Day: September 9, 2021

If there is another stock market crash, will we learn from our mistakes?

arrow and dissapointed man showing the stock market crashing

Much like the seasons, stock market crashes come and go. However, unlike the predictable nature of changes in season, the market’s next move is near impossible to foresee.

As long-term investors, we accept this unstructured cyclic pattern that ebbs and flows as it pleases. One thing we know for sure is that time and time again crashes eventually give way to new highs.

Conveniently, we don’t need to look too far back to reflect on such an occurrence. It was 17 months ago that the S&P/ASX 200 Index (ASX: XJO) capped off its ~32% COVID-19 induced crash. An event that unfolded in the space of a mere 28 days from top to bottom. Yet, here we are 17 months later and 53.5% higher.

Looking back, we now have the benefit of hindsight — and while that may not be helpful to the decisions made back in 2020, it can be put to good use in the event of any future stock market crashes.

Lessons worth remembering for another stock market crash

Timing the market is a fool’s errand

It seems obvious, but it must be said — no one can accurately predict the future, and certainly not consistently. Occasionally, we might ‘luck out’ and sell out of a company at the top, or buy-in towards the bottom. However, this strategy comes with its flaws.

See, we humans are emotional beings. As much as we’d like to believe we can make completely rational decisions, our instinctual nature tends to override our logical decision-making. The problem with this is that when the market is falling, it instils fear. We can’t help but be overwhelmed with the numbing distress of losing our hard-earned money. As a result, we often avoid the stock market completely when it is crashing.

However, the fact is, the days of the greatest historic stock market returns are wedged in between some of the worst.

In other words, you either need a DeLorean from Back to the Future to pick which days to buy and sell. Or you employ the strategy of dollar-cost averaging and settle in for the long haul. One of those two options is feasible at the time of writing this article.

Allocate appropriately based on your own circumstances

The next lesson is more of a personal consideration. When investing and the market is going up, it is easy to get carried away. It is important to consider how a stock market crash would impact your own situation and to invest accordingly.

In terms of cash, a good rule of thumb is to conserve roughly 6 months’ worth of expenses. This could be higher or lower depending on your circumstances. The importance of this emergency fund is to ensure that we as investors are not forced to sell our investments while they are in the doldrums. Because, as we discussed above, it could be soon after selling that they bounce back.

At the same time, having some extra cash on the sidelines affords us the ability to take advantage of depressed share prices, if we so please.

Additionally, taking an audit of our investment allocations in terms of sectors can also be important. For example, if a portfolio was heavily weighted towards retail shares, would we still be able to sleep at night if it was particularly hit hard during a stock market crash?

This self-assessment ensures that we can stomach the risk we have assigned ourselves. If we can’t, then it jeopardises the ability to stay the course through market volatility.

Look at the business, not the share price

Lastly, our final lesson is helpful in aiding in our rational decision-making during irrational market moments.

While the share price matters to investors in the long term, it can be a distraction in the short term. At the end of the day, we are investing in businesses and people, not just ticker codes on a screen.

Amazon.com, Inc. (NASDAQ: AMZN) is a good example of this. During the dot-com crash, the company’s share price plummeted 80%. Yet, all the internal metrics relating to sales, customer numbers, etc. were in an upwards trend.

It is during market crashes that a disconnect between the share price and the business fundamentals can occur. In the words of Jeff Bezos, “The company is not the stock, and the stock is not the company.” So, in saying that, it can be helpful to look at the progress of the company during such times.

Avoiding a stock market crash

This is a trick question, there is no avoiding stock market crashes as a long-term investor. Instead, we should only hope to navigate them better. Like a fisherman going out to sea — we are likely to encounter the occasional storm and rough waters — but as long as we have come prepared, then we can be confident in our actions.

Ironically, rough waters can be even better for fishing, as choppy conditions provide good conditions for fish to be more active in the water. So, with our lessons in mind, we should be equipped to cast a line in the next stock market crash.

The post If there is another stock market crash, will we learn from our mistakes? appeared first on The Motley Fool Australia.

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Which ASX 300 shares are leading the way as the top movers on Friday?

hand selecting happy face from choice of happy, sad and neutral faces signifying best ASX shares

The S&P/ASX 300 Index (ASX: XKO) is on the rebound today, following yesterday’s 1.9% market sell-off.

In the first few minutes after the market open, the ASX 300 soared 0.81% higher to 7,432 points. However, the index has lost some of these gains, now trading up 0.36% to 7,398 points.

Let’s take a look at which ASX companies are making moves on the ASX 300 chart.

Vulcan Energy Resources Ltd (ASX: VUL)

Investors are fighting to get a piece of the lithium developer, sending the Vulcan share price up 12.5% to a record high of $16.45 today.

The company hasn’t released any news since its corporate presentation last week, which highlighted its Zero Carbon Lithium strategy. Vulcan recently entered into a 5-year strategic partnership and a binding lithium offtake term sheet with Renault Group.

It’s worth noting that Vulcan shares are now up about 480% since the start of this year.

Liontown Resources Limited (ASX: LTR)

The Liontown Resources share price is also pushing ahead on Friday, up 8.53% to $1.15.

The emerging lithium producer also released a presentation last week. The company provided details on its demerger with a subsidiary, Minerals 260.

Liontown Resources stated it will focus on developing its world-class Kathleen Valley Lithium Project, while Minerals 260 will concentrate on exploring the PGE-nickel-copper-gold system in the Julimar region.

Novonix Ltd (ASX: NVX)

Another significant mover today is the Novonix share price, up 9.21% to $6.05.

Despite no news coming out of the lithium company, investors appear to be bullish on its future prospects.

The company’s share price has moved 388% higher this year on the back of strong lithium prices, which are up 98% year to date.

Which ASX companies are heading the other way?

Zimplats Holdings Ltd (ASX: ZIM)

The Zimplats share price is down a sizeable 3.6% to $22.73. Investors are selling the mining company’s shares despite no news being reported since its full-year results on 31 August.

A possible catalyst for the decline could be some profit-taking from investors following the release of the results. Zimplats shares are up 72.8% in 2021.

Polynovo Ltd (ASX: PNV)

Also being weighed down by investors today is the Polynovo share price, down 4.68% to $1.94.

The medical device company announced the resignation of its chief operating officer, Anthony Kaye.

Polynovo advised that Kaye will be returning to global biotech giant CSL Limited (ASX: CSL) in a more senior role.

The post Which ASX 300 shares are leading the way as the top movers on Friday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. and POLYNOVO FPO. 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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Why the Viva Leisure (ASX:VVA) share price is surging 16% today

A man and woman high five each while sitting down after working out at the gym.

The Viva Leisure Ltd (ASX: VVA) share price is surging despite no price-sensitive news having been released by the company today.

However, less than 2 hours before the ASX closed yesterday, Viva Leisure released an update to the market.

The update outlined the Commonwealth Bank of Australia‘s (ASX: CBA) decision to defer its formal review of Viva Leisure’s financial performance.

Additionally, some of its New South Wales health clubs will soon be able to reopen.

While the update wasn’t price sensitive, the market has seemingly reacted favourably nonetheless.

Right now, the Viva Leisure share price is $1.91, 16.46% higher than its previous close.

Let’s take a closer look at Viva Leisure’s recent update.

Viva’s market update

The Viva Leisure share price is soaring today, potentially spurred by a market update released by the company yesterday afternoon.

Then, the company announced CBA has agreed to defer its formal review of financial covenants until March 2022. The bank agreed to the deferral at the request of Viva Leisure.

In its financial year 2021 results, Viva Leisure noted it had agreed to new credit terms for a debt facility with CBA worth approximately $35 million during the financial year just been.

The facility comprises a $25 million Market Rate Loan facility – which was drawn to $10 million at the time of Viva Leisure’s earnings release – a bank guarantee facility, and a direct debit facility.

Additionally, Viva Leisure announced 20% of its NSW portfolio will be allowed to reopen from 11 September.

The news followed the NSW Government’s decision to lift COVID-19 lockdowns in regional parts of the state.

The reopening will see the doors of 7 of Viva Leisure’s businesses unlocked. However, they will still face certain restrictions.

Viva Leisure share price snapshot

Despite today’s uptick, the Viva Leisure share price is still firmly in the ASX red.

Right now, its share price is 35% lower than it was at the start of 2021. It has also fallen 21% since this time last year.

The post Why the Viva Leisure (ASX:VVA) share price is surging 16% today appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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Why the Oil Search (ASX:OSH) share price is leaping out of the trading pause

two oil workers with hard hats shake hands in the foreground of oil equipment

The Oil Search Ltd (ASX: OSH) share price is up 2.74% after exiting this morning’s trading pause. This comes after the company reported it has entered into a definitive agreement to merge with fellow ASX energy share Santos Ltd (ASX: STO) in an all-scrip transaction.

Both the Santos and Oil Search share prices were temporarily frozen earlier today at the companies’ request, pending today’s announcement.

News of a potential merger between the 2 oil and gas companies first came to light on 20 July. At that time, Oil Search rejected the initial merger proposal.

What are the terms of the merger?

If the merger passes the remaining regulatory hurdles, including approval from shareholders and the Papua New Guinean courts, then Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share they own.

This is in line with the revised merger terms released to the market on 2 August.

Once the merger is complete, Oil Search shareholders will own 38.5% of the new combined company, which is forecast to have a market cap of $21 billion.

Santos forecasts the merger could result in “pre-tax synergies” of US$90–115 million per year once integration costs are settled.

The combined companies will have a balance sheet with more than US$5.5 billion of liquidity.

Commenting on the merger, Oil Search chairman, Rick Lee said:

Put simply, this merger provides Oil Search shareholders with a compelling opportunity to participate in a larger entity with significant scale, product mix, ESG and geographic diversity, and access to capital. The combined entity will have the capacity to deliver on an exciting pipeline of organic growth opportunities.

The merged company will be headed by Santos CEO, Kevin Gallagher, who said:

Santos and Oil Search will be stronger together and will have increased scale and capacity to drive a combined disciplined, low-cost operating model and unrivalled growth opportunities over the next decade.

Following the merger, three non-executive directors from Oil Search will join the Santos Board. Santos will maintain its head office in Adelaide.

The Oil Search Board has unanimously approved the transaction.

Oil Search share price snapshot

The Oil Search share price is down 0.53% in 2021 compared to a 10.5% gain for the S&P/ASX 200 Index (ASX: XJO). Over the past month, Oil Search shares have dropped 3.48%.

At the time of writing, the Oil Search share price is $3.75.

The post Why the Oil Search (ASX:OSH) share price is leaping out of the trading pause appeared first on The Motley Fool Australia.

Should you invest $1,000 in Oil Search right now?

Before you consider Oil Search, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Oil Search wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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