The two ASX shares in this article could be cheap and have the potential to generate good returns over the next few years.
Cheap doesn’t always mean good. But I do think that the below two investments could be solid ideas.
Adairs Ltd (ASX: ADH)
ASX retail shares are typically priced at a lower earnings multiple compared to other industries.
The Adairs share price has fallen around 30% since the start of the year.
According to Commsec, the Adairs share price is valued at 7 times FY24’s estimated earnings with a projected FY24 dividend yield of 15%, including the franking credits.
I think there’s plenty to like about Adairs. The company says there is a link between the total floor space and sales. So it’s planning to open more stores.
The ASX share also says it’s upsizing some of its stores because bigger stores are a lot more profitable. One benefit is being able to display more of its products.
It’s doing the right things to connect with customers. It’s growing its membership program while also ensuring a quality e-commerce experience.
The company is also working on becoming more efficient with a new national distribution centre which allows it to manage inventory better, fulfil orders quicker and also lower costs.
I think that this cheap ASX share has a compelling future.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This exchange-traded fund (ETF) may not initially strike investors as a cheap option.
But remember, cheap doesn’t just mean a low price/earnings ratio
. It can simply mean that an investment is cheaper than what investors think it’s worth.
For a business to make it into the portfolio, it has to be at an attractive value compared to Morningstar’s estimate of fair value.
Some of its top holdings include Compass Minerals, Merch & Co, Constellation Brands, Philip Morris, Western Union, Kellogg, Campbell Soup, Medtronic, Zimmer Biomet, Emerson Electric, Polaris and Amazon.
But there is another factor regarding the MOAT ETF. Analysts have made a judgement that each of these businesses have economic moats, also known as competitive advantages, that are expected to endure for at least the next decade and perhaps longer.
The net returns have been good. Since inception, the MOAT ETF has delivered an average return per year of 19.2%. That’s after the management fees of 0.49% per year.
