would buy these ASX dividend shares in October

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. 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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Buying the best bargain shares today may not deliver high returns in the short run. Risks such as coronavirus and political uncertainty in the US may contribute to further weak sentiment among investors that puts pressure on stock prices.

However, in the long run, today’s undervalued stocks could deliver a strong recovery. The low prices of some high-quality businesses suggest that equities offer superior return potential than other assets. As such, now could be the right time to add attractive stocks to your portfolio.

High-quality stocks are cheap

Some of the best bargain shares may be those businesses that are priced at low levels due to weak investor sentiment towards the wider stock market, or towards the sector in which they operate.

For example, the retail sector may be facing a very difficult near-term outlook as a result of weak consumer sentiment. However, this does not mean that all retailers will produce poor results in the coming months. There may be some companies with wider economic moats that are able to outperform their peers.

Therefore, there may be opportunities to buy bargain shares due to weak investor sentiment towards a specific sector or the stock market in general. Over time, undervalued stocks that produce relatively impressive results can command higher valuations that lead to appealing investment returns.

The recovery potential of bargain shares

Bargain shares offer strong recovery potential over the long run. The past performance of the stock market shows that it has produced high single-digit annual returns over recent decades. It has also recovered from every previous bear market. As such, while the near-term prospects for many stocks are currently uncertain, a diverse portfolio of companies is likely to deliver impressive returns.

Historically, the best buying opportunities have often appeared when investor sentiment is weak. At such times, a larger number of companies often trade at prices that do not fully reflect their long-term growth potential. As such, now could be the right time to buy a selection of stocks ahead of a very likely recovery over the long run.

A lack of opportunities elsewhere

The prospect of buying bargain shares is made more appealing due to the lack of return potential available elsewhere. Assets such as cash and bonds are likely to offer very low returns over the medium term due to low interest rates. High house prices mean that property investment may be disappointing from a return perspective. Meanwhile, gold’s high price may also mean that investors have factored in a tough period for the economy.

Therefore, building a portfolio of undervalued shares may prove to be a relatively profitable move. It may not lead to high returns in the short run. However, it has been a sound strategy over many years that could lead to an improvement in your financial situation.

More reading

• Why today’s bargain shares can grow rapidly during the 2020s
• 3 top ASX shares to buy and cash in on the Federal Budget
• Is the Westpac (ASX:WBC) share price a buy?
• Would Warren Buffett buy SEEK (ASX:SEK) shares?
• Why I would buy these ASX dividend shares in October

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. 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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Tuesday’s Federal Budget contained some big surprises but also some good news for ASX shares. There were tax cuts, wage subsidies and increased fiscal spending to try and keep many sectors of the economy ticking along.

Investors might be wondering how they can make the most of the Federal Budget through their investing next year. Here are a few of my favourite ASX shares to buy to take advantage of the latest government outlook.

1. SEEK Limited (ASX: SEK)

The Seek share price has been rocketing higher since Tuesday as investors pile into the employment classifieds business.

A weak economy is not good for Seek as it generates earnings from job listings and advertising. That’s the main reason why the Seek share price was hammered in the March bear market.

However, investors have a reason to be bullish on the ASX share given strong incentives to boost employment levels. A quick economic rebound could put Seek shares back in the buy zone in early 2021.

2. Woolworths Group Ltd (ASX: WOW)

Woolworths is one of Australia’s largest companies with strong ties to essential and discretionary retail.

That means the Government’s $74 billion JobMaker scheme could be a real winner for investors. The ASX conglomerate share has been climbing since Tuesday thanks largely to the large wage subsidies on offer for hiring unemployed youth.

That could see Woolworths slash its employment costs across its major businesses that often hire young workers such as Bunnings and its Woolworths Supermarkets business.

If that kicks in soon, we could see Woolworths post a handy dividend in FY21 on the back of stronger earnings.

3. Lendlease Group (ASX: LLC)

On top of the subsidies and employment boosters, the Federal Budget earmarked $10 billion of additional funds for infrastructure and construction.

That’s good news for Lendlease which is a leading player in that sector and already has several major government contracts.

The ASX infrastructure share has been smashed in 2020 but this could be the start of a turnaround. Increased infrastructure spending could benefit Lendlease and lead to stronger earnings in the years ahead.

Foolish takeaway

These are just a few of my favourite ASX shares that I think can outperform thanks to Tuesday’s Federal Budget announcement.

More reading

• Would Warren Buffett buy SEEK (ASX:SEK) shares?
• 4 high quality ASX blue chip shares to buy right now
• Buying and holding these ASX shares could be the key to becoming wealthy
• Budget 2020: Why the Woolworths (ASX:WOW) share price can soar
• Why I think the Seek (ASX:SEK) share price is primed to surge in 2021

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

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