I think the best way to beat the market over the long term is to go for growth shares.
Dividend shares could be useful picks for retirees but it’s the businesses that are delivering attractive compounding growth that have the potential to beat the market.
But you can’t buy a share at any price. Afterpay Touch Group Ltd (ASX: APT) and Appen Ltd (ASX: APX) have attractive futures, but it’s hard to say they are good value today.
These three ASX shares have the potential to beat the market this year:
Webjet Limited (ASX: WEB)
Webjet is now one of the biggest global online business travel agencies in the world thanks to its recent Destinations Of The World acquisition. Before the acquisition WebBeds was already reaching profitability status and future revenue would have mostly fallen onto the bottom line. The acquisition will help provide scale and could lead to very helpful profit margin growth in the near future. The underlying EBITDA margin (click here to learn what EBITDA means) improved by 2.01% (201 basis points) in the recent result.
The rest of Webjet, the consumer-facing part, is also growing well and has a high level of loyalty/returning customers because of its service standards.
However, investors need to be wary of the fact that a global downturn could be a negative for earnings, at least in the short term.
According to CommSec estimates, Webjet is valued at 16 times FY20 estimated profit.
Bapcor Ltd (ASX: BAP)
Bapcor could be one of the better ideas to own if Australia goes through a recession. It sells auto parts, mostly to mechanics, through its Burson and wholesale brands.
Car parts will continue to break down whether the country is booming or recession times. But a person is more likely to buy a new car part than a new car if their money is tight.
One of the main reasons why I think Bapcor could beat the market this year is that its share price has fallen over 25% during the past six months, meaning it is starting from a lower base. Investors may get excited about the fact Bapcor is growing in Asia – a very large potential market.
Domain Holdings Australia Ltd (ASX: DHG)
Domain is the second largest property portal in Australia, but everyone knows its name. Falling house prices aren’t exactly helpful for Domain, but property owners have to keep listing or else they won’t get a sale.
Domain is in a good position where it can increase its listing price. Its effective price per property listing was increased by around 16% year on year and it could continue to do this over the medium term.
The recent merger between Nine Entertainment Co Holdings Ltd (ASX: NEC) and Fairfax could also boost Domain profits over time as the combined media entity drives more eyeballs to Domain.
According to CommSec estimates, Domain is valued at 32 times FY20 estimated profit.
Domain, Bapcor and Webjet aren’t the only growth shares worth considering. The below rapid growth shares in the free report below are also kicking goals every year.
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