If you have $2,000 to invest then I think there are a number of smart ASX shares that you could buy.
The share market has recovered strongly from the COVID-19 crash, but I think there are several ASX shares that would still make great buys today:
Citadel Group Ltd (ASX: CGL)
Citadel is an ASX tech share that provides software to essential sectors like defence, education and healthcare. I think its earnings are fairly defensive with the high-quality clients it works with. A large amount of its revenue comes from government-related entities.
One of the main reasons why I think Citadel looks like a good buy is that it's trading cheaply. At the current Citadel share price it's trading at 13x FY22's estimated earnings.
I'm also excited by the UK healthcare software acquisition called Wellbeing. It increases Citadel's recurring revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) margin. Plus, it will allow management to help sell Citadel's software into the UK market and sell the Wellbeing software into Australia. The combined package can be sold into other markets.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an electronic donation business. Its main client base is the medium and large church sector in the US. Management think this is a big opportunity for the ASX share, which is why the company has a long-term target of US$1 billion of annual revenue.
I was very impressed by the scalability of Pushpay in FY20. It increased its gross margin from 60% to 65% in just one year. In FY21 the ASX share is hoping to double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to US$50 million to US$54 million.
Church donations could prove to be a pretty defensive source of earnings for Pushpay in my opinion. I think it could become even more profitable as it grows larger. The current pandemic circumstances are very unfortunate, but they're helping bring forward adoption of Pushpay.
At the current Pushpay share price it's trading at 33x FY22's estimated earnings.
Bubs Australia Ltd (ASX: BUB)
Bubs is an infant formula business with plenty of growth potential. It's growing strongly overseas with Asian consumers rapidly taking up its goat milk formula. In the fourth quarter of FY20 Bubs said Chinese direct sales increased by 26% and other export market sales rose by 71%. Vietnam is one market that Bubs is finding good early traction in.
The company is reporting steady growth of its gross profit margin which could go even higher because its infant formula has a much higher gross margin than its other products. Higher margins is good for the bottom line. Bubs has good control over its supply chain through acquisitions with access to the largest goat herd in Australia. It also owns its own Chinese-approved manufacturing facility.
At the current Bubs share price of $0.92 I think it has a lot of growth potential over the next five years.
City Chic Collective Ltd (ASX: CCX)
City Chic is one of the few ASX retail shares I'd be willing to buy. It's a plus-size women's fashion retailer of clothes, footwear and accessories.
The company is doing incredibly well at increasing its sales and distribution network in the northern hemisphere. It's working with both US and European partners to sell products. The core business is going well, even through the pandemic, thanks to a high level of online sales. City Chic was positioned well coming into this difficult period.
I'm particularly excited by the ASX share's strategy of buying financially-distressed competitors in the US. City Chic can turn them into online-only offerings which decreases costs substantially. It should lead to the company steadily building market share in the US.
City Chic is currently trading at 24x FY22's estimated earnings.
MFF Capital Investments Ltd (ASX: MFF)
I think that MFF Capital is one of the best listed investment companies (LICs) on the ASX. It's very capably run by Chris Mackay. He has led the LIC to total shareholder returns of 18.1% per annum over the past decade. That's a great run.
This investment choice is a bet on Mr Mackay continuing the strong run over the next decade. MFF Capital has moved to a large cash position which means the ASX share is well placed to weather any market downturn later this year – it also gives lots of financial ammunition for MFF Capital to buy beaten-up shares at lower prices.
MFF Capital recently announced it intends to keep increasing its dividend. Its two biggest share holdings are currently Visa and Mastercard – two quality businesses.
BetaShares Global Quality Leaders ETF (ASX: QLTY)
I think that it's quality businesses that are best suited to get through whatever comes next. Businesses that can keep growing, despite COVID-19, are attractive propositions.
This exchanged-traded fund (ETF) is invested in shares that rate well on four metrics: return on equity (ROE), debt to capital, cash flow generation ability and earnings stability.
The businesses that feature at the top of this ETF's holdings are indeed quality. It owns names like Nike, Intuit, Intuitive Surgical, Nvidia, Apple, Accenture and Adobe. These aren't ASX shares, these are some of the best businesses in the world.
It has performed well since inception in November 2018 with net returns of around 19% per year. Past performance isn't a guarantee of future performance, but I think these quality names can keep on producing for the long-term.
Vitalharvest Freehold Trust (ASX: VTH)
Vitalharvest is an agricultural real estate investment trust (REIT). It owns berry and citrus fruit farms.
The REIT generates both fixed rent and variable rent in the form of a profit share from its main tenant.
At the current Vitalharvest share price, the ASX share is trading at a 19% discount to the net asset value (NAV) at 31 December 2019. This is a large discount, assuming the NAV hasn't changed negatively. The NAV may even have risen.
There is a new manager of Vitalharvest which is looking to target more acquisitions across the food logistics process with potential buys relating to food processing and storage.
As a bonus, Vitalharvest offers a distribution yield of 6.2%.
Foolish takeaway
I think each of these ASX shares has the potential to beat the overall ASX over the next 12 months and the longer-term. At the current prices I'd probably go for Citadel first, along with Pushpay and Bubs. I think those smaller businesses have a lot of long-term growth potential.
