Insights

The smartest ASX shares to buy if you have $2,000

These 2 ASX shares could be the smartest ideas to buy if you $2,000 to invest. I particularly like tech share Pushpay Holdings Ltd (ASX:PPH).
The post The smartest ASX shares to buy if you have $2,000 appeared first on Motley Fool Australia. –

illustration of rocket ascending increasing piles of coins representing asx shares involved in space tech

There are a few ASX shares out there that could make very smart buys with $2,000.

Here are my two top long-term ideas:

MFF Capital Investments Ltd (ASX: MFF)

I think that MFF Capital is one of the most promising ASX shares. I think it’s a very promising listed investment company (LIC) which is operated by Chris Mackay, one of the best Australian fund managers in my opinion.

MFF Capital invests in global shares. I believe MFF Capital is a good way to diversify your portfolio and hopefully get strong returns. According to CMC, it has delivered average total shareholder returns per annum of 17.4%.

The strong return has been down to good picks by MFF Capital, namely Visa and Mastercard which are the biggest positions and have been long-term positions. These two payment giants are benefiting from very powerful tailwinds as more transactions go cashless and there’s more online shopping.

Visa and Mastercard are still the biggest positions for MFF Capital – combined, they amount to just over 35% of the portfolio at the end of September 2020.

The ASX share has a really good portfolio in my opinion, it’s more than just Visa and Mastercard. Its other portfolio holdings include: Home Depot, CVS Health, Facebook, Berkshire Hathaway, Microsoft, CK Hutchison, Flutter Entertainment, L’Oreal, JP Morgan Chase, Prosus, Itochu, Mitsubishi, Asahi, Intercontinental Exchange, Lloyds Banking, Lowe’s, US Bancorp, Mitsui & Co, Sumitomo and Schroders.

MFF Capital has been steadily investing its large cash pile into shares over the past few months. It still has a fairly high cash position of 28.9% at the end of September 2020 which could be useful for buying opportunities over the coming weeks.

The ASX share is looking to grow its half-yearly dividend to 5 cents per share over the next few years. At the current MFF Capital share price that would be a future grossed-up dividend yield of 5.5%. It’s priced at a 9% discount to the net tangible assets (NTA) at 30 September 2020.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is one of my highest-conviction ASX share ideas at the moment.

The electronic donation business has done very well to try to help US churches during this difficult COVID-19 period. It is helping large and medium US churches to receive digital donations – in FY20 it grew total processing volume by 39% to US$5 billion.

One of the attractive features about Pushpay’s technology is that it allows the church to livestream the service to its congregation and stay connected.

Total revenue increased by 32% to US$129.8 million, which helped grow the gross profit margin by five percentage points from 60% to 65%. It’s the rapid increase in the gross margin that is one of the main reasons I’m interested in Pushpay. More gross profit should mean fast growth of the net profit as well.

Over the long-term, the ASX share is aiming for US$1 billion of annual revenue. Pushpay should be able to materially increase its margins as it gets closer to that target.

I like the optionality that Pushpay has in the future. At the moment it’s aiming for large and medium US churches. Other religions in the US could be a future target. There are other churches in other countries it could aim for. There are plenty of non-religious donation sectors that Pushpay could try to expand into in the future.

The ASX share’s core product has a long growth runway and it seems it has very strong economies of scale. In FY21 alone it’s looking to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to between US$50 million to US$54 million.

At the current Pushpay share price it’s trading at 38x FY21’s estimated earnings.

Foolish takeaway

I really like both of these ASX shares at the current prices. MFF Capital offers a lot of global diversification, low fees and a promising future dividend yield. However, Pushpay would be my first pick because of how much profit margin improvement it could achieve in the coming years.

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Tristan Harrison owns shares of Magellan Flagship Fund Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The smartest ASX shares to buy if you have $2,000 appeared first on Motley Fool Australia.

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