Tag: Motley Fool Australia

The Estia Health Ltd (ASX: EHE) share price is sinking lower on Monday after the release of a coronavirus update.

In late afternoon trade the aged care provider’s shares are down 7% to $1.47.

This latest decline means that the Estia Health share price has now lost 50% of its value since peaking at a 52-week high of $2.93.

What did Estia Health announce?

This morning Estia Health provided an update on the impact of the coronavirus outbreak in Victoria on its operations.

According to the release, the company has been issued with notices from the Aged Care Quality and Safety Commission in relation to COVID-19 outbreaks at its homes in Heidelberg West and Ardeer.

It also confirmed that it implemented the requirements within the notices, which relate to the monitoring and management of the outbreaks.

These requirements include not admitting new residents into the home until the Victorian Public Health Unit has declared the home cleared of COVID-19; the immediate appointment of an independent adviser to assist with ensuring the health and wellbeing of residents; and providing daily and weekly reports to the Commission on managing the outbreak.

A very challenging time.

Management commented: “This is a very challenging time for our residents and their families. We have added extra support so that families are regularly updated about their loved ones, including those residents that have been transferred to hospital. We are providing daily updates to family members on their comfort and condition; and families can access a dedicated support line for the home.”

It also advised the market that it isn’t possible to quantify the full financial impact on the company arising from the “rapidly evolving COVID-19 situation in Victoria.”

A further update is likely to be given with the release its FY 2020 full year results next month. At present this is scheduled to occur on 18 August 2020.

More reading

• ASX 200 goes up 1%, big 4 ASX banks rise

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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The COVID-19 pandemic has stunted the growth of many S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) shares. Conversely, it has presented opportunities for ASX 200 healthcare shares, particularly those that are engaged in products and services used in the prevention and treatment of COVID-19. Could these ASX 200 healthcare shares be a buy despite a significant run-up this year? 

1. Resmed Inc (ASX: RMD) 

Resmed is engaged in the development, manufacturing and distribution of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders. More recently, the company has pivoted its business to support the surge in demand for respiratory devices. This involves ramping up production for products such as life support ventilators, non-invasive ventilators and ventilation mask systems.

In its Q3 update, Resmed advised its revenues had increased by 16% while net operating profit soared by 39%. I believe it is very challenging to buy at today’s Resmed share price. It trades at an expensive valuation and also hit an all-time record high last week. However, the company does play a pivotal role in supplying critical COVID-19 related products. Furthermore, its accelerated earnings are likely to push the Resmed share price higher in the medium to long term.  

2. Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) 

Fisher & Paykel delivered its full year results on 29 June. The company saw its operating revenue up 18% over the last year while net profit after tax increased 37%. The increase in revenue was largely driven by growth in the use of the company’s Optiflow nasal high flow therapy, demand for products to treat COVID-19 patients and strong hospital hardware sales throughout the course of the year. Like Resmed, the company is ramping up production, having brought forward capital expenditure to complete its fourth manufacturing building in New Zealand. Looking forward, the company has forecast operating revenue for 2021 to increase by 18% and net profit after tax to increase in the range of 13% to 18%. 

3. Ansell Limited (ASX: ANN) 

Ansell will announce its FY20 full year results on Tuesday 25 August. In February, the company highlighted that macroeconomic conditions were softening with political and cyclical uncertainties likely to prevent a strong rebound in global business investment. While overall business conditions remain a challenge, COVID-19 is likely to be an opportunity to lift Ansell’s earnings. Its 1H20 results highlighted the company’s involvement in producing personal protective equipment (PPE) for Chinese authorities. Given Ansell’s global footprint, it’s quite likely the company will expand sales of its PPE products to other geographies. 

Foolish takeaway

All three ASX 200 healthcare shares have experienced significant gains in 2020. Despite the companies trading at tech-like valuations, it’s possible they will grind even higher. Particularly given increasing global COVID-19 cases and the relevance of their products and services. While I wouldn’t be buying these shares at today’s prices, I would watch them closely for opportunistic pullbacks. 

More reading

• 3 fantastic ASX growth shares to buy in August
• Get rich with these stellar ASX growth shares
• How mandatory masks could impact these ASX shares
• 2 five star ASX healthcare shares to buy in July
• ResMed share price rockets to record highs

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. and ResMed Inc. 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 Lynas Corporation Ltd (ASX: LYC) share price is up by 10.14% at the time of writing, after the company signed a deal with the United States (US) Department of Defense (DoD) for a phase 1 heavy rare earth separation facility.

April announcement

This follows an announcement in April that the US DoD intended to award Lynas the phase 1 contract.

Lynas CEO Amanda Lacaze said at the time the deal created the foundation for a facility that would help the US “avoid the supply chain vulnerability that has been exposed over the past year”. 

As a result, it reflected the US desire to diversify its geographic supply of rare earth materials.

Heavy rare earth facility

Lynas and its US partner Blue Line will undertake a strategy study plus planning and design for the construction of a heavy rare earth separation facility – the only source of separated heavy rare earths outside China.

Completion of this work is expected within the 2021 financial year.

Lynas will process the materials sourced from Lynas mine in Mt Weld, Western Australia.

“We are very pleased to have signed a contract with the DoD for this Phase I work,” Ms Lacaze said today.

“Heavy Rare Earths are essential for the high performance magnets used in electric motors, and Lynas has the feedstock, intellectual property, and track record to deliver a Heavy Rare Earths facility in a timely and low-risk manner. We look forward to working with the DoD to progress this project,” she added.

About the Lynas share price

Lynas Corporation is the world’s second largest producer of rare earths and only significant producer outside China. Rare earths are an essential component of digital age technologies and green technologies such as electric vehicles and wind turbines. 

The company’s assets include its Mt Weld mine, Mt Weld Concentration Plant and a manufacturing facility in Malaysia. According to Lynas, Mt Weld is recognised as one of the highest grade rare earths mine in the world.

Lynas shares reacted positively to today’s developments, rising by 10.14% to $2.39 per share at the time of writing. However, the Lynas share price is still 10.15% down on this time last year.

More reading

• ASX 200 up 0.25%: Lynas rockets on U.S. deal, gold miners surge, bank shares tumble
• Why Lynas, Northern Star, REA Group, & Sezzle shares are storming higher
• Escalating US-China tensions are sending these ASX stocks jumping higher today

Motley Fool contributor Matthew Donald 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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If you’re wanting to add some blue chip ASX shares to your portfolio, then you’re in luck.

The ASX 50 index is home to a good number of blue chips that I believe have the potential to generate strong returns for investors in FY 2021 and beyond.

Two blue chip ASX 50 shares that I would buy are listed below. Here’s why I like them:

Cochlear Limited (ASX: COH)

The first blue chip ASX 50 share to consider buying is Cochlear. I think the global leader in implantable hearing devices could be a fantastic long-term investment option. This is due to its exposure to the ageing populations tailwind. Because hearing tends to fade as people get older, I expect demand for hearing products to increase strongly over the next couple of decades.

And given the industry’s high barriers to entry and its material investment in research and development, I believe it well-placed to capture this growing demand. Overall, I suspect that this could lead to the Cochlear share price outperforming the ASX 50 over the next decade.

Goodman Group (ASX: GMG)

Another blue chip ASX 50 share to consider buying is Goodman Group. It is an integrated commercial and industrial property group that owns, develops, and manages industrial real estate in 17 countries. Among its portfolio you’ll find warehouses, large scale logistics facilities, and business and office parks.

The main attraction to the company for me are its warehouses and logistics facilities. I believe these have put Goodman Group in strong position for growth over the next decade thanks to their exposure to the structural tailwinds of the ecommerce market. These assets have long term relationships with the likes of Amazon, DHL, and Walmart. In respect to the former, last month the company strengthened its relationship with Amazon. The ecommerce giant signed a 20-year lease for a distribution centre in Western Sydney owned by its joint venture with Brickworks Limited (ASX: BKW).

More reading

• 3 junior ASX healthcare shares with explosive growth potential
• Buy and hold Cochlear and these ASX shares for strong long term returns
• Why Mesoblast might be the best ASX healthcare growth share to own right now
• 3 of the best ASX blue chip shares you can buy right now
• What you need to know about Downer’s share price, $400m cap raise and acquisition

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 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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The Coles Group Ltd (ASX: COL) share price has been a pretty decent performer over the last few months. Since 14 May, Coles shares have risen almost 20%, which includes making a new all-time high of $18.32 earlier this month. At the time of writing, the Coles share price is going for $17.96, which translates into a price-to-earnings (P/E) ratio of 20.2 and a trailing, fully franked dividend yield of 2.34% (3.34% grossed-up).

Coles is a consumer staples giant that investors flocked to when the coronavirus pandemic first struck. Although panic buying and the now-infamous hoarding of household essentials boosted Coles’ sales in March and April, things have arguably quietened down for the supermarket chain. So is the Coles share price still a buy today?

Coles launches new range of collectables

According to reporting in today’s Australian Financial Review (AFR), Coles is poised to launch a new range of collectables. Coles’ first foray into collectables came a few years ago in the form of the ‘Little Shop’ toys. It was a raging success and prompted a ‘collectables’ war with arch-rival Woolworths Group Ltd (ASX: WOW) that lasted until the start of this year. With the pandemic taking over priorities at Coles, it’s been radio silence for a while on any new collectables range. Until now.

The AFR reports that Coles’ new campaign will come in the form of pocket-sized children’s books. These will be produced in partnership with beloved children’s author Andy Griffiths and illustrator Terry Denton. The series will reportedly ‘draw inspiration from the award-winning Treehouse series’.

There will be 24 books in the series, including (of course) 4 ‘rare’ editions. Customers will be eligible for a ‘free’ book if they spend $30 or more in a single Coles shop.

The pocketbooks follow Coles’ Little Shop and Little Shop 2 promotions of recent years, as well as Woolies’ Lion King ‘Ooshies’ and ‘Secret Garden’ plant campaigns.

Is the Coles share price a buy today?

I think Coles’ new campaign could be a success for the company. I believe there’s a reasonable chance that branching out into books might be a hit with educationally-minded parents and collectable-loving kids alike.

However, just because Coles’ new program might hit the right note with consumers, this doesn’t mean Coles shares are necessarily a buy today. From where I’m standing, the Coles share price is at least being priced at fair value right now, and possibly even at a premium given its defensive nature as a business. A 2.34% dividend yield isn’t something to write home about either, in my view.

Further, with this announcement, it’s highly likely Woolworths will be dreaming up a rival scheme of its own, which could steal the wind from Coles’ sales, just like it did with the Ooshies toys.

Foolish takeaway

I think Coles is a solid business and certainly has a place in a diversified dividend portfolio. But I’m not too excited about the Coles share price or dividend potential right now. This new collectables campaign (even though it could be a hit) doesn’t change my mind on this thesis.

More reading

• These shares were the ASX 200’s biggest losers last week
• ASX 200 Weekly Wrap: ASX has week of high volatility
• Here are easy ways to diversify your ASX portfolio
• Should fixed-interest investments be part of your ASX share portfolio?
• 5 steps to start investing in ASX shares

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET 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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The Insurance Australia Group Ltd (ASX: IAG) tanked for a second day, but bargain hunters might soon swoop as a number of top brokers highlighted the stock as a value buy.

Shares in the insurer tumbled 4.2% in after lunch trade to a five year low of $5.09 when the S&P/ASX 200 Index (Index:^AXJO) inched up 0.1%.

Today’s loss comes after the IAG share price crashed around 8% yesterday on the back of a disappointing profit update.

Management warned that it suffered a pre-tax loss on investment income of around $280 million since the start of the financial year to end April and is unlikely to pay a dividend.

Missing the ASX rebound

The insurer blamed falling equity markets for part of its woes. I guess it’s safe to say it didn’t invest in superstar stocks like the Afterpay Ltd (ASX: APT) share price or Fortescue Metals Group Limited (ASX: FMG) share price during the market sell-off.

In fact, it cut its exposure to risk assets through the COVID-19 turmoil as its exposure to growth assets fell to 30% of its total investment portfolio from 49% at the end of the 2019 calendar year. IAG wasn’t expecting a big rebound in March.

This reinforces the view that mum and dad investors have been beating the experts for all the right or wrong reasons.

More defensive than its peers

But I digress. The more important question to investors looking for the next bargain is whether the IAG share price is too cheap to ignore.

A number of leading brokers think so. Citigroup believes at this price, IAG is looking more defensive in this highly uncertain COVID-19 environment than other stocks.

This is because of IAG’s limited downside exposure to insurance claims from disasters as its reinsurance arrangement provides a stop-loss for FY21.

Citi commented that while the reinsurance cover was expensive, it means IAG’s perils allowance for FY21 only rises by $17 million to $658 million.

The broker reiterated its “buy” recommendation on the stock even as it cut its price target to $6.15 from $6.60 a share.

Bad news more than priced in

Meanwhile, Credit Suisse is sticking to its “outperform” rating on the stock after upgrading IAG on May 25.

“Clearly this has not been a good call and the momentum is against IAG currently,” said the broker.

“However, we stick to our fundamental approach in picking stocks and maintain the view that IAG is ahead of the curve on the challenges that lie ahead and its valuation appeal is compelling.”

The broker incorporated the higher long-tail loss ratio and lower expected reserve release in to its forecasts. This resulted in a 6% downgrade to FY20 earnings and 3% to 5% downgrades in the outer years.

Credit Suisse’s 12-month price target on the stock falls to $6.25 from $6.40 a share.

More reading

• 3 Warren Buffett quotes to start the week off right
• 2 ASX shares to buy as alternatives to the pitiful returns from a term deposit
• 2 top ASX growth shares to buy for long-term growth
• Is it time to dollar-cost average into ASX shares?
• All Technology Index celebrates 6 months with stunning outperformance

Motley Fool contributor Brendon Lau 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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Like the idea of investing in term deposits, but are put off by the disturbingly low rates? Given that the returns on fixed income are expected to remain lower for an extended period of time, why not look at some alternatives in the form of ASX shares?

The risks associated with listed entities are a lot higher than low-risk term deposits, which are protected by the Australian Government’s Financial Claims scheme for amounts of up to $250,000.

But, given that the returns from ASX shares can also be a lot higher, here are 2 options that, in my opinion, are worth considering as surrogates for fixed income.

Magellan Infrastructure Fund (ASX: MICH)

This actively managed diversified infrastructure fund invests in a portfolio of 20 to 40 infrastructure shares to ensure investors are not overly correlated to any single company, industry-specific or macroeconomic risk. It deploys the open-ended fund structure, which simply means the price at which units trade on the ASX, tends to mirror the underlying net tangible asset value (NTA) very closely.

The COVID-19 crisis has clearly been a tough time for the fund’s portfolio of global infrastructure assets, which include Atmos Energy Corp, Red Electrica Corp SA, Crown Castle International Corp, and Transurban Group (ASX: TCL).

Given that this share is a long-term play, I believe it looks well positioned to benefit from the return to normalcy as the threat of the coronavirus dissipates, with the eventual news of one or more proven vaccines likely to provide a massive kicker.

The fund has a market cap of around $626 million at the time of writing, and typically pays a dividend of around 3%.

The primary objective of Magellan Infrastructure is to achieve attractive risk-adjusted returns over the medium to long-term, while reducing the risk of permanent capital loss. By hedging the bulk of its foreign currency exposure, Magellan Infrastructure is also relatively well protected from adverse currency movements.

While the Magellan Infrastructure share price sits slightly below its NTA of $2.81 (at $2.80 at the time of writing), it’s currently trading at an 18% discount to its 21 February high of $3.44. Three years from now, I expect the current share price will have proven to be an attractive entry point.

MCP Master Income Trust (ASX: MXT)

Listed in October 2017 as a fixed-interest credit fund, the MCP Master Income Trust provides investors with direct exposure to the Australian corporate loan market. Having been the exclusive domain of regulated banks, fixed interest credit has largely been off-limits to mum-and-dad investors.

Given that the trust’s units have traded with little correlation to public domestic and international equity and bond markets, I think the trust gives investors the means to diversify their portfolios in a way that hasn’t been readily available before.

The Trust aims to provide investors with monthly cash income, low risk of capital loss and portfolio diversification by actively managing diversified loan portfolios.

Like other listed credit funds, the MCP Master Income Trust was a major casualty of the COVID-19 market sell-down. The trust’s share price swan-dived by over a third from $2.00 on 6 March to a low of $1.26 on 23 March, amid fears of a collapsing oil price and a flailing property market.

It has progressively regained most of that ground, courtesy of improving investor sentiment and a fall in credit spreads – in part due to the propping up done by central banks (notably the Reserve Bank of Australia, and the US Federal Reserve) – and is currently trading a little under its $2.00 NTA at around $1.90.

In my opinion, the underlying strength in MXT’s share price reflects its ability to consistently deliver cash income for its investors. The trust returned 5.55% per annum over the twelve months including December 2019, and 5.45% per annum since listing in October 2017.

The share has a market cap of $1.2 billion, which puts it just outside the S&P/ASX 200 Index (ASX: XJO), and it pays a respectable dividend yield of 6.1%.

More reading

• 3 Warren Buffett quotes to start the week off right
• Why these brokers are telling you to buy the crashing IAG share price today
• 2 top ASX growth shares to buy for long-term growth
• Is it time to dollar-cost average into ASX shares?
• All Technology Index celebrates 6 months with stunning outperformance

Motley Fool contributor Mark Story has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Magellan Infrastructure Fund. 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 Healius Ltd (ASX: HLS) share price has edged 0.95% higher today, after the healthcare provider gave a trading update. According to Healius, a strong pathology recovery and cost management initiatives have underpinned an estimated $54 – $56 million profit for FY20. Healius also recently sold its medical and dental clinics. The sale will bring in approximately $470 million in 1H21, providing significant balance sheet flexibility. 

What does Healius do?

Healius delivers pathology and diagnostic imaging services across Australia and operates day hospitals in Victoria, New South Wales, Queensland, and Western Australia. Healius sold its 70 or so medical centres to BGH Capital in June. The centres are occupied by some 1,300 general practitioners, dentists, and specialists. 

What did Healius report? 

Healius reported FY20 underlying EBIT of $102 – 104 million with underlying NPAT of $54 – $56 million. Net debt was approximately $670 million at 30 June 2020 giving a bank gearing ratio of 2.7. The proceeds from the sale of the medical centres will be received in 1H21, adding $470 million to the company’s coffers. Healius is looking to ‘right-size’ overheads in FY21 and FY22 in order to expand margins. 

The pathology division contributed the bulk of earnings in FY20, with unaudited underlying earnings of $114 – $116 million. Imaging contributed $17 million and Montserrat Day Hospitals $3 million. In June, Healius noted good growth in activity post the impact of the March lockdown. Today’s strong result was driven by the pathology division trading plus rapid efforts to reduce costs when the extent of volume declines due to COVID-19 was unknown. 

The pathology division has been involved in the fight against COVID-19, undertaking up to 16,000 tests per day. Testing has rapidly escalated due to state-based testing initiatives and COVID-19 outbreaks. Healius undertakes nearly 50% of private testing in Victoria. Non-COVID pathology testing has also grown with the reopening of the economy nationally and is currently in the order of 5% – 10% behind the prior comparable period.

What is the outlook for the Healius share price? 

The sale of the medical centres is due to complete in the first half of FY21, with the proceeds delivering significant balance sheet flexibility. As part of the FY20 results, Healius expects to report an after-tax loss on discontinued operations in the order of $110 – $120 million relating to the medical centres. With the sale of the centres, Healius will have a good level of available liquidity together with significantly reduced requirements for ‘business as usual’ capital expenditure. At the time of writing, the Healius share price is sitting at $3.20.

More reading

• Is the Ramsay Health Care share price a buy?
• Afterpay and these shares were the best performers on the ASX 200 in June

Motley Fool contributor Kate O’Brien 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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It has been a busy day of quarterly update releases on the Australian share market.

And while the likes of Bubs Australia Ltd (ASX: BUB) and Sezzle Inc (ASX: SZL) may have stolen the headlines, they weren’t the only companies releasing updates.

Three updates you may have missed are listed below. Here’s a summary of how they performed:

Alcidion Group Ltd (ASX: ALC)

The Alcidion share price is dropping lower on Monday after the release of its fourth quarter update. The healthcare technology company reported quarterly contracted revenues of $3.7 million despite operating in a challenging market. This was more than double what it achieved during the prior corresponding period. As a result, Alcidion’s full year revenue is anticipated to be in the range of $18.4 million and $18.7 million. In addition to this, the company advised that it has $12.8 million in revenue already contracted to be recognised in FY 2021, with a further $17 million sold out to FY 2025.

Mach7 Technologies Ltd (ASX: M7T)

The Mach7 share price is racing higher today after releasing its fourth quarter update. That update revealed that the medical imaging data management solutions provider generated $3.6 million of positive free cash flow during the quarter. This lifted its full year free cash flow to $4.5 million. A key driver of this was a material purchase order from Hospital Authority Hong Kong. This meant Mach7 finished the quarter with a cash balance of $48.9 million. Though, since then it has completed the acquisition of Canadian company, Client Outlook. This acquisition provides a unique zero-footprint viewing and integration platform distinguished as healthcare’s first Smartviewer, known as eUnity.

Telix Pharmaceuticals Ltd (ASX: TLX)

The Telix share price is down slightly this afternoon after the release of its quarterly update. As was expected, the clinical-stage biopharmaceutical company reported a reduction in prostate cancer imaging kit sales during the second quarter. This was because many oncology and radiology services were deferred to manage patient risk. As a result, Telix received $0.95 million in cash from kit sales for the quarter, down 16% on the first quarter. The company held cash reserves at the end of the quarter of $24.38 million. Though, it has since received an R&D tax refund of $11.4 million. As a result, management believes it has sufficient funds for at least five further quarters of operations.

More reading

• 3 exciting small cap ASX shares to watch in August
• Why Alcidion, Bubs, IGO, & Next Science shares are pushing higher
• 3 exciting small cap ASX shares to watch in FY 2021
• Add these ASX small cap shares to your watchlist immediately
• 5 exciting small cap ASX shares to watch

James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and MACH7 FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended Alcidion Group Ltd, MACH7 FPO, and Sezzle Inc. 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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ASX growth shares typically pay a low dividend or no dividend at all. However, unlike dividend shares, the vast majority of profits is typically invested back into the company to support long-term growth. This can lead to very strong share price growth over the longer term for top performing ASX growth shares.

In this article, I’ll take you through two quality ASX growth shares that I think are worth buying and holding for the long term

2 ASX growth shares to buy and hold

Bubs Australia Ltd (ASX: BUB)

Bubs is an Australia-based producer of goat milk products. It has established a portfolio of premium, high-margin brands, concentrating on infant formula products. The company is now extending its product range across other categories. These include organic baby food and adult goat dairy products.

The Bubs share price trended downward from late 2019 until mid-March this year. It then trended upwards until early May, after which it has trended largely sideways.

The third quarter of FY 2020 was a stand-out quarter for Bubs. It recorded a very strong 67% increase in revenue to $19.7 million for the three months to March. This was driven by strong growth during the coronavirus pandemic. Fourth quarter results just released saw a 5% decline in gross sales on the prior corresponding period to $13 million for Bubs. However, sales grew strongly by 14% compared to quarter sales in the corresponding period last year.

I believe that Bubs is an ASX growth share that’s well positioned for long-term success, driven by its expanding presence in Asia.

REA Group Limited (ASX: REA)

The REA Group share price was significantly impacted during the the early phase of the coronavirus pandemic up to late March. However, since then, it has recovered most of those share price losses.

REA Group achieved a 1% increase in overall revenues for Q3 FY2020 to $199.8 million. I believe this was a solid result considering all the challenges it is facing during the pandemic.

REA Group is likely to face continued COVID-19 headwinds in the months ahead. However, I believe this ASX growth share is well positioned to perform strongly over the long term, once the pandemic finally subsides. I prefer REA Group over its rival Domain Holdings Australia Ltd (ASX: DHG) due to its expanding overseas division and larger local presence.

Foolish takeaway

Bubs and REA Group are both quality ASX growth shares that I believe are well positioned to outperform the S&P/ASX 200 Index (ASX: XJO) over the next five years. Both companies continue to perform strongly in their domestic market, while also focusing on successful international expansion strategies.

More reading

• Is it time to dollar-cost average into ASX shares?
• All Technology Index celebrates 6 months with stunning outperformance
• Why I would buy Pushpay and these ASX growth shares in August
• ASX 200 up 0.25%: Lynas rockets on U.S. deal, gold miners surge, bank shares tumble
• Why Lynas, Northern Star, REA Group, & Sezzle shares are storming higher

Motley Fool contributor Phil Harpur owns shares of REA Group Limited. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended REA Group 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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