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2 ASX shares I’d buy in May 2023

There’s uncertainty about particular areas of the Australian economy, but I think there are still some great opportunities out there at good prices. I’ve got my eyes on these ASX shares in May 2023.

Brickworks Limited (ASX: BKW)

Brickworks is one of the biggest manufacturers of building products in Australia.

It is the market leader in Australia in brickmaking, with brands including Austral Bricks and Bowral Bricks. The ASX share has a strong presence in masonry with brands like Austral Masonry and Urban Stone. It’s one of the main players in roofing with Bristle Roofing. Other brands in different building products include Terracade, Southern Cross Cement and Capital Battens.

I think Australia’s rising population will help demand for its Australian building products division. For me, it’s a similar story with its American brickmaking division – a strong market position, a growing addressable market and Brickworks is working on improving the economics of that business.

I love that Brickworks owns a significant number of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, an investment business. This adds diversification and reliability to Brickworks’ asset base, and can provide a growing dividend plus long-term capital appreciation. I believe WHSP has a promising future.

The ASX share also has a growing portfolio of industrial properties in partnership with Goodman Group (ASX: GMG). Each completed property is adding significant value to Brickworks’ asset base, and unlocking a new stream of rental profit. There are several other property estates to be developed.

On top of all that, it hasn’t cut its dividend for four decades, so there’s a good dividend payer here as well.

Xero Limited (ASX: XRO)

Xero is one of the best ASX shares in my view. It does have a valuation that reflect this, but I don’t think the market is fully reflecting how profitable the business can become if it can keep growing its subscriber base.

The company provides cloud accounting and business operations software. It can significantly reduce how much time it takes to get the accounting done, it provides automation tools for reminding customers to pay their invoice, as well as many other useful tools. It’s proving to be very popular, its global subscriber base keeps growing.

Xero has recently said that it’s going to balance growth with profitability, by reducing the amount it spends on growth compared to how much revenue it brings in. I think the amount of profit that Xero is going to generate will excite investors when they see how much cashflow it starts making.

I believe Xero could be one of the few ASX tech shares that could go on to be worth over $50 billion, if it can keep growing its subscriber numbers. Its very high gross profit margin can enable it to generate a strong EBIT (EBIT explained) margin.

$50,000 per year in passive income from shares? Yes, please!

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At the time of publishing, Jaz owns shares of Brickworks and WHSP.
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