Over the long-term, I think that ASX growth shares can produce the strongest returns thanks to compounding.
However, I’d only want to go for businesses that seem pretty likely to deliver on that growth potential.
With that in mind, these are two ASX growth shares that I like the look of:
REA Group Limited (ASX: REA)
REA Group is one of leading businesses on the ASX in my opinion.
The key asset for the company is its realestate.com.au website. It attracts the most potential buyers, which then attracts the most sellers. A very strong cycle for the company.
It’s this market position that allows REA Group to keep implementing price increases. That fee is still very reasonable compared to the overall selling costs, so I think there’s long-term organic growth potential here.
The ASX growth share has expanded or acquired into a number of add-on services in the Australian real estate market such as real estate data, advertising commercial property, flat sharing and so on.
The business also has investments in websites in a number of other countries such as the USA, India and south east Asia.
The REA Group share price has fallen by 23% since the start of 2022. That means it’s now priced at 30 times the 2024 financial year’s estimated earnings according to CommSec estimates.
VanEck Video Gaming and Esports ETF (ASX: ESPO)
This is one of my favourite exchange-traded funds (ETFs).
It’s all about the global video gaming industry. There is also a fast-growing sub-sector within the gaming industry – e-sports. There are huge audiences now watching these video gaming matches, the big ones get the same as the Olympics and the soccer World Cup. This is unlocking new revenue potential such as media rights, merchandise, ticket sales and advertising.
I think video gaming is both a defensive area and growth area. That’s a key reason why I like the ESPO ETF as an ASX growth share.
Some of the businesses in this portfolio are: Nvidia, Ubisoft, Bandai Namco, Nintendo, Activision Blizzard, Take-Two Interactive and Electronic Arts.
The sector has been growing revenue at a double digit rate for a long time. The Asian market is proving to be a good growth area for the sector.
I think the group of businesses in the ESPO ETF can deliver long-term compound growth from this level.
