Day: 22 May 2020

The Myer Holdings Ltd (ASX: MYR) share price was one of the standout performers on the ASX today, closing 7.41% higher after being up by as much as 15.56% in early afternoon trade.

The department store operator released a COVID-19 trading update at midday today, flagging the reopening of all stores by the end of next week.

What did Myer announce?

Taking into account government measures across the different states and territories of Australia, Myer has reopened 24 stores over recent weeks on a staged and trial basis.

Given the easing of restrictions across the nation, Myer now has its sights set on a full-scale reopening. It will reopen all of its remaining stores from next Wednesday 27 May, aside from Karrinyup in Western Australia, which is expected to reopen on 30 May after the completion of refurbishment works. Additionally, click-and-collect services will be available at all stores.

Stores will operate with enhanced safety and cleaning measures, including increased frequency of cleaning, hand sanitiser stations, social distancing, and contactless payments.

The department store operator closed all stores nationwide in late March, temporarily standing down around 10,000 staff in the process. On 24 April, Myer revealed that its online business had “performed strongly” since the closure of brick-and-mortar stores. The company echoed a similar sentiment today, noting the online platform has “continued to perform strongly” over recent weeks.

Again borrowing from its April announcement, Myer assured investors it is “continuing to take all necessary measures to minimise costs, including engaging in ongoing discussions with suppliers and landlords.”

While the reopening of stores is certainly welcome news for shareholders, an announcement from Wesfarmers Ltd (ASX: WES) might have acted as a further driver in today’s share price rise.

This morning, the ASX conglomerate shared details of a major shakeup in its discretionary retail division. Addressing the unsustainable financial performance of Target, Wesfarmers flagged its intention to close up to 75 Target and Target Country stores.

Given Target stores rival Myer in many locations, this news could have also been lifting the Myer share price higher today.

More reading

• ASX 200 drops 1% on Friday
• ASX 200 down 0.2%: Wesfarmers overhauls Target, Sydney Airport has no plans to raise equity
• Wesfarmers share price lower after announcing major Target overhaul
• 3 high yield ASX dividend shares you can buy right now
• Is the Wesfarmers share price in the buy zone?

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. 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.

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If you’re looking to beat low interest rates with dividend shares, then I think the three listed below would be top options.

Here’s why I think they would be good options for income investors right now:

Coles Group Ltd (ASX: COL)

The first dividend share I would buy is this supermarket giant. I think Coles is a top option due to its defensive qualities and positive long term growth outlook. Combined with its cost cutting plans, I believe Coles is well-placed to grow its earnings and dividends at a solid rate over the next decade. Another positive is its favourable dividend policy of returning upwards of 90% of its earnings to shareholders. Based on this, I expect its shares to provide investors with a fully franked dividend yield of 4.1% in FY 2021.

Rural Funds Group (ASX: RFF)

Another dividend share to consider buying is Rural Funds. It is a property company that owns a diversified portfolio of high quality Australian agricultural assets that are leased to experienced agricultural operators. It generates its revenue from long-term leases across five sectors: almond orchards, cattle assets, vineyards, cotton assets, and macadamia orchards. Due to its lengthy tenancy agreements, Rural Funds has good visibility with its earnings. This means it has been able to provide guidance for the next couple of years. It plans to pay distributions of 10.85 cents per share in FY 2020 and then 11.28 cents per share in FY 2021. This equates to yields of 5.85% and 6.1%, respectively.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A final option for income investors to consider buying is the Vanguard Australian Shares High Yield ETF. I think this exchange traded fund is a top option for investors that don’t have enough funds to diversify their portfolio effectively. This is because it provides investors with exposure to many of the highest yielding blue chip shares on the ASX through a single investment. At present I estimate that its units provide a forward dividend yield of ~4.5%.

More reading

• 3 super strong ASX 200 blue chip shares to buy right now
• Wesfarmers share price lower after announcing major Target overhaul
• ASX retail stocks facing new billion-dollar earnings scare during COVID-19 recovery
• 3 ASX retail shares to own for the next 20 years
• Is the Wesfarmers share price in the buy zone?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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.

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ASX small cap stocks are outrunning their larger counterparts since the bear market bottom on March 23.

The S&P/ASX Small Ordinaries (Index:^AXSO) bounced by nearly 40% since while the S&P/ASX 200 Index (Index:^AXJO) recovered by 22%.

There’s a real chance that smaller stocks can continue to outperform if we get firmer signs of the economic recovery from the COVID-19 pandemic.

That’s a big “if” but for the eternal optimists in us, there are still buying opportunities at the small end of the market even after the big run.

Here are two ASX small caps that brokers are urging investors to buy.

Dirt cheap

One that’s deeply undervalued is mining and construction engineering group NRW Holdings Limited (ASX: NWH), according to UBS.

The broker reiterated its “buy” recommendation on the stock after management’s latest trading update and guidance.

The group reported revenue of $1.6 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) of $177 million for the 10 months to April.

“Annualised EBITDA and EBIT are 8% and 11% below UBSe, respectively,” said UBS.

“However, we expect this would not include claims recovery from higher COVID-19 related operating costs and we estimate profitability has historically been higher in Q4 vs Q3; both suggestive of upside risks.”

The broker’s 12-month price target on NRW is $4 a share.

Buy call retained

Another small cap that issued a trading update is Service Stream Limited (ASX:SSM). The infrastructure services group is forecasting FY20 EBITDA of around $108 million.

That’s below consensus estimates of $116 million and Macquarie Group Ltd’s (ASX: MQG) forecasts of $113.9 million.

The coronavirus fallout is impacting on group performance. The earnings miss is due to higher costs due to safety expenses, clients pausing work and the commencement of minor projects.

“With NBN activations remaining strong through 2H20, we suspect the weakness from delays are mixed and related to some reluctance on decision making from client to pursue projects and to interrupt connections in both utility and telecommunications whilst Australia works from home,” said Macquarie.

That’s good news in the sense that the headwind is transitionary. The broker also pointed out that Service Stream isn’t a beneficiary of the JobKeeper program unlike others. If the lift from the government program was excluded, Service Stream would be in a far superior position compared to peers.

Macquarie still expects Service Stream to be net cash positive by this financial year and reiterated its “outperform” recommendation on the stock with a price target of $2.88 a share.

More reading

• 3 super strong ASX 200 blue chip shares to buy right now
• Why this ASX infrastructure company could help protect your portfolio in a downturn
• Here are all the ASX 200 shares that have doubled or more since the bottom of the bear market
• Is Afterpay an ASX blue chip of tomorrow?
• Brokers name 3 ASX 200 shares to buy right now

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Service Stream Limited. 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 latest ASX small caps broker picks to buy today appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) is home to a large number of quality blue chip shares for investors to choose from.

In fact, there are so many it can be hard to decide which ones to buy.

To narrow things down for you, I’ve picked out three blue chip shares which I think are in the buy zone right now. They are as follows:

Coles Group Ltd (ASX: COL)

I think Coles is a great blue chip option for those searching for a combination of value, growth, and income. At present I feel the supermarket giant’s shares are trading on an attractive valuation in comparison to its peers. Especially given its solid growth potential thanks to its focus on automation, cost cutting, and expansion opportunities. In respect to automation, this focus is expected to lead to margin improvements over the long term. I feel this bodes well for Coles’ dividend growth over the next decade.

Goodman Group (ASX: GMG)

Another blue chip to consider buying is Goodman Group. It is an integrated commercial and industrial property group which owns, develops and manages industrial real estate in 17 countries. Goodman Group has made some very smart investments over the last decade, which I feel positions it perfectly for long term growth. These include gaining exposure to the structural tailwinds of the ecommerce market. Given how quickly online shopping is growing, these assets are likely to be in demand for a long time to come and should underpin solid earnings and distribution growth throughout the 2020s.

REA Group Limited (ASX: REA)

Another blue chip share to consider buying is REA Group. I think the property listings company is a great option due to the resilience of its business model. Even though listings volumes were down during 7% during the third quarter, it didn’t stop REA Group from growing its earnings. The company posted a 1% increase in revenue to $199.8 million and an 8% lift in operating earnings to $119.6 million. And while trading conditions are likely to remain tough in the near term because of the pandemic, I expect its earnings growth to accelerate once the crisis passes. I feel this makes it worth being patient with its shares.

More reading

• Here are all the ASX 200 shares that have doubled or more since the bottom of the bear market
• Is Afterpay an ASX blue chip of tomorrow?
• Brokers name 3 ASX 200 shares to buy right now
• Is Telstra about to be caught in a new mobile phone war?
• ASX 200 down 0.2%: Wesfarmers overhauls Target, Sydney Airport has no plans to raise equity

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended ResMed Inc. 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.

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I’ve been keeping a close eye on what substantial shareholders have been doing recently.

Substantial shareholders are shareholders that hold 5% or more of a company’s shares. These tend to be large investors, asset managers, and investment funds. These shareholders are obliged to update the market when they make any changes to their holdings.

As a result, I feel investors should look to use these notices to their advantage. After all, they show where the smart money is going.

Two notices that have caught my eye are summarised below:

Altium Limited (ASX: ALU)

According to a notice of initial substantial holder, Pinnacle Investment Management has just become a substantial shareholder of this electronic design software company. The notice reveals that Pinnacle has been adding to its position this month, bringing its total holding to 6,931,951 shares. This equates to a 5.29% stake in Altium. The fund manager was buying shares in or around the level Altium’s shares are trading at now. Which would appear to indicate that it believes they offer plenty of upside from here. I certainly believe this is the case and feel Altium is a top buy and hold option thanks to its exposure to the Internet of Things market.

Atomos Ltd (ASX: AMS)

According to a change of interests of substantial holder notice, Ellerston Capital has taken advantage of a pullback in this video hardware technology company’s share price to top up its position. The notice reveals that Ellerston has bought almost 6 million shares over the last couple of months. This lifted its holding to a total of 22,311,112 shares, which equates to 10.58% of its issued stock. The Atomos share price is down 72% from its 52-week high and at a level which this fund manager appears to believe is attractive. Its shares were hit hard after the pandemic shut down its core pro video market. But with economies slowly reopening around the world, this fund manager may be expecting a rebound in sales and its share price in the near future.

More reading

• Is the Altium share price a buy at $36?
• 3 top ASX growth shares that could smash the market in the 2020s
• 3 shares I’d buy if the coronavirus selloff gets worse
• How to become a millionaire with a $5,000 investment in ASX 200 shares each year
• 5 things to watch on the ASX 200 on Thursday

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Atomos Ltd. The Motley Fool Australia owns shares of Altium. 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.

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Is the Altium Limited (ASX: ALU) share price a buy at $36? I think the electronic PCB software business is a great company.

Altium’s share price has been a strong performer over the past couple of months. Since 23 March 2020 the Altium share price has gone up by 45%. That’s strong gains if you bought at the time, but what about now?

There are plenty of reasons to like Altium:

Growing profit margins – A business can grow its profit faster than revenue if the profit margin can increase as economies of scale keep increasing. These are the types of businesses we want to have in our portfolio. Altium is a great example of this effect (in normal times).

Strong balance sheet – It’s the businesses with a strong balance sheet that are able to cope with the coronavirus situation the best. Altium has no debt and a solid pile that was growing, until recently at least.

Excellent management – I think the management is one of they key reasons the Altium share price has done so well over the past decade. They are long-term focused, set tough but attainable goals and are very considered with capital.

Growing dividend – There aren’t many businesses that offer that attractive combination of fast growth and a growing dividend. Plenty of businesses retain all their profit for further growth. But a dividend is a nice way of getting returns without resorting to selling shares.

So Altium’s share price is a buy today?

I’m confident about Altium’s long-term future. The issue I see is the short-term. Altium has already warned that it’s having to reduce prices to continue to attract new subscribers. That’s the right thing for the long-term – prices can be increased in the future. But it will hurt Altium’s profit in FY20 and maybe even FY21.

We don’t yet know how much profit pain that will entail. It’s true the Altium share price is being helped by the current ultra low interest rates. However, we should be cautious about businesses that are being priced with not much downside. I’d be interested if Altium’s share price was under $30, so I’m going to wait for a better buying opportunity.

More reading

• Fund managers have been buying these ASX shares
• 3 top ASX growth shares that could smash the market in the 2020s
• 3 shares I’d buy if the coronavirus selloff gets worse
• How to become a millionaire with a $5,000 investment in ASX 200 shares each year
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. 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.

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Shares in ASX essential network services business Service Stream Limited (ASX: SSM) look set to end the week down more than 6% despite the company’s attempts to reassure the market that it hasn’t been experiencing any overly negative financial impacts from COVID-19.

Service Stream designs, constructs, operates and maintains essential telecommunications and utilities infrastructure, including water and gas distribution networks. With large portions of the Australian population still more or less confined to their homes, people are relying on this infrastructure now more than ever.

In a business update released to the market on Thursday, Service Stream stated that demand for its services had remained strong throughout the pandemic. However, it did note that the costs of delivering those services had increased, and some “minor” projects had been delayed or paused.

Service Stream had originally forecast operational earnings before interest, tax, depreciation and amortisation expenses (EBITDA) for the second half of FY20 to be in line with the first half result of $58.1 million. Due to the impacts of the coronavirus pandemic, the company now expects full year operational EBITDA to be $108 million, which would imply a second half operational EBITDA in the range of $49.9 million, or a decline of a little over 7% versus the first half.

The market reacted negatively to the news, with the Service Stream share price dropping almost 6% on Thursday. However, while it’s disappointing that the company is now forecasting a drop in EBITDA, Service Stream does point out that operational EBITDA of $108 million for the year would still be a record result for a growing company.

Should you invest?

Service Stream doesn’t provide the exciting growth narratives of coronavirus market darlings like Kogan.com Ltd (AS:KGN), Appen Limited (ASX:APX) or NextDC Limited (ASX:NXT). But the fact that it is flying under the radar for many investors works in its favour.

Shares in many of those sexier tech companies are now trading higher than they were pre-coronavirus, which seems unsustainable as the country heads into a potential economic recession. For example, despite its soaring share price, Kogan relies on strong consumer sentiment, which may not exist once the economic impacts of the coronavirus pandemic are fully realised.

Service Stream, on the other hand, should have a much more reliable source of revenue. Even in periods of economic stress and uncertainty, people will continue to depend on the infrastructure that supports necessities like water, gas and telecommunications.

Service Stream could make a good defensive option for investors looking to safeguard their portfolio against a severe downturn. Plus, at its current price of around $2.00 it is still well short of the 52-week high price of $3.06 it reached back in August – meaning it could represent great value.

More reading

• Why Afterpay and these ASX shares just hit multi-year highs
• ASX 200 drops 0.4%, Chinese threat to Australian iron
• If you invested $10,000 in the Kogan IPO, this is how much you’d have now
• Why the share price of this top dividend share just sank 6%
• 3 mid cap ASX growth shares to buy for monster returns

Motley Fool contributor Rhys Brock owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Service Stream Limited. 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.

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