It’s fair to say 2020 has been wild so far.
COVID-19 has presented a huge headwind for some companies while also creating large-scale opportunities for others. Here are two stocks and one ETF that I’ve got my eyes on at the moment.
Bravura Solutions
Bravura Solutions Ltd (ASX: BVS) is a world-leading developer and provider of enterprise software across the wealth management and funds administration industries.
There are some macro trends concerning regulatory compliance that will provide a significant tailwind moving forward. Additionally, Bravura has the typical attractive features of a software-as-a-service (SaaS) business including scalable gross margins and recurring revenue streams, with clients often signing 5-10 year contracts.
Despite meeting earnings guidance, the share price has taken a hit after realising some of the effects of COVID-19. I’d be happy to pick up shares in Bravura considering they’re now trading significantly lower than where they were before COVID, yet they are on the same fundamentals.
Bravura’s recent acquisition of UK Delta further diversifies its service offering and earnings.
Altium
Altium Limited (ASX: ALU) is another stock I’ve added to my buy list. Altium develops software for the design of electronic devices and is well-positioned to take advantage of the growing demand for this type of product. Altium is currently going through some structural changes related to its product offering and its pricing model which should provide some further upside potential in the coming years.
These changes will take time, so for this reason, I’m happy to accept that the share price might stay relatively flat, in-line with earnings in the short-term. Altium has set an ambitious 5-year revenue target of USD$500 million. If management is able to execute, I think investors should be able to quite well out of this one in the long term.
It will take time to switch customers from the old perpetual licence model to the new SaaS model, so there’s probably no need to jump in straight away, but definitely, I think Altium is one to keep your eyes on.
BetaShares NASDAQ 100 ETF
Looking back since its inception, the BetaShares NASDAQ 100 ETF (ASX: NDQ) has had a great track record of consistent growth. As of 31 August 2020, it has returned 43.95% after fees in the last year. Since its inception in 2015, it has returned an impressive 22.43% after fees. Management fees are 0.48% per annum, significantly higher than ETFs exposed to Australian companies and broader markets, yet the fees are still relatively cheap compared to traditional managed funds or listed investment companies (LICs).
I like the NDQ ETF because of the high concentration of some of the top holdings such as Apple (13.5%), Amazon (10.8%), Microsoft (10.8%) and Facebook (4.5%). These companies have driven much of the outperformance we’ve seen this year and I’m confident in their future outlook. I will wait until the outcome of the upcoming US election to pick-up some NDQ, as it could be volatile over the next few weeks.
