I like to regularly invest in ASX shares that seem like long-term opportunities. Over time, I believe that ASX shares with good growth potential is the way to go.
For people needing income, I can understand why certain blue chip ASX shares appeal. However, I’m looking for potential options that can produce attractive total returns over the coming years.
Fortescue Metals Group Limited (ASX: FMG)
Fortescue is not the typical ASX 300 business that I like to think as an opportunity – names like Temple & Webster Group Ltd (ASX: TPW), Adore Beauty Group Ltd (ASX: ABY), Pushpay Holdings Ltd (ASX: PPH) and Brickworks Limited (ASX: BKW) normally come to my mind.
The miner makes billions of dollars of profit from iron ore. The iron ore price has sunk a lot over the last six months. Cyclical lows of the Fortescue share price can prove to be an opportunity, which could be seen again during 2022. I think that iron has a long-term future and Fortescue’s big dividend is a juicy bonus.
What attracts me the most about Fortescue is its push into the ‘green’ space, like green hydrogen. The ASX share is pursuing numerous projects around the world that could see Fortescue become a world leader in green hydrogen production. There are potentially trillions of dollars for businesses involved in decarbonisation over the coming decades.
I have bought Fortescue shares a few times this year after its decline, but I’m hoping the price will fall to around $17 or below again.
WCM Global Growth Ltd (ASX: WQG)
This is one of the best listed investment companies (LICs) in my opinion. It focuses on quality businesses that are listed outside of Australia.
Past performance is not a guarantee of future performance, but it has done very well over the last few years. I think that shows the investment style can work well into the future. Over the last three years the net return has been an average of 26.2% per year.
WCM’s investment process is based on the belief that corporate culture is the biggest influence on a company’s ability to grow its competitive advantage or ‘moat’. Seeing growing competitive advantages is a key trait for WCM’s portfolio.
Some of the businesses that were in the ASX share’s portfolio at the end of November 2021 were: Shopify, West Pharmaceutical Services, LVMH (Moet Hennessy Louis Vuitton) and Amphenol.
WCM Global has committed to a growing dividend and the share price is valued at a double digit discount to the pre-tax net tangible assets (NTA) – this is the underlying value of the shares.
WAM Microcap Limited (ASX: WMI)
WAM Microcap is another LIC, but this one looks at the small cap ASX shares which are usually valued at less than $300 million.
The fund manager – Wilson Asset Management – likes to look for catalysts that will improve the share price of the business. This investment style has proven to be very effective. Since inception in June 2017, WAM Microcap’s portfolio has produced an average return per year of 25.2% (but that’s before expenses, fees and taxes).
Whilst WAM Microcap is a bit more active than some long-term focused managers, I think it gives the fund manager an ability to perform well in various times, not just when the share market is booming.
WAM Microcap pays a very attractive dividend each year, but I believe that it can achieve capital growth thanks to the level of its long-term returns.
It’s also at a lower premium to the NTA that it has been for quite a while, so it’s a more attractive time to look at it in my opinion.