I recently bought an ASX share for my portfolio.

It’s something that I’ve regularly written about and offers exposure to something quite different to many other ASX investments.

I’m talking about WAM Microcap Limited (ASX: WMI).

Almost every investor knows what’s going on with shares like National Australia Bank Ltd (ASX: NAB), Afterpay Ltd (ASX: APT) and Telstra Corporation Ltd (ASX: TLS).

It’s when you start going down the market capitalisation list that you start finding those unknown opportunities. Not many people are looking at shares with market caps under $300 million. That’s exactly the shares that listed investment company (LIC) WAM Microcap looks at.

Regular investors can’t be expected to know about every small cap ASX share. I believe it can be a smart idea to delegate some of that share picking to one of the best small cap investment teams in Australia, Wilson Asset Management.

How has WAM Microcap performed?

At the end of April 2020, WAM Microcap’s gross investment portfolio performance was 11.1% per annum since inception in June 2017. But of course, that includes the 21.4% drop over the previous three months from the coronavirus sell-off. But WAM Microcap outperformed its benchmark by 7.7% per annum in that time.

At the end of January 2020 its gross investment performance was 22.8% per annum since inception.

So why did I buy this ASX share?

The ASX share holds dozens of positions, so it doesn’t have too much risk from any one position. Indeed, it actually offers a lot of diversification.

The main thing to worry about, apart from potentially poor returns, is that small cap values can get smashed during times like this when market liquidity disappears. Which is exactly what happened.

But it’s this market selloff that presents the best times to buy. We’ve already seen huge share price recoveries from shares like EML Payments Ltd (ASX: EML) and City Chic Collective Ltd (ASX: CCX).

It’s not exactly a cyclical share, but there are going to be moments where it makes a lot more sense to buy this ASX share small cap LIC compared other times. Despite the huge recovery of the WAM Microcap share price from 23 March 2020, it’s still materially under the pre-crash high of $1.58 (though it has paid a dividend since then).

The dividend

The dividend of WAM Microcap is one of the best features. It has been increasing its ordinary dividend over the past few years, whilst also paying special dividends. Using an annualised dividend of 6 cents per share, it has a grossed-up dividend yield of 6.6%. A very good yield in today’s low interest era.

Foolish takeaway

I think WAM Microcap is at a fair price right now. It’s probably trading close to its net tangible asset (NTA) price, but its actual share holdings have rallied hard and aren’t as good value. There could be another market dip. I’d be very willing to buy a parcel of the ASX share and buy more the next time the market falls – whenever that is.

More reading

• ASX shares can help millennials retire before their parents
• ASX shares I’d invest $10,000 into today
• Why high yield dividend shares can be detrimental to your wealth
• Is it time to buy ASX small caps for your portfolio?

Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended 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.

The post Why I just bought this ASX share for the long-term appeared first on Motley Fool Australia.

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The WiseTech Global Ltd (ASX: WTC) share price is dropping lower on Thursday after the release of an update.

At the time of writing the logistics solutions company’s shares are down 3.5% to $21.60.

What was in WiseTech’s update?

This morning WiseTech provided the market with an update on the earnout arrangements it has for many of the bolt-on acquisitions it has made in recent years.

Earnouts are used during acquisitions to reward the sellers of a business if the acquired business goes on to achieve certain financial goals.

According to the release, it has worked collaboratively with 17 of its acquired businesses to simultaneously reduce and close-out future earnouts and replace significant cash payments with equity.

WiseTech Global Founder and CEO, Richard White, explained: “The current environment provided us with the opportunity to restructure previously agreed acquisition earnouts, ensuring we can better drive those resources, accelerate their contribution to CargoWise development, and further improve our commercial efficiency.”

“Our shared vision and alignment with our Founder MDs enabled us to close out these arrangements efficiently, remove significant contingent cash obligations and reduce future contingent liabilities. The leaders across our acquired organisations remain in the Group and are focused on delivering value for shareholders.,” he added.

What are the changes?

The company revealed that the negotiations have resulted in:

• Reduction in contingent liabilities overall from $215.5 million to $68.5 million.
• Removal of $151.5 million of future contingent cash liabilities.
• Equity issuance of $81.4 million of which $45.7 million remains escrowed for 12 months.
• The complete close-out of all future earnouts for ABM Data, CargoIT, Cargoguide, CargoSphere, CustomsMatters, DataFreight (LSI), Microlistics, Pierbridge, SmartFreight, Softcargo, SaaS Trans, Trinium, and Xware.
• The replacement of cash earnouts with equity for Cypress, Depot Systems, Forward, and SISA: part immediate equity close-out, and part future equity earnouts of $10.9 million based on product development.

The company will now review earnouts for the remaining acquisitions it has made.

In other news, WiseTech revealed that it remains on target to achieve its guidance for FY 2020.

Mr White advised: “In the current environment, our business continues to demonstrate resilience and tracks in line with our expectations.”

More reading

• Why Beach, Jumbo, ResMed, & WiseTech Global shares are dropping lower
• 1 key trait to look for with most top ASX growth shares
• The WiseTech share price has doubled since March. Too late to invest?
• Fund managers have been buying these ASX shares
• 2 top ASX tech shares with strong long-term growth potential

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. 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 WiseTech Global share price drops lower on market update appeared first on Motley Fool Australia.

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There are some great ASX shares to buy for Warren Buffett-like value investors right now. The S&P/ASX 200 Index (ASX: XJO) is down 13.60% this year and is going from bear to bull on an almost daily basis.

That volatility and market noise is good for experienced investors. Here are a few ASX shares I think even the ‘Oracle from Omaha’ couldn’t ignore at today’s prices.

3 ASX shares even Warren Buffett couldn’t ignore

There’s no doubt Buffett is one of the world’s greatest ever investors. He keeps things simple, looks for strong earnings potential and creates value through ownership.

Now, if you’re a Fool with $5,000, you won’t be able to effect great strategic change today. But what you can do is invest in undervalued ASX shares with strong earnings potential.

I like the look of CSL Limited (ASX: CSL) right now. CSL is a leading biotech group with a $130.77 billion market capitalisation. With a strong research and development pipeline, and after falling 6.38% lower in yesterday’s trade, CSL shares could be in the buy zone.

Another ASX share worth a look today is Wesfarmers Ltd (ASX: WES). Wesfarmers is a diversified conglomerate that is sitting on a big pile of cash after selling a $1.1 billion stake in Coles Group Ltd (ASX: COL).

Wesfarmers is in a strong financial position and is looking to restructure its underperforming Kmart Group segment. That could be good news for investors like Warren Buffett who like to see efficiency and strong cash flow.

Finally, I like National Australia Bank Ltd. (ASX: NAB) shares right now. NAB shares are down 23.3% this year, at the time of writing, but could bounce back as we begin to recover from the coronavirus-led economic fallout.  

Despite some regulatory headwinds and intensifying competition, I think NAB will continue to churn out dividends for shareholders in years to come.

Foolish takeaway

These are just a few of the ASX shares that could be undervalued right now. Warren Buffett has proven to be a patient investor who isn’t afraid to sit and wait for the right opportunity.

More reading

• 1 key trait to look for with most top ASX growth shares
• What would $50,000 invested in the ASX 200 a decade ago be worth today?
• Is the Transurban share price a buy today?
• Should you ever buy ASX shares at an all-time high?
• 3 quality ASX dividend shares for income investors to buy today

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 CSL Ltd. 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.

The post 3 ASX shares Warren Buffett couldn’t ignore today appeared first on Motley Fool Australia.

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There are plenty of things to look out for with top ASX growth shares.

What are the profit margins going to look like in a few years? How good are the management? Is the balance sheet strong enough? How good are the competition? I think these are all important factors. Another thing you should think about at the moment: how will the coronavirus affect the business?

But I believe there’s one key factor you shouldn’t forget about with top ASX growth shares:

Does the top ASX growth share offer international growth?

I think that international growth is very important for generating excellent long-term returns.

At some point a business will stop growing. How long is that growth runway? Australia is a wealthy country that can support sizeable businesses, particularly if they’re the market leader in that industry like Commonwealth Bank of Australia (ASX: CBA), Woolworths Group Ltd (ASX: WOW) or InvoCare Limited (ASX: IVC). 

But that top ASX growth share will hit a ceiling if it’s only servicing a region/country with 25 million people. If you are able to sell your product or service to extra countries then the company will have much more growth potential. New Zealand is usually the natural first choice because it’s a similar market to Australia. Plenty of shares on the ASX have done this.

What are some examples?

Look at how much growth A2 Milk Company Ltd (ASX: A2M) has unlocked because of Asia and the USA. Bubs Australia Ltd (ASX: BUB) is another that I’ve got my eyes on for international growth. Pushpay Holdings Ltd (ASX: PPH) is winning in the huge US market.

Tech shares like Xero Limited (ASX: XRO), Afterpay Ltd (ASX: APT) and WiseTech Global Ltd (ASX: WTC) are partially valued so highly because they are expanding globally.

But beware. Sometimes international growth can be a poisoned chalice. Not every top ASX growth share will be successful at expanding overseas. Look what happened when Wesfarmers Ltd (ASX: WES) tried to take Bunnings to the UK.

I’m very interested in Bubs and Pushpay because of the large markets they’re trying to win in.

More reading

• 3 ASX shares Warren Buffett couldn’t ignore today
• Should you ever buy ASX shares at an all-time high?
• Have $4,000? Invest in these 4 ASX shares right now
• Is the A2 Milk Company share price in the buy zone?
• Are these exciting small cap ASX tech shares the next Afterpay?

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 BUBS AUST FPO and Xero. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk, AFTERPAY T FPO, Wesfarmers Limited, and WiseTech Global. The Motley Fool Australia has recommended BUBS AUST FPO 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.

The post 1 key trait to look for with most top ASX growth shares appeared first on Motley Fool Australia.

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If you haven’t been investing long, or haven’t started yet, I’m sure you wish you had started 10 years ago. Hopefully, in another 10 years, you won’t be wishing the same thing.

Investing in the ASX has been a great tool to build wealth over time. To show just how powerful a tool it can be, rather than examining a specific company, we’re going to look at a hypothetical case. Just how much would a $50,000 investment 10 years ago be worth today if it followed the returns of the S&P/ASX 200 Index (ASX: XJO)?

An investment in the ASX 200 

An investment 10 years ago that tracked the ASX 200 would have returned approximately 30% today. So your hypothetical $50,000 investment would now be worth $65,000. Are you feeling a little underwhelmed? Then I suggest you continue reading, because that’s not the full story.

This return is despite the ASX 200 having just surged out of the global financial crisis lows. Not to mention the index is currently sitting around 19% below its February high. However, and more importantly, this does not include the return and reinvestment of dividends, which is a significant proportion of the total return for the ASX 200.

If we also include dividend return and reinvestments from the ASX 200, we see a return of around 96% across the past decade. This means your $50,000 investment would now be worth $98,000 – a gain of $48,000. This clearly shows how important dividends are when considering the total return. It’s the reinvestment of these dividends where we see the wonder of compounding at work.

In fact, if we were to go back even further, we would get an even better idea of just how powerful the compounding effect is.

Going back 15 years, the ASX 200 with reinvested dividends has increased 172%. This size of return would turn your $50,000 into $136,000, giving you a capital gain of $86,000. That’s a significant additional gain when we only added 5 years to the time period.

To highlight the benefit of dividend return and reinvestment, the chart below covering the last 15 years of ASX 200 growth clearly shows the advantage of compounding as the return ‘gap’ widens.

Data from Investing.com. Chart by author

Can you do even better investing in ASX shares?

The above hypothetical returns are fantastic, particularly considering not much thought is required if you simply wanted to track the returns of the ASX 200. There are a number of ETFs such as BetaShares Australia 200 ETF (ASX: A200), which make this task easy. However, it is possible to do even better if you manage to choose a company or group of companies that can outperform the market over the long term. 

Even outperforming the ASX 200 by 1% or 2% each year can have a dramatic effect when these returns are compounded over a decade or two. The difference between an 8% annual return and a 10% annual return when compounded over 15 years is 100% – an 8% average return will increase your portfolio by 3.17 times and a 10% average return will increase your portfolio 4.17 times.

That means if you can consistently beat the market by 2% a year, then after 15 years your investment of $50,000 would be $50,000 better off than the market. Well worth pursuing the extra few percent I would say!

A couple of ASX shares to potentially invest in which I believe will outperform the market in the coming decade are Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Nearmap Ltd (ASX: NEA).

More reading

• 3 ASX shares Warren Buffett couldn’t ignore today
• Is the Transurban share price a buy today?
• Should you ever buy ASX shares at an all-time high?
• Have $4,000? Invest in these 4 ASX shares right now
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Michael Tonon owns shares of Nearmap Ltd. and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post What would $50,000 invested in the ASX 200 a decade ago be worth today? appeared first on Motley Fool Australia.

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