Top performing fund names 2 cheap and growing ASX retail shares to buy now

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In its August monthly update, the QVG Opportunities Fund has named two cheap and growing ASX retail shares to buy.

The Adairs Ltd (ASX:ADH) share price rose 13 per cent in August. Adairs shares are currently trading at $2.52, up 73 per cent over the past 12 months.

In late August, the homewares retailer reported record sales, profits and dividends for FY18.

Sales were up almost 19 per cent, with like for like sales growing at a very impressive 14 per cent. Adairs profits jumped 45 per cent higher to $30.6 million and the company increased its full year FY18 fully franked dividend by 69 per cent to 13.5 cents per share.

Adairs has 167 stores in Australia and New Zealand. QVG says the company has been successful at taking market share via exclusive product, growing online sales and category expansion beyond their core Manchester ranges.

With industry-leading online sales penetration approaching 15 per cent, larger stores allowing for category expansion, 6-8 new stores per annum, and share gains from department stores, QVG believes Adairs can grow earnings at double-digit rates over the medium term.

The fund says ADH shares trade on 8x forward EBIT, a 35 per cent discount to small cap industrial peers.

Adairs shares trade on an attractive fully franked dividend yield of 5.35 per cent.

The Speciality Fashion Group Ltd (ASX:SFH) share price rose almost 14 per cent in August. Speciality Fashion shares are currently trading at $1.30, and have soared 333 per cent over the past 12 months.

In late August, the fashion retailer reaffirmed its intention to start paying dividends again over the coming year.

In May, Speciality Fashion sold its Katies, Millers, Crossroads, Autograph and Rivers brands to focus solely on plus-size women’s apparel chain City Chic.

QVG said Speciality Fashion was a “compelling” stock, with the fund recently increasing its holding.

The fund said City Chic is a high margin business with a very high proportion of online
sales, global growth and store roll out potential and management who are fanatical about understanding the needs of their customer.

QVG says that with just one broker covering the Specialty, a less than $250m market cap and with the earnings power of City Chic having long been hidden within the previously larger SFH Group, its not hard to see why the shares are under-appreciated.

QVG says Speciality Fashion shares trade on just 10x EBIT.

The QVG Opportunities Fund performance for August was a gain of 4.80 per cent (net) versus the benchmark rise of 2.49 per cent. This takes the fund’s first year performance to a gain of 54.7 per cent versus a rise of 22.3 per cent by the Small Ords Accumulation Index. 

Here’s how you can strike it rich in the share market…

The best way to strike it rich in the share market is to buy shares that are not only cheap, but growing quickly.

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Best of all, the report is absolutely free, exclusively for readers of The Capital Club.

In this comprehensive free report, you’ll find the name of one ASX gold stock that’s not only profitable, but trading at less than 4 times forecast profits.

You’ll also discover the name of a company one fund manager has called the cheapest stock in the ASX 100, and you’ll read about the three catalysts that could push the share price higher in the next six months.

Finally, the report names one of the cheapest retailers trading on the ASX, a company that just picked up the assets of a distressed competitor on the cheap, paying just 2 times earnings. No wonder one top fund manager thinks its share price could at least double.

With the share prices of each of these 3 companies having the potential to double or more, you’ll want to act now. Simply click here or the button below, enter your email address, and this free report will be instantly sent to you.

See the 3 stocks

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au