Day: January 20, 2021

Why the Genetic Signatures (ASX:GSS) share price surged 6% higher today

pair of gloved hands holding cotton swab and test tube towards car window representing Anteotech share price

The Genetic Signatures Ltd (ASX: GSS) share price has been pushing higher with the market today.

In afternoon trade the specialist molecular diagnostics company’s shares are up 3% to $1.96.

Though, at one stage today, the Genetic Signatures share price was up as much as 6% to $2.02.

Why did the Genetic Signatures share price jump higher today?

Investors were buying the company’s shares following the release of a second quarter update that revealed further strong sales growth.

According to the release, Genetic Signatures delivered a 738% increase in quarterly revenue to $8.2 million. This led to the company reporting record unaudited half year revenue of $18.7 million, which was up 638% on the prior corresponding period.

This impressive growth has been driven largely by strong demand for its COVID-19 testing kits. Genetic Signatures designs and manufactures a suite of real-time Polymerase Chain Reaction (PCR) based products for the routine detection of infectious diseases under the EasyScreen brand.

Pleasingly, this strong sales growth led to the company achieving its second consecutive cashflow positive quarter. It added $4.1 million in net cash from operating activities, including its $2.6 million R&D tax refund.

At the end of the period, the company had a cash balance of $36.3 million and no debt.

Management commentary

Genetic Signatures’ CEO, Dr John Melki, commented: “We pleased to report record half year revenue and a second quarter of positive cash flow. The recent supply agreement with Boston Medical Center has already seen two orders fulfilled, while a second US-based customer has been acquired. The investments made in personnel and warehousing facilities provides a strong foundation for Genetic Signatures as our team continues to pursue active leads in the North American market.”

“Recent developments in the United Kingdom, as well as localised outbreaks in Australia, have shown broad testing remains a pivotal tool in responding to COVID-19. We see strong demand continuing in the future as governments pursue various testing strategies. Genetic Signatures remains focused on both ensuring the consistent and reliable supply of test kits to support these ongoing measures and introducing these customers and others to the benefits of the broader EasyScreen suite of diagnostic tests.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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3 reasons why Soul Patts (ASX:SOL) is a great ASX dividend share

Soul Patts share price

There are some key reasons why Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a popular ASX dividend share. This business is also called Soul Patts, for short.

What is Soul Patts?

Soul Patts is an investment conglomerate that has been listed since 1903.

Its leadership has consisted of successive family members who value the history of the company.

More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.

The company started out as an Australian pharmacy business. It still has indirect investment exposure to pharmacies with an investment in Australian Pharmaceutical Industries Ltd (ASX: API).

Here are some reasons why Soul Patts is an interesting ASX dividend share:

Diversified portfolio

A diversified portfolio means that the diversification may be able to lower risks when it comes to specific company risk or industry risk.

Soul Patts is invested in a variety of different industries such as telecommunications, building products, resources, listed investment companies (LICs), agriculture, swimming schools, financial services, healthcare, pharmacies and electrical and electronic products.

Those industries are represented by both ASX shares and non-ASX and unlisted companies. Its listed holdings include TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), API, New Hope Corporation Limited (ASX: NHC), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT), Clover Corporation Limited (ASX: CLV) and Palla Pharma Ltd (ASX: PAL).

Some of the non-ASX share businesses include Round Oak Minerals, Apex Healthare, Ampcontrol and Aquatic Achievers.

Investment style

Its objective is to deliver superior returns to our shareholders by creating capital growth along with steadily increasing dividends.

Soul Patts is a long-term investor with a broad mandate. The flexible mandate allows Soul Patts to invest in companies at an early stage and grow with them over the long-term.

Its approach is to be counter cyclical and be focused on value. For example, it recently made its investment into agriculture at a time when Australia was going through one of its worst droughts.

Soul Patts described itself as a trusted partner that actively assists its portfolio companies in accessing growth capital and undertaking strategic acquisitions.

The ASX dividend share has been a long-term investor in TPG, ever since it was a much smaller company. The New Hope investment was another time Soul Patts invested in a business when it was much smaller.

Long-term dividend record

Soul Patts has two different dividend records.

One of the records that the ASX dividend share likes to tout is that it has increased its dividend every year since 2000. That actually means that Soul Patts has the longest dividend growth streak on the ASX. Ramsay Health Care Limited (ASX: RHC) used to have a strong dividend record too, but that ended in 2020 due to COVID-19.

The other dividend record that Soul Patts has is that it has paid some sort of dividend every year going back to 1903, including through world wars, recessions and the Spanish Flu.

Soul Patts funds its growing dividend from its investment portfolio income. Businesses like TPG and Brickworks provide the bulk of the money used to fund the growing dividend. The rest of the net cashflow is re-invested into other opportunities for more growth.

In terms of the current dividend yield at the current Soul Patts share price, it has a trailing grossed-up yield of 3%. If the FY21 dividend is 62 cents per share, then it has a forward grossed-up dividend yield of 3.1%.

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Returns As of 6th October 2020

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Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Top brokers name 3 ASX shares to sell today

Young man looking afraid representing ASX shares investor scared of market crash

On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX shares that have just been given sell ratings by brokers are listed below. Here’s why these brokers are bearish on them:

Blackmores Limited (ASX: BKL)

According to a note out of Citi, its analysts have retained their sell rating and $60.50 price target on this health supplements company’s shares. While the broker believes that Blackmores’ earnings are likely to have bottomed in FY 2020, it is waiting for evidence of this before becoming more positive on the company. Especially given the difficulties it has been facing in the key China market. Citi appears concerned this could stifle its top line growth. The Blackmores share price is trading at $71.95 today.

Commonwealth Bank of Australia (ASX: CBA)

A note out of Morgan Stanley reveals that its analysts have retained their underweight rating but lifted their price target on this banking giant’s shares to $78.50. According to the note, the broker is expecting the banks to outperform the market this year. However, it sees more value in other banks and feels Commonwealth Bank’s shares have now peaked following their recovery over the last three months. In light of this, the broker is sticking to its underweight rating for now. The CBA share price is fetching $85.23 this afternoon.

Scentre Group (ASX: SCG)

Analysts at UBS have downgraded this shopping centre operator’s shares to a sell rating with an improved price target of $2.58. According to the note, the broker made the move on valuation grounds following a strong rise in the Scentre share price since the start of November. UBS believes that the retail re-opening trade has now played out and its shares have peaked. The broker also has concerns over occupancy rates due to COVID-19. The Scentre share price is trading at $2.82 on Thursday.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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What a dramatic day in the US could mean for ASX shares in 2021

US flag and senate building with blue sky in background

At 4 am this morning (our time), Joe Biden took the oath of office to become the United States of America’s 46th President. President Biden’s term runs until 20 January 2025.

Regardless of personal feelings or political views, this change is a monumental one. A new administration means new domestic policies for the US economy. This includes new paradigms in foreign relations for the United States.

For this reason, there will be some new angles for ASX investors to consider today as a new post-Trump era begins.

President Biden has apparently already hit the ground running. According to reporting in The Guardian today, Biden has already signed a raft of ‘game-changing’ executive orders on his first day as president. These include mandating the use of face masks across all federal government properties and re-entering the US into the Paris Climate Accord.

Regarding the latter, the report notes that, as President, Biden will be able to “unilaterally limit fossil fuel development on federal lands”. His administration will also be able to mandate “tougher rules for fuel efficiency in cars and trucks”. Tougher congressional action on climate change appears off the table for now.

The 2 chambers of congress remain very evenly divided. So expansive legislative action looks to be a tough ask at this point. Even so, Biden is set too “reverse ‘more than 100’ climate-related policies enacted by Trump” via executive action.

US stimulus set to be debated

Another one of the new president’s goals looks set for an interesting arena over the coming weeks.

Last week, we discussed the details of Joe Biden’s newly-proposed US$1.9 trillion stimulus package. This package reportedly is a priority for the new administration. It may find its way through the close dividend congress, given that the Democratic Party assumes a technical majority in the Senate today.

An economic priority for the Biden Administration is a new round of infrastructure spending. Reporting from CNN tells us that a large infrastructure bill is likely to be a close second priority behind Biden’s coronavirus stimulus package.

CNN notes that infrastructure spending tends to have high levels of bipartisan support in congress. It also notes that any package will probably include funding for traditional infrastructure like roads, railways and bridges. In addition, more modern infrastructure like 5G networks may be included.

Is ‘reflation’ on the cards for the US?

So what does all this mean for ASX investors?

Well, the US is still the largest economy in the world. As such, any significant spending measures that give the US economy a sugar hit bode well for the Australian economy as well. If the large stimulus package is passed, it will also likely give the US share markets a boost as well. That’s always good news for ASX investors in turn.

This view is backed up by an analysis of the inauguration from BetaShares. BetaShares reckons that increased levels of stimulus, enabled by Democratic control of Congress, has the potential to lead to a ‘reflation’ of the US economy.

That would see inflation rise.  In turn, we could see interest rates ‘normalise’ from their current near-zero levels. If that does come to pass, BetaShares expects it will benefit the entire US market, albeit at the expense of the biggest tech companies:

More economically-sensitive companies with near-term cash flows can become increasingly attractive to investors. This could potentially see a renewed and sustained rotation away from the mega-cap tech companies towards the broader market.

A caveat to keep in mind though: the stimulus will likely increase the already-massive US deficit further. This could lead to a weakening of the US dollar. In turn, this will cause our dollar to commensurately rise. That’s not such good news for the Aussie economy. 

New infrastructure spending might be coming too

Turning away from the macro now. If the US does pass an infrastructure spending package, it will likely be good news for a dominant sector of the ASX resources.

Infrastructure requires large amounts of steel and other commodities. Even if the US chooses to pursue a ‘buy American’ policy, new infrastructure spending definitely won’t hurt the global iron ore price for example.

Thus, any new infrastructure spending will likely benefit ASX giants like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).

However, it’s possible that the Biden administration’s position on fossil fuels might hurt some other ASX resources companies.

We’re talking about companies like Woodside Petroleum Ltd (ASX: WPL) or Whitehaven Coal Ltd (ASX: WHC). Government-wide attitudes like what Biden is promising a have far-reaching effects, and investors would probably do well to keep this in mind.

In turn, this new attitude could help ASX renewable energy shares like Tilt Renewables Ltd (ASX: TLT). Even more so if the new administration’s attitude prompts our own Federal Government to ramp up action on climate change.

Foolish takeaway

Changes of government in the world’s largest economy can have wide-reaching and hard-to-gage consequences.

Thus, I think every ASX investor should take note of what is happening over in the US right now.

It could well influence where the ASX goes over the next 4 years and beyond!

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*Returns as of June 30th

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What a dramatic day in the US could mean for ASX shares in 2021 appeared first on The Motley Fool Australia.

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