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If you’re looking at investing at the small side of the market, then the two small caps listed below could be worth considering.

While there is certainly still a lot of work to be done, they both appear to be carving out bright futures for themselves.

Here’s why they are rated highly right now:

Serko Ltd (ASX: SKO)

Serko is an online travel booking and expense management provider behind the Zeno Travel and Zeno Expense platforms. Zeno Travel provides AI-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers. Whereas the latter platform allows its users to automate and streamline the expense administration function, identify out-of-policy expense claims, and prevent fraud.

Although Serko’s growth has been hit hard by the pandemic, it is starting to see transaction volumes recover. Earlier this month, Serko revealed that volumes increased to 44% of prior year volumes for the month of November. This was up from 35% of prior year volumes for the month of October.

Analysts at Morgans are positive on its prospects, particularly given its major deal with travel giant Booking.com. Its analysts have a buy rating and $6.55 price target on the company’s shares. This compares to the latest Serko share price of $4.99.

Whispir (ASX: WSP)

Whispir is a software-as-a-service communications workflow platform provider. Its high quality software platform allows companies to deliver actionable two-way interactions at scale using automated multi-channel communication workflows.

This helps make operations more efficient and can cut down the number of service desk support calls. It counts a number of blue chips as customers such as AGL Energy Limited (ASX: AGL), Disney, and Foxtel. This underpinned strong annualised recurring revenue (ARR) growth in FY 2020, with more of the same expected in the new financial year.

Analysts at Ord Minnett currently have a $4.40 price target on the company’s shares. This compares to the current Whispir share price of $3.19.

More reading

• 3 leading ASX tech shares to buy
• 3 ASX tech shares that have delivered strong returns in 2020
• 2 exciting small cap ASX shares to watch
• 2 exciting small cap ASX shares to watch in 2021
• ASX 200 rises on Thursday

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 Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko Ltd and Whispir Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The low interest rate environment hit a new low last week when the Federal Government was effectively paid to borrow money.

The government has just successfully undertaken a $1.5 billion traunch of three-month bonds with a negative interest rate of -0.01%.

Unfortunately for income investors, this appears to be a sign that it will be a long time until interest rates return to “normal” levels again.

But don’t worry, because there are plenty of dividend shares that offer investors generous yields.

Two to consider buying are listed below. Here’s why they are rated highly:

BHP Group Ltd (ASX: BHP)

This mining giant has been tipped to reward its shareholders with some very generous dividends in the coming years. This is due to its world class operations, low costs, and favourable commodity prices. The latter is certainly the case for iron ore, which is trading north of US$150 a tonne at present.

Last week, Macquarie reiterated its outperform rating and $46.00 price target. The broker is also forecasting a ~$3.09 per share fully franked dividend in FY 2021. Based on the current BHP share price, this represents a 7.2% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

This telco giant has underperformed over the last few years after struggling with a massive earnings gap caused by the NBN rollout. The good news is that the NBN headwind is now easing and its outlook is becoming significantly more positive. Especially given its T22 strategy, which is cutting costs and simplifying its business. The latter could include splitting its business into three in an attempt to monetise some of its assets.

Analysts at UBS believe now is an opportune time to invest and have recently put a buy rating and $3.70 price target on its shares. They are also forecasting a 16 cents per share fully franked dividend for the foreseeable future. Based on the current Telstra share price, this means a fully franked 5.3% dividend yield.

More reading

• 5 ASX dividend shares to buy for income in 2021
• Brokers name 3 ASX shares to buy right now
• UBS just downgraded these outperforming ASX mining stocks
• 5 things to watch on the ASX 200 on Friday
• Why the Adbri (ASX:ABC) share price has dipped in trading today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Investing money regularly in cheap shares could produce a generous passive income in older age. The stock market crash has caused many high-quality companies to trade at prices that are substantially below their long-term averages. Buying and holding them over the long run may produce impressive returns that create a worthwhile nest egg for retirement.

Certainly, there are risks facing the stock market in the short run. However, through buying a diverse range of companies and allowing them the time they need to grow, an investor may experience a greater amount of financial freedom in older age.

Buying cheap shares for a passive income

The stock market crash means there is the potential to obtain attractive capital growth from today’s cheap shares that could ultimately provide a passive income in retirement. For example, some stocks face the prospect of difficult operating conditions in 2021. Risks such as Brexit and a weak global economic outlook may hinder their capacity to generate growing profit. However, their financial strength and competitive advantages may mean that they have the potential to recover in the coming years. In doing so, they may help an investor to build a large nest egg for retirement.

Of course, not all cheap shares will deliver impressive returns in the coming years. As such, it is crucial for any investor to understand the businesses they are purchasing. For example, companies with low debt, an economic moat and a sound strategy to deliver growth may be better able to produce rising share prices over the coming years. This may mean they make a bigger contribution to the size of an investor’s nest egg, thereby offering the prospect of a larger passive income in older age.

Investing money on a regular basis

Investors who do not have a lump sum to invest today can make regular purchases of cheap shares to build a nest egg that offers a passive income in retirement. Indeed, even modest amounts of money invested regularly in undervalued stocks can add up to a surprisingly large portfolio over the long run.

For example, the stock market has historically delivered an 8% annual total return. Investing $25 per week at that rate of return could produce a portfolio valued at $380,000 over a 40-year working life. From that, a 4% annual withdrawal would equate to an income of over $15,000.

Clearly, a larger passive income could be achieved by investing a greater amount on a regular basis. Meanwhile, many investors may have a shorter investment horizon than 40 years. However, the example shows that even achieving the market rate of return on a regular investment can lead to a worthwhile retirement income. And, through buying cheap shares after a market crash, an investor could beat the market and build an even larger portfolio by the time they retire.

More reading

• 2 blue chip ASX shares Warren Buffett would love
• 2 ASX shares to buy that are growing rapidly
• 3 little-known small cap ASX shares rated as buys by fundie
• 5 ASX dividend shares to buy for income in 2021
• 3 ASX growth shares to add to your portfolio in 2021

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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One notable believer in buy and hold investing is legendary investor Warren Buffett.

In fact, Mr Buffett has famously quipped that his favourite holding period is forever. And given the success he has had over the last six decades, it certainly can pay to listen to his advice.

The Oracle of Omaha also has a penchant for blue chip shares and countless can be found in his portfolio.

With that in mind, listed below are two shares that could be top blue chip buy and hold options. Here’s what you need to know about them:

CSL Limited (ASX: CSL)

CSL is one of the world’s largest biotechnology companies and regarded by many as the highest quality company on the Australian share market. It has consistently grown its sales and earnings at a solid rate for many years and has been tipped to continue this positive form in the future.

This is thanks to its leading therapies, growing plasma collection network, and its burgeoning research and development (R&D) pipeline. This pipeline contains a number of therapies that have the potential to generate billions of dollars in sales over the next decade if their trials are successful.

UBS is positive on its R&D pipeline and notes that it has underpinned the majority of its growth in the past few years. Pleasingly, it appears to believe this can continue and has put a buy rating and $346.00 price target on its shares.

SEEK Limited (ASX: SEK)

SEEK is the dominant job listings company in the ANZ region and has a number of growing businesses around the world. Chief among them is the Zhaopin business in China. It has been growing at a very strong rate in recent years and is quickly becoming an integral part of the SEEK business.

Zhaopin, combined with its investments in growth opportunities, is expected to play a key role in the company achieving its aspirational revenue target of $5 billion later this decade. This will be a material increase on the revenue of $1,577.4 million it reported in FY 2020.

Analysts at Credit Suisse are positive on the company’s future and have recently put an outperform rating and $28.50 price target on its shares.

More reading

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• Why the IGO (ASX:IGO) share price shot up 18% in early trade today
• CSL (ASX:CSL) share price on watch after terminating COVID-19 vaccine trial

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article is about two ASX shares that are growing rapidly.

Here are those names:

Redbubble Ltd (ASX: RBL)

According to the ASX, Redbubble has a market capitalisation of $1.6 billion.

Redbubble has two online artist-produced marketplaces for various items like clothes, stationery, housewares, bags, wall art and so on. Those two marketplaces are Redbubble.com and TeePublic.com.

The ASX share is one that was recently named by Montgomery Investment Management’s Joseph Kim as potential winner. He said: “While Redbubble has clearly been a “stay-at-home” trade, we believe the business has the opportunity to emerge a longer-term structural winner from COVID-19 should it capitalise in the recent spike in user and customer interest as a result of recent lockdown measures.”

In FY20 it generated marketplace revenue of $349 million, which represented 36% growth. Gross profit went up 42% to $134 million and operating earnings before interest, tax, depreciation and amortisation (EBITDA) grew 141% to $15.3 million.

The growth has continued into the first quarter of FY21. The first three months of FY21 saw marketplace revenue grow 116% to $147.5 million, gross profit went up 149% to $64.5 million and it generated $22.1 million of earnings before interest and tax (EBIT). Redbubble also made $27.1 million of operating cashflow.

At the time of that quarterly update, Redbubble CEO Martin Hosking said: “The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in the customer experience to improve loyalty and retention and ensure long-term higher levels of growth. The company has the resources to undertake the anticipated investments and the margin structure to ensure it can do so while remaining profitable.”

Temple & Webster Group Ltd (ASX: TPW)

According to the ASX, Temple & Webster has a market capitalisation of $1.1 billion.

Temple & Webster is a leading online retailer of furniture and homewares. It has over 180,000 products on sale from hundreds of suppliers. The products are sent directly from suppliers to the customer, which enables faster delivery times and reduces the need to hold inventory and also allowing a larger product range. The ASX share also has a private label range which is sourced directly by Temple & Webster from overseas suppliers.

In FY20 the company delivered revenue growth of 74% to $176.3 million. The growth accelerated during the year, with second half revenue jumping 96% and fourth quarter revenue rising 130% compared to the prior corresponding period.

Temple & Webster also said that it achieved accelerated operational leverage with 483% growth of EBITDA to $8.5 million and the adjusted EBITDA margin improved from 2.5% to 5.3% in FY20.

The management pointed out that while online sales went up 57% during the April to July period, Temple & Webster grew 150%. Management explained that it’s gaining increasing benefits of scale as it gets larger. It’s forging closer relationships with its suppliers as it becomes a more significant part of their business, which allows it to obtain stock security, better terms and exclusive product ranges. The ASX share is also investing in areas like technology and data, brand awareness and its private label products. Management said that the bigger it becomes, the better and stronger its proposition becomes, which is a virtuous cycle.

In FY21 year to date to 19 October, Temple & Webster said that it grew revenue by 138% and the FY21 first quarter EBITDA was $8.6 million, which was larger than the whole of FY20’s EBITDA. At the time of the update, October revenue growth was still above 100%.

Temple & Webster said that it’s committed to a high growth strategy to take advantage of the structural shift towards online, capitalising on both organic and inorganic opportunities.

According to Commsec, Temple & Webster is valued at 32x FY22’s estimated earnings.

More reading

• Redbubble (ASX:RBL) share price jumps 12% to record high
• Is the Temple & Webster (ASX:TPW) share price a buy?
• ASX 200 falls on Thursday
• 2 leading ASX growth shares to buy that are falling
• The 13 ASX shares that could have doubled your money in 2020

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 Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some ASX small cap shares worth buying and owning according to fund manager Naos Asset Management.

What is Naos Asset Management’s investment approach?

Naos is led by chief investment officer (CIO) Sebastian Evans. NAOS Small Cap Opportunities Company Ltd (ASX: NSC) is one of the listed investment companies (LIC) operated by Naos.

That particular LIC looks at businesses with market capitalisations between $100 million and $1 billion.

The fund manager has a number of investment focuses. It looks for businesses that are good value with long term growth potential. With its portfolio, Naos believes it’s better to have a quality portfolio rather than numerous holdings. That’s why it only holds around 10 positions in each fund, with each ASX share representing a high-conviction position.

Naos invests in the small cap ASX shares for the long-term. It considers the performance and the liquidity of its positions whilst ignoring the index. Performance can sometimes be quite variable when compared to the index.

It looks to invest purely in industrial companies whilst also considering the ESG factors (environmental, social and governance).

Eureka Group Holdings Ltd (ASX: EGH)

Naos says that Eureka Group is a provider of quality and affordable rental accommodation for independent seniors within a community environment. Eureka owns 30 villages and manages a further nine villages with a total of 2,147 across Queensland, Tasmania, South Australia, Victoria and New South Wales.

The ASX small cap share recently held its annual general meeting (AGM) and gave a market update in early November which included FY21 earnings before interest, tax, depreciation and amortisation (EBITDA) guidance of $9.8 million to $10.2 million. This would be an increase of 21% to 26% compared to the prior corresponding period. Occupancy has remained above 95% and the business continues to sell non-core assets, which will provide the funding for organic growth and acquisition opportunities.

The fund manager believes Eureka has multiple levers that can be pulled to help earnings growth at a significant rate going forward, and when overlaid with the current industry tailwinds, Naos thinks Eureka will be highly attractive to investors, particularly in this low interest environment.

COG Financial Services Ltd (ASX: COG)

The financing business also held its AGM and gave an update about its strategy going forward. It’s still focused on its broking and aggregation business, particularly the insurance broking, as COG brokers have a close relationship with clients and have the ability to meet their financing needs.

The ASX small cap share also provided disclosure about the software that allows COG brokers to have real time data on their entire client base together with real-time quoting and application functionality. Naos believes this is key for COG as some of the brokers it owns may have 10,000 active SME clients that will have a number of financing and insurance needs in any given year.

Naos also thinks that a merger with Earlypay Ltd (ASX: EPY) – formerly CML Group – would also be beneficial if done at the right time.

Big River Industries Ltd (ASX: BRI)

This is a business that’s a diversified manufacturer and distributor of timber and building products. It sells softwood and hardwood formply and structural plywood products, consumable formwork products and it’s a national merchant of timber and associated building products to local trade, medium sized and enterprise sized companies.

Naos pointed out that Big River Industries was recently successful in applying for a $10 million grant for recovering from the bushfires. The grant will allow the ASX small cap share to close the manufacturing facility in Wagga Wagga and move this capability into the newer facility in Grafton.

The fund manager likes this because it will reduce the exposure to more commodity-type manufactured goods and allow the company to continue to focus on the distribution model with a focus on higher value products. The closure in the site could lead to a significant reduction in working capital and potential upside from land sale proceeds.

More reading

• Why the Earlypay (ASX:EPY) share price rocketed up 7% last week

Motley Fool contributor Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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2020 has been a defining year for ASX dividend shares. In a sense, those companies that pay dividends (or at least used to) have had a ‘wheat from the chaff’ kind of year.

We have seen shareholder income from some ASX dividend shares slashed or dried up entirely. Many of these were previously well-known for their dividends, such as Westpac Banking Corp (ASX: WBC) and Ramsay Health Care Limited (ASX: RHC). But some others managed to ride it out, or even grow their dividends.

So here are 5 ASX dividend shares that offer the prospects of dividend income in 2021:

Telstra Corporation Ltd (ASX: TLS)

The ASX’s largest telco, Telstra has long had a reputation for dividend payments, despite its infamous payout slash a few years ago. The company has managed to maintain its 16 cents per share annual dividend in 2020 however, and has indicated it plans on continuing this payout in 2021. If that indeed comes to pass, it means Telstra shares’ trailing dividend yield of roughly 5.25% on current pricing looks set to continue into next year.

Coles Group Ltd (ASX: COL)

Coles has had an interesting year. It was an unexpected beneficiary of the mass-panic hoarding of groceries earlier in the year, and has benefitted from strong sales since. This enabled Coles to increase its 2020 dividends compared to 2019’s payouts. Coles is currently offering a rough trailing yield of 3.2%.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is another ASX dividend share that has held up well this year. The owner of the Bunnings, OfficeWorks and Kmart chains has paid out 2 ordinary dividends (75 and 77 cents per share respectively) as well as a special dividend of 18 cents per share. That gives this industrial conglomerate a rough trailing yield of 3.42% today.

Rural Funds Group (ASX: RFF)

Rural Funds is an agriculture-based real estate investment trust (REIT). It owns a portfolio of farmland, on which foods such as grapes, nuts and cattle are grown or produced. It has also paid out 2 dividend distributions in 2020, which were higher than the 2 payments 2019 saw. That gives Rural Funds’ shares an approximate trialling yield of 3.85% on current prices, although these payments don’t come with franking credits attached. 

Washington H. Soul Pattinson & Co Ltd (ASX: SOL)

‘Soul Patts’ holds the distinguished title of the ASX dividend share with the best record of consecutive dividend increases. Another industrial conglomerate, Soul Patts has grown its dividend every single year since 2000. This includes 2020, which saw the company bump its payout by 9.4% to 60 cents a share. That gives Soul Patts a rough trailing yield of 1.98% on current pricing.

More reading

• Aussie dollar breaking to new 30-month high will boost these ASX stocks
• JB Hi-Fi (ASX:JBH) share price lifts today on broker rating upgrade
• 2 ASX dividend shares with attractive yields to buy
• ASX 200 up again on Wednesday
• Why ‘ASX dividend king’ Soul Patts (ASX:SOL) is a top income share for 2021

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you have room in your portfolio for a growth share or two, then you might want to take a look at the three listed below.

All three have been named as buys and tipped to deliver strong growth over the coming years. Here they are:

Appen Ltd (ASX: APX)

Appen provides and prepares the data that goes into the artificial intelligence (AI) and machine learning models of some of the biggest tech companies in the world. This includes Amazon, Facebook, Google, and Microsoft. Given the increasing amount of investment being made by businesses on AI, Appen has been growing at a very strong rate over the last few years.

Unfortunately, COVID-19 has impacted the priorities and activities of its major customers and put many major projects on the backburner. However, management is confident that things will return to normal once the pandemic passes.

One broker that believes the recent weakness in the Appen share price is a buying opportunity is UBS. Last week its analysts retained their buy rating and $44.00 price target on its shares following its trading update.

REA Group Limited (ASX: REA)

REA Group is the property listings company behind the market-leading realestate.com.au website. It also owns and operates several international equivalents and recently increased its stake in India-based Elara Technologies.

It has been a strong performer over the last few years despite the housing market downturn and even the pandemic. So, with the housing market tipped to rebound in 2021, its outlook is looking particularly rosy.

Analysts at Morgan Stanley certainly believe this is the case. Thanks to a combination of price increases, volume growth, and good cost control, the broker believes REA Group is well-positioned for growth. It has an overweight rating and $150.00 price target on its shares.

Zip Co Ltd (ASX: Z1P)

Zip is a leading buy now pay later provider with operations across several key markets such as Australia, the United Kingdom, and the United States. Thanks to the growing popularity of the payment method, the decline in credit card usage, and its international expansion, Zip has been growing its customer and sales numbers at a rapid rate.

The company has been tipped to continue its strong growth thanks to the positive industry tailwinds and new product launches. This includes Zip Business and its Tap & Zip product.

Morgans is very positive on its outlook. Last month it retained its add rating and lifted its price target slightly to $9.80.

More reading

• These were the worst performing ASX 200 shares last week
• ASX 200 drops on Friday
• Why JPM just upgraded the beaten-down Appex (ASX:APX) share price to “buy”
• Brokers name 3 ASX shares to buy right now
• ASX 200 down 0.3%: CSL sinks, Zip’s Facebook deal, IGO rockets

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 Appen Ltd and ZIPCOLTD FPO. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Last week the S&P/ASX 200 Index (ASX: XJO) fought hard and was able to extend its winning streak to six consecutive weeks. The benchmark index rose 0.1% to finish the period at 6,642.6 points.

While a number of shares climbed higher with the market, some recorded stronger gains than others.

Here’s why these were the best performers on the ASX 200 over the period:

IGO Ltd (ASX: IGO)

The IGO share price was the best performer on the index last week with a 24.2% gain. Investors were buying this nickel producer’s shares after it completed its institutional placement and entitlement offer. IGO raised a total of $707 million at a 9.7% discount of $4.60 in order to expand into the lithium market. The company has signed an agreement to acquire a 49% stake in Tianqi Lithium Energy Australia from China-listed Tianqi Lithium Corporation.

Link Administration Holdings Ltd (ASX: LNK)

The Link share price was on form and surged 12.2% higher over the five days. The catalyst for this was news that the administration services company has received a second takeover approach. SS&C Technology has tabled an offer of $5.65 per share. This represented a 13.9% premium to Link’s last close price. It was also higher than the offer made by a consortium comprising Pacific Equity Partners and Carlyle Group. It is currently conducting due diligence after offering $5.40 per share.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price continued its positive run and climbed a further 11.4% last week. Investors were buying the iron ore producer’s shares after the price of the steel-making ingredient jumped higher again. On Friday the spot iron ore price was fetching a massive US$156.58 a tonne. This compares to Fortescue’s C1 costs guidance of US$13.00 to US$13.50 per wet metric tonne in FY 2021.

Viva Energy Group Ltd (ASX: VEA)

The Viva Energy share price wasn’t far behind with a gain of 9.2% last week. This appears to have been driven by an update relating to its Geelong Energy Hub project. Viva Energy advised that it has selected and entered into memorandums of understanding with two partners in relation to the development of the project and the related capacity in the terminal.

More reading

• These were the worst performing ASX 200 shares last week
• Will China’s tariffs cripple the Aussie economy’s 2021 recovery plan?
• ASX 200 drops on Friday
• I wouldn’t buy this if I was you…
• Why JPM just upgraded the beaten-down Appex (ASX:APX) share price to “buy”

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 Link Administration Holdings Ltd. The Motley Fool Australia has recommended Link Administration Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article is about three growing ASX tech shares which could be worth watching.

Here are those ideas:

Serko Ltd (ASX: SKO)

Serko is a business based in New Zealand that specialises in online travel booking and expense management for the business travel market.

It’s a holding of the listed investment company (LIC) WAM Microcap Limited (ASX: WMI). The fund manager said that Serko has benefited from an uplift in travel and the state by state reopening of borders between New Zealand and Australia. Serko recently raised NZ$67.5 million at NZ$4.55 per share to strengthen its balance sheet.

In the recent FY21 half-year result it reported that total operating revenue was down 66% to NZ$5.1 million. Half-year total travel bookings for the period were down 77%, but have since risen to being down 65% for October.

The ASX tech share is predicting that travel volumes will be in the range of 40% to 70% of pre-COVID-19 levels by March 2021. It also recently started a partnership with Booking.com for business, powered by Zeno (which is Serko’s platform).

Altium Limited (ASX: ALU)

Altium is one of the world’s leading electronic PCB software businesses. It offers different software for different sized teams of engineers, with the flagship software offering being Altium Designer.

The business is aiming to be the clear global market leader over the next five years as it aims for 100,000 Altium Designer subscribers. It also has a revenue goal of US$500 million, though this could take a little longer to achieve because of the impacts of COVID-19.

In FY20 the company generated 10% revenue growth, profit before tax grew by 12% to $64.6 million, normalised earnings per share (EPS) went up by 5% and subscribers went up 17%.

In FY21, which has largely been affected by COVID-19 again, Altium is expecting revenue to grow by 6% to 12% to US$200 million to US$212 million whilst earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be in a range of US$76 million to US$89 million.

The ASX tech share is heavily focusing on growing its cloud offering, Altium 365, so that engineers can collaborate in the best way. It would also allow Altium to monetise its Altium 365 platform either through transaction fees on manufacturing (like an Airbnb model) and/or premium services (such as the Amazon Prime model).

At the current Altium share price, it’s priced at 46x FY23’s estimated earnings.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This is an exchange-traded fund (ETF) that’s invested in 100 of the largest businesses listed on the NASDAQ, which is a stock exchange in the US.

BetaShares promotes this ETF as a way to “in one trade on the ASX get access to companies like Apple, Amazon and Google, that have changed the way we live.” The ETF provider also points out that the ETF provides diversified exposure to a high-growth potential sector that is under-represented in the Australian share market.

Whilst the ETF, which can be bought on the ASX, doesn’t give exposure to ASX tech shares, it does give exposure to many of the world’s most well-known technology businesses.

Its biggest holdings include: Apple, Microsoft, Amazon, Tesla, Facebook, Alphabet (Google), Nvidia, PayPal, Adobe, Netflix, Intel, Broadcom, Qualcomm and Texas Instruments.

This ETF has delivered outperformance over the long-term. At 30 November 2020, over the prior five years it had delivered an average return per annum of 21.5%.

Betashares Nasdaq 100 ETF has an annual management fee of 0.48%.

More reading

• 2 popular international ETFs for ASX investors to buy
• 3 ASX tech shares to buy for the long term
• 3 quality SaaS ASX shares to buy
• Zip and Creso Pharma were among the most traded shares on the ASX last week
• 2 of the best ASX tech shares you can buy today

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and Serko Ltd. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and Serko Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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