Month: May 2022

Once a week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) remains the most shorted share on the ASX for another week after its short interest rose to 17.3%. Some traders appear to believe the market is too optimistic on the travel industry recovery.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest surge to 16.6%. This betting technology company’s shares have fallen heavily this year amid valuation and cash burn concerns.
• Nanosonics Ltd (ASX: NAN) has short interest of 12.2%, which is down week on week. Uncertainty caused by a major change to this medical device company’s sales model in the United States has put pressure on its shares.
• Polynovo Ltd (ASX: PNV) has seen its short interest rise to 10.6%. This is despite the medical device company reporting heavy insider buying recently. Though, there is a lag with short seller data, so we may not know if short sellers have been spooked into closing positions by the insider buying until next week.
• Kogan.com Ltd (ASX: KGN) has seen its short interest ease to 10.1%. Short sellers have been going after this ecommerce company due to its poor performance and rising competition from Amazon.
• EML Payments Ltd (ASX: EML) has seen its short interest remain flat at 10%. This payments company has become a target of short sellers after it downgraded its profit guidance following a tough third quarter. There are regulatory concerns also weighing on sentiment.
• Webjet Limited (ASX: WEB) has short interest of 9.6%, which is up week on week. This online travel agent is releasing its half year results later this week. Judging by the increase in short interest, short sellers aren’t expecting a strong result or guidance.
• Appen Ltd (ASX: APX) has seen its short interest rise to 9.15%. There are concerns that Appen could be facing softening demand due to some companies taking parts of their machine learning in-house.
• AMA Group Ltd (ASX: AMA) has 9.1% of its shares held short, which is up week on week once again. There are concerns about this smash repair company’s high debt load and dwindling cash balance.
• Redbubble Ltd (ASX: RBL) is back in the top ten with short interest of 8.9%. A disappointing underperformance in FY 2022 and less effective marketing for ecommerce companies (from privacy changes) have been weighing on sentiment and Redbubble’s shares.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

More reading

• What’s going on with the Polynovo share price today?
• What’s boosting the Flight Centre share price on Monday?
• ASX 200 midday update: Brambles rockets, Goodman upgrades guidance
• Top brokers name 3 ASX shares to buy next week
• These were the best performers on the ASX 200 last week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd, Betmakers Technology Group Ltd, EML Payments, Kogan.com ltd, Nanosonics Limited, POLYNOVO FPO, and REDBUBBLE FPO. The Motley Fool Australia has positions in and has recommended EML Payments, Kogan.com ltd, and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Flight Centre Travel Group Limited, and Webjet Ltd. 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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The AGL Energy Limited (ASX: AGL) share price has bounced back from a rough start on Monday. Its struggle comes amid more reports of activist organisations slamming the company’s planned demerger.

At the time of writing, the AGL share price is $8.42, 0.24% higher than its previous close.

Though, it spent much of this morning in the red, trading for as low as $8.36 – a 0.4% slip.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is recording a 0.22% gain on Monday.

Let’s take a closer look at the latest criticism aimed at the split that will see AGL’s energy retail business become AGL Australia and its generation business transform into Accel Energy.

AGL demerger faces more heat

The AGL share price has rebounded after a disappointing morning’s trade. Its recovery came amid reports that London-based activist investment firm Snowcap has once again voiced its disapproval of the company’s demerger.

If this all sounds a bit familiar, it’s likely because Snowcap released a dossier detailing its disapproval of the demerger in February. Then, it said the split was “value destructive and environmentally disastrous”.

It also said the AGL share price could have an upside of 30% to 60% if the company ditched its demerger and transitioned away from coal-fired power by 2030. And that view reportedly hasn’t changed.

A Snowcap spokesperson has been quoted by the Australian Financial Review commenting on the company’s demerger scheme booklet:

We were extremely underwhelmed – 356 pages and still not one good reason why AGL should split in two.

It’s increasingly apparent to us that the demerger exclusively serves the interests of AGL’s leadership and advisers, leaving shareholders to pick up the $260 million bill.

The activist firm also welcomed the 11.28% stake in AGL recently picked up by Mike Cannon-Brookes’ Grok Ventures.

It reportedly said it was “encouraged” to see a fellow shareholder both disapprove of the demerger and envisage a greener future for the company.

Similar sentiments have also come from the Australasian Centre for Corporate Responsibility (ACCR) and Greenpeace.

The former pointed to a 2021 shareholder vote wherein 54% of AGL investors urged the company to establish Paris Agreement-aligned emissions targets.

ACCR director of climate and environment Dan Gocher said AGL’s plan to demerge “ignores the majority of its shareholders”.

AGL share price snapshot

Despite plenty of controversy, the AGL share price has been performing well in 2022.

It has gained 33% since the start of the year, outperforming the ASX 200 by around 40%.

However, the company’s stock and the index are both approximately equal with where they were 12 months ago.

The post AGL share price bounces back amid latest demerger opposition appeared first on The Motley Fool Australia.

More reading

• How dependant on coal closure is the AGL share price?
• AGL share price lifts despite Greenpeace accusing leadership of being ‘caught with their pants down’
• Is Cannon-Brookes getting ready to pitch a third takeover bid for AGL shares?
• Own AGL shares? Expert warns Cannon-Brookes’ stake might not be all it seems
• Cannon-Brookes warns AGL dividends at risk from demerger

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 Scott Phillips.

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Last week’s US$45 billion stablecoin meltdown rippled across almost every crypto asset.

The biggest hits came for investors in TerraUSD (CRYPTO: UST), backed by digital token Terra (CRYPTO: LUNA).

You can find the details of last Wednesday’s crypto meltdown here.

But in a nutshell, UST is an algorithmic stablecoin that’s intended to be pegged to the US dollar. Part of the mechanism intended to keep it trading in line with US$1 was a system that enabled anyone holding UST to swap it out for US$1 worth of LUNA at any stage.

However, when investors lost confidence in the peg, the token entered a rapid spiral, tumbling to 30 US cents as LUNA fell far more.

The ripple effects of the selloff hit the rest of the market, seeing even the biggest tokens like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) sell off sharply. By the time the smoke cleared, the combined crypto sector had shed some US$270 billion.

What’s happening now?

Despite financing efforts by Terra to regain the dollar peg, the token is currently trading for a lowly 17.7 US cents.

As for LUNA? It’s down 99.99% since this time last week, worth 0.02594 US cents.

Commenting on the carnage, founding partner of Castle Island Ventures Matt Walsh said (as quoted by Bloomberg), “It’s something the scale of which crypto has really never seen in terms of a top-five project just absolutely imploding.”

In a caution to newbie crypto investors, managing partner at Multicoin Capital Kyle Samani added, “The biggest losers from all of this will be retail [investors] that didn’t understand the risks they were taking.”

Can regulators prevent another crypto stablecoin meltdown?

When that much money gets wiped off the boards in a matter of hours, you can bet it draws the attention of corporate regulators.

Speaking at the Financial Services Institute of Australasia event in Sydney on Friday, Reserve Bank of Australia deputy governor Michele Bullock warned of increasing risks to broader financial markets as the market valuations of stablecoin and other cryptos grow.

As the Australian Financial Review reports, Bullock noted that “stablecoins are not so stable any more”, adding that “the crypto world is causing problems for everyone at the moment… Everyone is nervous about the implications, particularly for consumers.”

Bullock said stablecoins “are not big enough at the moment to cause [a] financial stability issue”. However, she warned, “Their links to the financial system are increasing, so there is potential there for risks to rise, and rise quite quickly.”

Australian Prudential Regulation Authority chairman Wayne Byres agreed that stablecoins needed stronger regulation. But with most cryptos created outside of the traditional banking industry, Byres questioned whether agencies like APRA were suited for that role.

According to Byres (quoted by the AFR):

It is not obvious to me that the role that might be needed when it comes to stablecoins is necessarily one for the prudential regulator as such. But I think it is clear – and is certainly absolutely worthy of consideration – that as these sorts of digital currencies move more into the mainstream, that there is going to be some form of regulatory requirements.

Some will be protective and some will be helpful to facilitate an orderly market developing.

While crypto investors can almost certainly expect more regulations in the stablecoin segment, those could be some time coming.

In the meantime, be aware that just because a token is pegged to a certain fiat currency or asset, it’s no guarantee it will trade for that value.

The post Can regulators prevent another US$45 billion crypto stablecoin meltdown? appeared first on The Motley Fool Australia.

More reading

• 2 cryptocurrencies that could dwarf Shiba Inu
• Is the Bitcoin price heading all the way back down to US$20,000?
• How is the Bitcoin ETF (EBTC) performing compared to the ASX on Friday?
• Could the next crypto collapse flow through to ASX shares?
• Crypto crash: Why Bitcoin, Ethereum, and Dogecoin are struggling again

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia has recommended Bitcoin and Ethereum. 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 of battery technology company Novonix Ltd (ASX: NVX) have lifted on Monday and now trade 1.36% in the green at $3.73.

The Novonix share price has traded as high as $3.98 and as low as $3.71 up until the point of writing.

In wider market moves, the S&P/ASX All Technology Index (ASX: XTX) is trading more than 1.8% higher as ASX tech shares begin to show signs of life. Early in the day the tech index reached a 3.8% peak.

What’s up with Novonix shares?

Shares in the company have collapsed from their former glory after shifting downwards at pace over the last six months.

In that time, shares have crumbled from a high of $12.15 to their current levels – a collapse of 69%.

This year to date, shares have faltered 59.4%, meaning Novonix needs to rally ~150% to return to these former highs.

Brokers aren’t constructive on the stock either – it has extremely narrow coverage, and just one analyst, Morgans, advocates its clients to hold Novinix shares at present, according to Bloomberg data.

However, tech shares are showing signs of life once more on Monday. The index tracking the sector has levelled off in today’s session and is running in the green, resulting in a sector-wide rally across many beaten-down names.

As such, companies like Novonix are benefitting from the resurged confidence, as hungry investors look for a cheap meal during market hours on Monday.

Trading volume is also at 60% of its four-week average as investors continue bidding up Novonix shares on Monday.

Novonix share price snapshot

Despite its difficulties this year, the Novonix share price has held onto a 96% gain over the last 12 months.

In the past month, however, it has collapsed 39% into the red.

Based on the current share price, Novonix presides a market capitalisation of $1.78 billion.

The post Novonix share price fights to stay in the green on Monday appeared first on The Motley Fool Australia.

More reading

• These were the worst performers on the ASX 200 last week
• Why is the Novonix share price down 9% today?
• The Novonix share price just rebounded 13%. Is it a buy?
• Technophobia? Why ASX 200 tech shares are getting hammered again
• Why is the Novonix share price down 6% on Friday?

Motley Fool contributor Zach Bristow 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 Scott Phillips.

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The Polynovo Ltd (ASX: PNV) share price rocketed as high as 8.65% during market open but has since fallen wayside.

At the time of writing, the medical device company’s shares are swapping hands at $1.32, up 1.54%.

This follows the All Ordinaries Index’s (ASX: XAO) lead which rose to an intraday high within the first hour of trade.

However, since then, the broader ASX index has given back its gains to fetch at 7, 328 points, up 0.28%.

Director tops up on Polynovo shares

An insider has again recently taken advantage of the Polynovo share price weakness to top up their holdings.

In its most recent statement, Polynovo revealed that its chair, David Williams picked up more shares.

In total, 181,532 Polynovo shares were bought through his subsidiary, Lawn Views Pty Ltd via an on-market trade.

The indirect acquisition occurred on 13 May, and the average price paid per Polynovo share was $1.2746.

This means that Mr Williams now has around 21.50 million fully paid ordinary Polynovo shares across all his holdings.

The above transaction equated to the value of more than $231,000.

It is worth nothing that in the beginning of May, Polynovo shares touched a 52-week low of 83.5 cents. Since then, a number of directors, particularly Mr Williams have made a series of purchases.

Polynovo share price snapshot

It appears that the latest purchases could be spooking short sellers to close on their positions. ASIC is due to release its short position report mid-week, which will indicate where Polynovo shares are at.

On 9 May, the company had a reported short interest of 10.54%. This puts Polynovo as one of the most shorted shares on the ASX.

Despite this month’s gains, Polynovo shares have fallen by around 50% over the past 12 months.

Based on today’s price, Polynovo commands a market capitalisation of roughly $860.19 million.

The post What’s going on with the Polynovo share price today? appeared first on The Motley Fool Australia.

More reading

• These were the best performers on the ASX 200 last week
• Why is the Polynovo share price surging 35% in 5 days?
• Why is the Polynovo share price rocketing 17%?
• Why EOS, Pendal, PolyNovo and Xero shares are charging higher
• Why BrainChip, PolyNovo, TPG, and Westpac shares are pushing higher

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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 Scott Phillips.

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ASX lithium shares are having a stellar start to the week amid improving market sentiment.

Shares in Pilbara Minerals Ltd (ASX: PLS) are trading 3.24% higher, while Core Lithium Ltd (ASX: CXO) shares are up 3.49%. Meanwhile, the Allkem Ltd (ASX: AKE) share price is climbing 1.53%.

Let’s take a look at what could be impacting lithium shares today.

Why are ASX lithium shares rising?

ASX lithium shares could be trading higher this week after Macquarie shared a positive outlook for the sector.

The broker suggested ASX investors ought to own lithium and rare earth shares, the Financial Review reported. As most people are likely aware, lithium and rare earths are considered vital components of the batteries that power EVs.

However, Macquarie did warn investors that electric vehicle (EV) sales in China dropped 39% in April amid COVID-19 lockdowns.

Lithium shares on the ASX also include Sayona Mining Ltd (ASX: SYA), LionTown Resources Limited (ASX: LTR) and Mineral Resources Ltd (ASX: MIN). Sayona is soaring 4.1%, while LionTown is up 2.86% today and Mineral Resources is climbing 1.3%. In earlier trade, the Mineral Resources share price jumped 3.65% before retreating.

Macquarie has placed an $85 price target on Mineral Resources, representing a 55% upside on the current share price of $54.73. Commenting on the company, Macquarie said:

Movements in spot iron-ore and spodumene prices present the most material risk to our earnings forecasts for Mineral Resources.

Mineral Resources is exploring lithium at Mt Marion and Wodgina in Western Australia. The company is also exploring iron ore and manganese. On 12 May, Mineral Resources announced the company’s first lithium output from the Wodgina project.

Commenting on this news, Mineral Resources chief executive Paul Brown said:

Achieving first spodumene concentrate production at Wodgina is a great milestone as we look to safely and efficiently build production momentum to meet significant global demand for lithium products.

Macquarie also tips lithium shares Pilbara Minerals, Allkem and LionTown Resources to “outperform”.

Share price snapshot

The Core Lithium share price has exploded 413% in the past 12 months, while Pilbara Minerals has surged 136%.

Allkem has rocketed 84% in a year, LionTown has soared 173% and Mineral Resources has leapt 22%.

Sayona Mining shares have increased more than 700% in a year.

In contrast, the S&P/ASX 200 Index (ASX: XJO) has returned 1% in the past 52 weeks.

The post Why are ASX lithium shares off to such a flying start this week? appeared first on The Motley Fool Australia.

More reading

• Why is the Core Lithium share price charging 7% higher?
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• If you’d bought $10,000 of Pilbara Minerals shares 10 years ago, congratulations! Here’s what you’d have now
• Down 20% in a month, is the Pilbara Minerals share price a buy?

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 Scott Phillips.

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Australian shares have curled downwards after a strong start from the open on Monday. The benchmark S&P/ASX 200 Index (ASX: XJO) has given back early gains to now trade just nine basis points higher at 7,084.

After a good squeeze of the juice on opn, the ASX 200 began to turn south amid the release of the latest economic data from China.

Reportedly, the data came in much softer than expected, resulting in traders having to re-evaluate their views on the current state of the ASX.

What’s up with the ASX 200 today?

Data out of China on its economic growth has come in weaker than market expectations. As The Australian reports today, “China’s monthly economic activity data for April are even weaker than expected as COVID lockdowns appear to do more damage than expected.”

Underlying the weakness was China’s COVID-19 lockdown policy, reports say. Further, experts from Oxford Economics predict the resultant disruption from China could extend well into June.

Economist Tommy Wu, quoted by The Australian, said:

China’s economy could see a more meaningful recovery in the second half, barring a Shanghai-like lockdown in another major city.

Still, the risks to the outlook are tilted to the downside, as the effectiveness of policy stimulus will largely depend on the scale of future COVID outbreaks and lockdowns.

Consequently, both tech and industrials are leading the pack today, with the S&P/ASX 200 Industrials Index (ASX: XNJ) and the S&P/ASX All Technology Index (ASX: XTX) both up more than 2% on the day.

In the absence of any other market news, it appears that the economic data from China has had a material impact on Aussie shares today.

A bit more on the ASX 200

In the last 12 months, the index tracking the ASX 200 has held onto a more than 1% gain. However, it has slipped almost 5% into the red this year to date.

The post Why is the ASX 200 giving back the morning’s gains on Monday? appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: Brambles rockets, Goodman upgrades guidance
• 5 things to watch on the ASX 200 on Monday
• These were the best performers on the ASX 200 last week
• These were the worst performers on the ASX 200 last week
• Here are the top 10 ASX shares today

Motley Fool contributor Zach Bristow 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 Scott Phillips.

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Inflation is on the rise, and that means interest rates are too. So where can investors turn to protect their portfolios from the sting of inflation? ASX-listed exchange-traded funds (ETFs) might be one place the average investor hasn’t thought to look yet.

At the latest ASX Investor Day, two Betashares ETFs were touted as potential inflation fighters. The first is the Betashares Cloud Computing ETF (ASX: CLDD), which invests in a diversified mix of global companies in the cloud computing industry. The second is the Betashares Global Cybersecurity ETF (ASX: HACK), which invests in 41 leading companies fighting cybercrime.

Let’s take a closer look at these ASX ETFs and why they could be less prone to rising prices.

Paying up for what is essential

Pricing power is a key factor when it comes to avoiding the margin crimping effects of inflation on a company. Essentially, all products are competing with each other for each dollar in a consumer’s wallet.

When prices rise broadly, that competition becomes more fierce as the average person becomes more selective with where they spend their money. However, the more of a necessity a product or service is, the greater the ability to increase prices while retaining customers.

As noted at the ASX Investor Day, both cloud computing and cybersecurity are sectors that are becoming more of a necessity than a discretionary purchase. In the case of cybersecurity, this is a byproduct of the costliness of not having protection in the current era.

According to the presentation, the global cost of ransomware attacks increased an astonishing 5,700% between 2015 to 2021. Similarly, data is growing at a blistering rate of 60% per annum.

Furthermore, the presenter highlighted high margins, recurring revenues, and sticky relationships as attractive features of companies within the cloud computing ASX ETF.

What companies are in these ASX ETFs?

It is always good to remember that ETFs are a collection of companies. So, before investing it’s good to get a grasp of where exactly our dollars are being allocated.

For the Betashares Cloud Computing ETF, the top 10 positions are as follows:

• Anaplan Inc (NYSE: PLAN)
• Akamai Technologies Inc (NASDAQ: AKAM)
• Mimecast Ltd (NASDAQ: MIME)
• Qualys Inc (NASDAQ: QLYS)
• Box Inc (NYSE: BOX)
• Digital Realty Trust Inc (NYSE: DLR)
• Dropbox Inc (NASDAQ: DBX)
• SPS Commerce Inc (NASDAQ: SPSC)
• Five9 Inc (NASDAQ: FIVN)
• Workday Inc (NASDAQ: WDAY)

Meanwhile, the top 10 companies making up the Betashares Global Cybersecurity ETF are:

• Cisco Systems Inc (NASDAQ: CSCO)
• Palo Alto Networks Inc (NASDAQ: PANW)
• Crowdstrike Holdings Inc (NASDAQ: CRWD)
• Zscaler Inc (NASDAQ: ZS)
• Mandiant Inc (LON: 0QZY)
• Leidos Holdings Inc (NYSE: LDOS)
• Booz Allen Hamilton Holding Co (NYSE: BAH)
• Cloudflare Inc (NYSE: NET)
• Sailpoint Technologies Holding (NYSE: SAIL)
• Akamai Technologies Inc

Considering most of these companies fall under the ‘tech’ stock category, it comes as no surprise that neither of these ASX-listed ETFs has fared too well so far this year. At the time of writing, HACK is down 16.2% year-to-date, while CLDD is down 30.1%.

The post Here are 2 ASX-listed ETFs that might be able to fend off inflation appeared first on The Motley Fool Australia.

More reading

• Here are 2 quality ETFs that are now a lot cheaper
• Here are 2 ETFs delivering breakneck ASX performance
• 2 excellent ETFs for investors to buy in May
• 3 top ETFs for ASX investors to buy and hold for 10 years
• Are these 2 ASX tech shares top ideas for May 2022?

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BETA CYBER ETF UNITS, Cisco Systems, Cloudflare, Inc., CrowdStrike Holdings, Inc., and Five9. The Motley Fool Australia has positions in and has recommended BETA CYBER ETF UNITS. The Motley Fool Australia has recommended CrowdStrike Holdings, Inc. 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 of Nitro Software Ltd (ASX: NTO) are shifting higher on Monday and now trade 4.71% higher at $1.335. Earlier, the Nitro share price was as high as 7%.

Despite no market-sensitive updates today, the Nitro Software share price has surged hard from the open alongside many other tech names.

In wider market moves, the S&P/ASX All Technology Index (ASX: XTX) is also up 1.79% as investors show confidence in tech shares once again.

What’s up with the Nitro Software share price?

Shares in Nitro have oscillated in recent weeks and have been trading in a fairly narrow range of $1.59 to $1.13 per share, a roughly 20% spread.

In that time, tech shares have embarked on a gyrating ride as well, recently coming off a rough period marred by volatility.

As such Nitro has seen both its stock price and valuation take a lunge backwards in recent weeks, with a string of brokers reducing their price targets on the company.

Each of UBS, Bell Potter, Goldman Sachs and Jarden cut their price target on the stock by 5%–25% to start the month.

Meanwhile, analysts at Shaw & Partners increased their valuation of the company by 8% to $2.70 per share. Morgan Stanley also retained its buy rating in a recent note, although trimmed its price target by over 40% to $2.30 in the process.

The broker noted it had revised its earnings targets for Nitro given a large drop in similar names and a reduced earnings guidance, but this was offset by its view on Nitro’s e-signing capacity – especially via the company’s PDF software.

Forager Funds is also opting to keep ahold of the stock, according to a recent TMF analysis from Tony Yoo.

“Trends in revenue growth for all three remain at least in line with expectations, ranging from 24% at Whispir (using the recurring component of its revenue only) to more than 40% at Nitro,” Forager said, cited by TMF.

And the investment manager isn’t against the grain here either – 100% of analysts have Nitro Software rated as a buy right now, according to Bloomberg data.

The consensus price target from this list is $2.57 per share, indicating an upside potential of 127% should the bull thesis pull through.

Nitro Software share price snapshot

In the last 12 months, the Nitro Software share price has clipped more than 48% into the red after another 46% dip this year to date.

The post Why is the Nitro Software share price rallying 5%? appeared first on The Motley Fool Australia.

More reading

• 3 ASX tech shares we’re sticking with: Forager
• Analysts say these top ASX growth shares are buys
• 2 highly rated small cap ASX shares that analysts say have huge potential
• Analysts say investors should buy these top ASX shares
• Why Nitro, PointsBet, Sezzle, and Siteminder shares are racing higher

Motley Fool contributor Zach Bristow 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 recommended Nitro Software Limited. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In 2020, Morgan Housel released The Psychology of Money. I think it deserves to be on the Mount Rushmore of investing books, especially for folks who believe history and behavioral psychology are critical elements for investing.

In the book, Housel has a section describing the stock market as a field where multiple games that have nothing to do with each other are being played at once. To quote from the book:

Few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are.

Here’s why this simple concept has lifelong impacts on your money and why it’s the best investing lesson I ever learned.

Understanding a stock’s price

A stock’s price at a given time is merely a representation of the consensus value determined by buyers and sellers. But many of these players’ motives and reasons for buying or selling the stock are completely different from yours.

For example, you have retail investors and institutional investors. Retirees and college kids. Long-term investors with multi-decade time horizons and day traders. Short-sellers and folks who only stay on the long side. Options and futures traders and those who only buy shares in stocks. The list goes on and on.

Housel’s point is that many of these games have conflicting influences over the price action of a given stock. And for that reason, the price of a stock seldom resembles its long-term intrinsic value.

The tug-of-war between greed and fear

At certain times, the price of a stock can be dominated by greed and, at other times, it can be dominated by fear. In today’s brutal bear market, that means you have some traders who may dump perfectly good growth stocks and move into value simply because they are fearful.

They decide they would rather own a stable business with a good balance sheet and positive free cash flow than take a risk on a company whose value comes from what it could be worth in future years and not what it is worth today. As a result, we continue to see exciting growth companies with a lot of potential get sold off heavily in the short term due to panic.

On the flip side, a lot of value stocks, and oil and gas stocks, were arguably underappreciated in 2020 and 2021, while some growth stocks saw their valuations get ahead of themselves. In those years, we saw investors take more risks and cast out companies with low growth. We saw a disregard for the geopolitical importance of utilities, energy stocks, and defense stocks in favor of bets on the next big thing.

Real-world examples

The point here is that you can gain clarity by remembering that a lot of the money in the stock market is playing a completely different game than you are. Once you understand that, it’s easy to see why an excellent company like Amazon can fall by over 30% in a couple of weeks for little more than a mediocre earnings report and broader market volatility.

Let’s take the example a step further with a stock like Shopify (NYSE: SHOP). Shopify closed the 2019 calendar year at just under $400 a share. It gained tons of momentum during the pandemic as e-commerce grew and the gig economy went into full effect. It ballooned to a market cap of over $200 billion and an all-time-high price per share of $1,762.92 on November 19, 2021; and has since slid to its current price of around $335 per share.

Shopify stock embodies several different games being played at once. On the one hand, you have long-term investors who believe in Shopify’s ability to add new merchants, have existing merchants upgrade to more expensive plans, and have those merchants earn more money which benefits Shopify. Then you have a series of folks who were only buying Shopify as a short-term ‘pandemic play’ and don’t care about the underlying business — which was a big reason why Shopify stock ran up too far, too fast in 2021.

But today, you have yet another game being played — the game of losing patience by selling growth stocks that make little to no profit and seeking cover in safer names. Once an investor realizes these conflicting games, it starts to make sense why a stock like Shopify can go from boom to bust. It doesn’t make the price action in either direction right; it just helps explain why it happened in the first place.

A lesson from Warren Buffett

Warren Buffett is an excellent example of an investor who knows exactly what game he is playing. Buffett has repeatedly admitted he is unlikely to outperform a raging bull market because he doesn’t invest in many growth stocks and sticks mostly to value. But he still believes he will outperform the S&P 500 over time — which has been true over his long-term track record.

Berkshire Hathaway’s portfolio may look overly conservative as it contains a lot of insurance companies, banks, oil and gas stocks, and consumer staples companies. But for Buffett, these are the kinds of businesses he wants to invest in. It’s his game, and he’s playing the stock market according to his own rules and risk tolerance.

An individual investor has no control over the broader stock market. So, imposing control over our investment decisions and style is the best way we can feel comfortable and achieve direction when stock prices seem to rise and fall randomly.

The silver lining

For long-term investors in stocks like Shopify, the whipsaw price action of 400% gains followed by 80% losses in just a two-year period can be confusing and annoying. It can be hard to know a fair price for a company when conflicting motives are tugging at its stock price. However, there is a silver lining.

Over time, fundamentals always win out. One look at the stock charts of successful companies like Nike or Apple, and you’ll quickly see that sell-offs are simply par for the course for a successful long-term investment.

The beauty of long-term investing is that it is one of the few games where the odds are in your favor. The stock market tends to fall faster than it goes up but goes up more than it goes down. The average compound annual growth rate of the S&P 500 with dividends reinvested since 1965 has been around 10.5%. That’s a massive tailwind for long-term investors to benefit from compound interest.

By investing in quality businesses that you understand and letting time be an ally, an investor stands a better chance of ignoring the noise of the market and focusing on what matters most.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post The single greatest investing lesson I ever learned appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Foelber has positions in Shopify and has the following options: long September 2022 $600 calls on Shopify and short January 2024 $600 calls on Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, Berkshire Hathaway (B shares), Nike, and Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $1,140 calls on Shopify, long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $1,160 calls on Shopify, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon, Apple, Berkshire Hathaway (B shares), and Nike. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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