There are some ASX growth shares that may be able to generate good long-term returns.
Businesses that are predominately software in nature may be a good hunting place to look:
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Betashares Nasdaq 100 ETF (ASX: NDQ)
This is an exchange-traded fund (ETF) which invests in 100 of the biggest businesses on the NASDAQ, which is a stock exchange in North America.
You'll find many of the world's biggest technology companies within its holdings including Apple, Microsoft, Amazon, Tesla, Facebook and Alphabet. These businesses have been delivering outperformance over the long-term as the profits grow higher over time.
There are plenty of other large tech stocks within this ASX growth share's portfolio that you've probably heard of including Nvidia, PayPal, Netflix, Intel and Adobe. There are also names like Broadcom, Qualcomm, Texas Instruments, Advanced Micro Devices, Intuit, Applied Materials, Booking Holdings, Intuitive Surgical, MercadoLibre, Micron Technology, Automatic Data Processing, Activision Blizzard and Zoom.
The above businesses are spread across different services like semiconductors, travel, communication, gaming, e-commerce, healthcare and so on.
Betashares Nasdaq 100 ETF has an annual management fee cost of 0.48% per annum, which is cheaper than many active fund managers, although there are some ETFs on the ASX that have lower annual fees.
The net returns of this ETF have been stronger than the ASX over the last few years. Over the last year to 31 December 2020 the net return was 34.8%. In the prior three years, the average net return was 27.4% per annum. Since inception in May 2015, Betashares Nasdaq 100 ETF has made average returns per annum of 21.4%.
Redbubble Ltd (ASX: RBL)
Redbubble is an ASX growth share that is well liked by some fund managers. It is an e-commerce platform that sells a large array of artist-produced products like apparel, stationery, housewares, bags, wall art, masks and so on. Redbubble operates both Redbubble.com and TeePublic.com.
Joseph Kim from Montgomery Investment Management said that: "While Redbubble has clearly been a "stay-at-home" trade, we believe the business has the opportunity to emerge a longer-term structural winner from COVID-19 should it capitalise in the recent spike in user and customer interest as a result of recent lockdown measures."
At the end of FY20, Redbubble had a diversified network of 37 fulfillers across 10 countries and 41 locations. The group fulfils products close to customers, keeping shipping timelines and costs competitive. During FY20, fulfilment capacity was added in Europe, Canada and the United States.
The company added 16 new products across Redbubble in FY20, including face masks in April 2020. Each time Redbubble adds a new product line, it opens up more addressable market for the company to target.
In FY20, Redbubble saw 36% growth of marketplace revenue to $349 million. Gross profit went up 42% to $134 million. Operating earnings before interest, tax, depreciation and amortisation (EBITDA) grew 141% to $15.3 million and the ASX growth share generated $38 million of free cashflow.
At the time of the FY20 report release, Redbubble CEO Martin Hosking said: "2021 represents a year of opportunity for the business. We are positioned to build on a decade of momentum and aggressively pursue the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms."
In the FY21 first quarter, the company saw growth continue at a fast pace. Excluding a positive adjustment relating to delivery times, normalised marketplace revenue (paid) grew by 98% to $139.3 million and gross profit went up 118% to $59.6 million. Redbubble generated earnings before interest and tax (EBIT) of $17.2 million.
The ASX growth share plans to continue to invest in the customer experience to improve loyalty, retention and ensure long-term higher levels of growth. It wants to extend the market leadership that it currently has.
