The Qantas Airways Limited (ASX: QAN) share price has fallen nearly 38% since the start of the year. Unsurprisingly, this is predominantly due to the COVID-19 pandemic and the resulting restrictions on air travel.

However, Qantas shares have soared 117% from their March lows. This performance exceeds the recovery of the S&P/ASX200 index (ASX:XJO) which has rebounded around 35% since its lowest point.

Let’s first look at two reasons the Qantas share price may still offer compelling value at today’s price of $4.42. Then, we’ll consider what Qantas CEO, Alan Joyce, had to say about the company’s outlook. 

Reason 1: strong brand name

According to Airline Ratings, Qantas has been named the safest airline in the world for 2020. I think it’s fair to say that when travelling by plane, passengers value their safety above everything else. A reputation for absolute safety could definitely be seen as a ‘moat’ or competitive advantage for Qantas. As restrictions continue to ease and plane travel resumes, it’s possible passengers will be prepared to pay a premium for safety. This could be good news for the Qantas share price.

In an ASX media release on 5 May, Qantas reported that is Frequent Flyer program has continued to perform well during the pandemic. The program has enabled some revenues to keep flowing from partnerships with companies such as Woolworths Group Ltd (ASX: WOW).

Also, a survey of Qantas Frequent Flyer members showed 85% were planning to fly as soon as conditions returned to normal. This is another positive sign for the Qantas share price.

Reason 2: strong financial position 

Qantas has secured a further $550 million in debt funding to help it survive the coronavirus crisis.  This was facilitated by borrowing against three of its wholly-owned Boeing 787-9 aircraft. Likewise, $1.05 billion was raised in March against seven 787-9 aircraft. Pleasingly, the group has no significant debt maturities until June 2021. 

In addition, Qantas has sufficient liquidity to continue operating under current conditions until at least December 2021.

As of 4 May 2020, Qantas had short-term liquidity of $3.5 billion which includes a $1 billion undrawn facility. The group expects a cash burn rate of $40 million per week by the end of this month.  

Fuel is a significant expense for airlines and the strategy Qantas takes to keep its fuel costs under control is hedging. Essentially, hedging helps minimise the risk and uncertainty created by oil price fluctuations. 

Unfortunately, as demand for travel significantly declined, the group experienced hedging losses due to the drop in oil prices. These losses, together with the impact of foreign exchange, will result in a $145 million cash outflow by the end of September.

Nevertheless, the Aussie airline stated that there will be no risk of further hedging losses. This should assist the company to retain its strong cash position and help boost the chances of continued growth in the Qantas share price. 

CEO comments

On a further positive note, Qantas Group CEO Alan Joyce said in the 5 May media release:

“Our cash balance shows that we’re in a very strong position, which under the circumstances we absolutely have to be. We don’t know how long domestic and international travel restrictions will last or what demand will look like as they’re gradually lifted.

Our ability to withstand this crisis and its aftermath is only possible because we’re tapping into a balance sheet that has taken years to build”.

Foolish takeaway

Qantas has a reputation of being the safest airline in the world as reinforced by its rating for 2020. Furthermore, the company’s financial position is strong considering the current circumstances. As such, I feel the current Qantas share price may present a buying opportunity. Whilst uncertainty still remains surrounding demand once restrictions ease, an indication that 85% of Qantas Frequent Flyer members will fly once they are permitted to is positive in my view.

More reading

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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths 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 don’t have enough funds to build a truly diverse portfolio, a quick way to add some diversity is with exchange traded funds (ETFs).

Through just a single investment, ETFs give investors exposure to whole indices, industries, and even themes.

There are a large number of ETFs for investors to choose from, but three that I rate highly right now are listed below. Here’s why I like them:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

I think the BetaShares Asia Technology Tigers ETF would be a great option for investors. This exchange traded fund provides investors with exposure to a number of exciting tech shares in the Asian market. These include the likes of ecommerce giant Alibaba, search engine company Baidu, and new Afterpay Ltd (ASX: APT) shareholder and WeChat owner, Tencent. These companies are revolutionising the lives of billions of people in the region and look very well-positioned to profit from it over the next decade.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

Another option you can use to diversify is the BetaShares NASDAQ 100 ETF. It provides investors with exposure to the 100 largest non-financial shares on the NASDAQ index. This includes giants such as Amazon, Facebook, Microsoft, and Starbucks. I believe many of these companies have the potential to grow at a quicker rate than the global economy over the next decade. This could lead to the BetaShares NASDAQ 100 ETF providing stronger returns than the ASX 200 for the foreseeable future.

iShares Global Healthcare ETF (ASX: IXJ)

Another option for investors to consider is the iShares Global Healthcare ETF. I believe it could be a quality option for investors due to the increasing demand for healthcare services globally. This exchange traded fund provides exposure to companies across a range of sectors including biotechnology, pharmaceutical, and medical devices. This includes many of the world’s biggest healthcare companies such as CSL Ltd (ASX: CSL), Johnson & Johnson, Novartis, and Pfizer.

More reading

• Are Megaport shares the ones to buy and hold beyond 2030?
• Why I would buy these outstanding ASX 50 shares right now
• Where to invest $2,000 in cheap shares
• Why the shares of Afterpay rival Openpay are up 840% since March
• 3 of the best ASX shares to buy with $3,000 right now

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 AFTERPAY T FPO and CSL Ltd. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and BetaShares Asia Technology Tigers ETF. 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 3 top ETFs you can easily diversify your portfolio with immediately appeared first on Motley Fool Australia.

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The ASX tech sector is relatively small compared to the much larger US NASDAQ tech sector. However, it is home to a growing number of exciting tech shares, including Megaport Ltd (ASX: MP1).

You may be familiar with names such as Appen Ltd (ASX: APX), Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO), but perhaps not Megaport.

Here’s why I think this fast-growing tech share is a good buy and hold option for the long term.

What does Megaport do?

Megaport provides a ‘network as a service’ offering to enterprises, or what is commonly referred to as “elastic interconnection services”.

This enables enterprises to increase or decrease their fixed broadband bandwidth. They can do this in response to their own usage requirements and can then ramp up their bandwidth requirements during busy times. Likewise, they can reduce it when demand is lower.

The service is provided via a network of cloud providers, data centre operators, and network service providers.

A simple mobile application enables users to access services for as short or as long a period as they require.

Why is the Megaport business model so compelling?

Megaport has a subscription-based billing model.

This is much more beneficial than being tied to regular network service agreement levels, or expensive long-term contracts.

It also provides Megaport with a sticky recurring revenue stream, receiving revenue from not just the network access points, but also the services that customers consume within the ecosystem.

As more network access points are added, more customers are attracted to joining. Also, existing ones tend to consume more. Thus, the ecosystem continues to grow and grow over time.

Megaport has a geographically dispersed customer base across the Asia Pacific, Europe and North America. This provides it with a diversified income stream.

It also partners with all the leading cloud operators including Amazon Web Services, Google Cloud and Microsoft Azure, further strengthening its business model as none are in direct competition.

Strong customer demand in a fast-growing industry

Megaport is growing rapidly within a fast-growing industry. Demand for its services continues to grow strongly.

It is connected to over 60 data centres globally. And this number continues to climb. The amount that enterprises worldwide continue to spend on cloud computing services is increasing at a rapid clip.

This is leading to solid customer and revenue growth, shown through Megaport’s share price.

In the first half of FY 2020, Megaport reported a massive 70% increase in revenue to $25.9 million.

Its March 2020 quarter update revealed a 10% increase in revenue, quarter on quarter. At the end of March, it had a healthy cash balance of $108.7 million.

Are Megaport shares a good long-term investment?

Buying Megaport shares is potentially a risky investment. Its revenues are growing rapidly and it is still yet to reach profitability.

Also, its current share price is factoring in the expectation that it will continue to grow at a high growth rate. If it fails to meet its growth targets, its share price could be hit harshly over the short term.

However, I still believe Megaport is a good long-term investment. This is despite the possibility of short-term share price volatility.  

Megaport is well placed to tap into the rapid rise of cloud computing and the need for rapid connectivity. The global public cloud services market continues to expand rapidly, as more infrastructure migrates to the cloud.

More reading

• 3 top ETFs you can easily diversify your portfolio with immediately
• 3 large cap shares beating the ASX 200 this year
• Where to invest $2,000 in cheap shares
• Why the shares of Afterpay rival Openpay are up 840% since March
• Should the Xero share price have a P/E ratio of 4,000?

Phil Harpur owns shares of AFTERPAY T FPO, Appen Ltd, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, MEGAPORT FPO, and Xero. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended MEGAPORT FPO. 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 Are Megaport shares the ones to buy and hold beyond 2030? appeared first on Motley Fool Australia.

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