“If we as a society stopped and thought about it for a minute, we’d blow the whole finance industry up.”

That was me, talking to a good mate this morning.

(And because we live in reactionary, call-out times, let me be clear I’m talking metaphorically and holistically — I’m clearly not suggesting actual explosions or harm!)

With that out of the way, back to my point.

My mate called me to laugh about the recent bout of market volatility, with the US market down some 6% overnight.

Laugh, not because we were both making losses, but because the whole thing is just silly.

Here, some travel stocks have lost 20% in little more than 7 trading hours over the past two days.

Twenty per cent.

Because?

Well, you can make up your own mind. 

In theory, it seems to be because of a more sober outlook from the US Fed and an uptick in coronavirus cases in the US.

Okay, fine.

But let me put that another way.

If you think Flight Centre Travel Group Ltd (ASX: FLT)’s total future earnings — from here to eternity — are  worth 20% less because of those two inputs, I don’t think you have any business investing.

Here’s why:

First, eternity is a long time. Coronavirus is either transitory or endemic, but in either case, discounting the entire future earnings of Flight Centre by 20% on the basis of two transitory data points is, as they say in Yes, Minister, ‘courageous’.

Second, if that’s your view, you implicitly thought Flight Centre was worth 20% more on Wednesday just because you expected the Fed to be more bullish, and COVID cases to fall in a 24hr period.

Which means you were betting 20% of the value of that position on what a Fed Chief might say, and the ultra-short-term trajectory of an inherently unknowable and volatile data series: COVID case counts.

And when I say ‘you’, I don’t just mean you, dear reader.

I mean the sum total of all investors buying and selling (and, implicitly, choosing to neither buy nor sell) over the past couple of days.

In short, the finance industry.

These are people who extract billions of dollars in fees from people like you and me every year.

Because, apparently, they’re the experts.

They know what’s going on.

They’re not silly enough to take part in a market that drops 38% in a matter of weeks, then climbs the best part of 20%, before falling 6% in a couple of days.

I mean, that’d be crazy, right?

Who’d seriously invest that way.

And who, in their right minds, would pay fees to people who invested that way?

Oh.

I see.

Us?

Yep. Us.

Billions and billions of dollars every year, across the globe.

Can you imagine if your accountant worked that way?

Your mechanic?

Your doctor?

Now, I have to say, I shouldn’t hate on it too much.

After all, as long as we can separate ourselves from the seemingly manic activity, it can be an opportunity.

I’ve been telling you that I think it’s been a good idea to keep buying, if you want to make money.

(If you don’t like money, I have a PayPal account you can donate to!) 

Not because I knew what the skittish market would do next, but because my (and I hope your!) time horizon is different.

From a wealth-building perspective, I genuinely don’t care what the market does next.

Because I’m not cashing out tomorrow. Or next week. Or next month. Or next year.

Nor are you.

Even if you’re retired or about to retire, you almost certainly don’t need to ‘go to cash’ this week.

Maybe you can live on dividends. Maybe you need to slowly liquidate your portfolio over many years.

Either way, today’s movements are noise.

All of this volatility reminds me of an old joke:

A bloke is worried about whether his blinkers are working, and asks his mate to stand behind the car and check.

His mate calls out ‘They’re working… they’re not working… they’re working… they’re not working… they’re working…’.

It’s not a bad metaphor for investing.

Investing doesn’t stop working just because some knuckleheads get temporarily overexcited or temporarily disappointed.

Investing wasn’t a great idea on Wednesday, but a terrible idea yesterday.

(Sounds kinda obvious when you put it that way, doesn’t it?)

Was the market seriously ever worth 38% less in March, compared to February, because of a pandemic?

Nope.

Just as it wasn’t worth less because of wars, recessions or anything else in the past.

Because the value of each company’s shares are the full sum total of profits over the long term — not just this week or this month, or even this year.

To be blunt, Flight Centre cannot have been worth $16.85 per share on Wednesday at 4pm and $13.32 at 11am today. The company’s future just hasn’t swung that wildly in 7 trading hours.

Maybe — maybe — one of them was right.

But probably not.

Still, if we’re generous, and say one of them was right, then the market has been right half the time.

Half.

(And both are still probably wrong.)

Now you know that, are you still going to put value in the daily recitations of the value of the S&P/ASX 200 Index (ASX: XJO)?

Do you still reckon the billions doled out in fees to financial types are value for money?

Are you really going to let the daily movements of share prices tell you how to think and how to feel?

I hope not.

Short term movements are noise.

Distraction. Misdirection. Rubbish.

—-

A small aside: As I write this on Friday morning, an alert just popped up on my phone. Apparently US futures are up 100 points.

Up. Down. Up.

It’s laughable.

—–

Fair dinkum. If you’re still letting the market dictate your moods, or your actions, I hope this piece helps you sleep a little better.

I hope it helps you realise that the charade of ‘control’ that lets the finance industry rake in exorbitant fees is, well, just that — a charade.

I hope it makes you ask that eternal question, first voiced by someone when a stockbroker showed him his brand new boat: “… But where are all the customers’ yachts?”.

Yes, there are some good eggs. They’re trying their best. You’ll know them, because they’re the ones who are happy to say ‘I don’t know’, and to prick the pompous bubble of the industry.

The others? Well, decide for yourself.

Just take their prognostications with a huge dose of salt. And their fees the same.

In the meantime?

I’m never particularly happy when my portfolio is worth less than it was yesterday. I’m only human, too.

But it’s the response that counts far more.

Mine? 

I’m not selling. I’m not panicking. And I’m sure as hell not asking the market what I should think.

I’ll probably buy shares next week, I think. (I have a decent Achilles’ heel: our internal trading rules mean I’m not allowed to buy or sell shares within 2 full business days of mentioning them in public or to our members. So my ‘restricted’ list is usually longish and ever-changing!).

And my prediction? I’m sticking with the words of John Pierpont Morgan who famously said, when asked to give a prediction on what would happen to the index: “It will fluctuate”.

Everything else is vanity, pretence or willing obfuscation.

Over the long term, though? History has delivered meaningful long-term compound gains for the patient.

Invest accordingly. Please.

Fool on!

More reading

• 3 ASX shares I’d buy if the market hits 23 March levels again
• Leading fund manager names 4 ASX stocks set to benefit from a faster re-opening of the Australian economy
• ASX 200 falls 1.9%, big 4 ASX banks retreat
• The latest ASX shares to be hit by broker downgrades to “sell” today
• What would I rather buy today: TPG or Telstra shares?

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group 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 Down 20% in 7 trading hours… Worse to come? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2BQQL1F

The Mineral Commodities Limited (ASX: MRC) share price ended the week on a sour note, closing 15.38% lower on Friday at 22 cents.

While the ASX was a sea of red as investors responded to a potential second COVID-19 wave in the US, Mineral Commodities also released a trading update today which likely weighed on its shares.

Mineral Commodities is a global mining and development company. Its primary focus is on the development of high-grade deposits within the mineral sands and battery minerals sectors.

The company’s major projects include the Tormin mineral sands operation in South Africa and the Skaland graphite operation in Norway.

Operations update

In the release today, Mineral Commodities shed some light on trading conditions and recent developments at its major operations.

At Skaland, the company’s mining operations and downstream program haven’t experienced any major interruptions from COVID-19.

Meanwhile, at Tormin, Mineral Commodities revealed that the pandemic has caused delays for its section 102 expanded mining rights application. Nonetheless, the application has progressed to the Department of Mines Resources and Energy for granting.

Mining and processing operations at Tormin were impacted by South Africa’s nationwide lockdown in March and April. However, operations resumed on 13 April and have since returned to normal. Accordingly, the company reported that mining and processing tonnes in May were the highest recorded performance for the year.

Sales

Mineral Commodities revealed it has seen “unabated” demand and continues to sell all the production of its non-magnetic zircon rutile concentrates to China.

However, as flagged back in March, there has been reduced demand for bulk ilmenite concentrate. As a result, no sales for ilmenite concentrate had been secured up until mid-June. However, the company noted it has now secured firm sales for the second half of FY20.

With this, Mineral Commodities stated it has observed improving market conditions as most Chinese tertiary mineral sands processing facilities have returned to production. It expects to start shipping ilmenite concentrates by as early as July 2020.

Mineral Commodities also flagged a technical dispute that has arisen regarding its Life of Mine Garnet Offtake Agreement with GMA Group. The dispute relates to stockpiled inventory quantities and both parties have reverted to a formal dispute resolution process.

On a more positive note, graphite sales at Skaland have continued without interruption. The company achieved record sales in the first quarter as product inventory accumulated in 2019 was sold down.

Financial position

Turning to the balance sheet, Mineral Commodities has US$18.6 million in current account receivables. This includes US$11.7 million owing from GMA Group, with US$8.6 million past due for payment.

Mineral Commodities noted that budgeted revenue and operating cash inflows have been adversely affected by the disruption to normal ilmenite and garnet sales.

“The Company’s business remains sound and on track to deliver the growth profile at Tormin and Skaland, however unforeseen circumstances have ensued, compounded by the COVID-19 pandemic, which require Management and the Board to undertake contingency planning to ensure that the business successfully navigates these challenges,” said executive chair Mark Caruso.

More reading

• Top fundie names small-cap ASX shares to buy
• ASX shares I’d buy if this decline is a second COVID-19 crash
• Insiders have been buying these ASX shares this week
• 3 fantastic ASX shares to buy and hold to make you wealthy
• The latest ASX shares to be hit by broker downgrades to “sell” today

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Mineral Commodities share price tumbles 15% on COVID-19 trading update appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3cX8Nw9

Investing is one of those rare games where cheating isn’t against the rules. Well, not all cheating. Insider trading is still a crime.

But by ‘cheating’, here I mean looking over other investors’ shoulders and seeing what they’re buying. Of course, not all investors are worth a look. You never want to copy the test of the worst student in the class.

But the fund managers at Bennelong Australian Equity Partners are amongst those investors that are well worth a peek, in my view. Bennelong’s managed funds are often at the top of the pile in terms of performance history. The Bennelong Emerging Companies Fund, for example, has managed a return of 22.47% per annum since its inception in 2017.

And it’s this fund we’re going to have a peek at today.

Bennelong has just released its monthly update for May, and it merits some interesting reading if you’re looking for some small-cap ASX shares to buy.

Bennelong’s top ASX share picks

In its letter to investors, Bennelong remained coy about its exact portfolio holdings (and fair enough). But it did give us some tidbits.

The fund manager named Viva Leisure Ltd (ASX: VVA), Mader Group Ltd (ASX: MAD) and BWX Ltd (ASX: BWX) as amongst its top holdings for the month.

Viva Leisure owns a chain of gyms, including Club Lime and HIIT Republic. Here, Bennelong obviously bet on the lifting of coronavirus restrictions surrounding gyms benefitting this company going forward. Fair enough too – this stock is already up more than 260% from the lows we saw in March.

Mader (which an enviable ticker symbol, I must say) is a manufacturer of mining equipment and machinery. According to the company it works with ‘all the major names Australian and international mining’, which presumably includes BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG). Again, Mader has done well in recent months, up more than 30% from the March lows. Even so, this company remains significantly underwater from its highs in February, and so might still offer some growth opportunities.

BWX is a boutique beauty products manufacturer which includes brands such as Sukin, Andalau, USPA and Nourished Life. Its shares have also been doing well lately, up more than 36% from its March lows. Like Mader though, BWX is still underwater in 2020 so far, and so perhaps Bennelong is playing a long game with this one.

Foolish takeaway

Just because one ASX investor is buying a share doesn’t mean we should all rush out and blindly copy their moves without doing our own research first. But we can still ‘cheat’ by getting some of our next ideas to research from well-performing fund managers. So take these shares with a grain of salt, but take note nonetheless!

More reading

• These top ASX shares have doubled in value in 12 months

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX 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 Top fundie names small-cap ASX shares to buy appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/30Aab5a