The Wesfarmers Ltd  (ASX: WES) share price has been up and down in 2020. Shares in the Aussie conglomerate are down 2.46% this year whilst still outperforming the S&P/ASX 200 Index (ASX: XJO) but this doesn’t tell the whole story.

The group’s shares hit a new 52-week high of $47.42 per share in mid-February. That was just prior to the bear market which sent the Wesfarmers share price tumbling to a 52-week low of $29.75 on 23 March.

So, despite the volatility, is the Wesfarmers share price set to climb in 2020?

Is the Wesfarmers share price headed higher this year?

I think Wesfarmers is actually in a strong position right now. The Aussie conglomerate is sitting on a pile of cash after having sold another part of its stake in Coles Group Ltd  (ASX: COL) for $1.1 billion at the end of March.

Wesfarmers is diversified across a number of sectors which is good for stability. However, one of those happens to be the Aussie retail sector which is struggling right now.

Even before the coronavirus pandemic, retailers were doing it tough. Late this month Wesfarmers made the call to restructure its Kmart Group arm. This includes the closure of up to 75 Target stores across Australia as well as the rebranding of further Target stores to Kmart.

It’s true that cash is king right now. Ordinarily, having excess cash could be bad for the Wesfarmers share price. This is because the cash is not being put towards earning a strong return. However, the current economic environment is quite uncertain.

This means that strong cash positions have a couple of advantages. One is balance sheet strength and the ability to operate confidently. The other is being primed to acquire more companies and expand operations in 2020.

Many companies are trading cheaply now because of lost earnings and lower growth forecasts. This means Wesfarmers could swoop in and buy undervalued shares to diversify and broaden its portfolio.

Foolish takeaway

I think the Wesfarmers share price could climb higher in 2020. The Aussie conglomerate is looking to restructure and improve its efficiency right now.

Combined with a strong cash position and undervalued companies in the market, Wesfarmers definitely has the potential to climb in value over the next 7 months.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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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The Freedom Foods Group Ltd (ASX: FNP) share price is on course to end the week on a very disappointing note.

At the time of writing the diversified food company’s shares are down 15% to $3.68.

At one stage today they dropped 19% to a multi-year low of $3.53.

Why is the Freedom Foods share price crashing lower?

Investors have been selling Freedom Foods’ shares following the release of a trading update this morning.

That update revealed various impacts from the pandemic, both positive and negative, across its business.

During March and April, the company’s Australian retail grocery channel experienced stronger than expected demand. This was driven by consumer spending shifting to this channel during lockdown. Sales in the channel have now normalised.

Also performing positively was its dairy nutritionals business. Demand for lactoferrin remains strong and its performance is in line with expectations. Pleasingly, 80% of FY 2021 output is already contracted.

Things were not so positive for the out of home channel in Australia. Sales in this high margin channel were just 25% of its pre-pandemic expectations in April. This was due to distributors destocking because of reduced demand from widespread outlet closures and restricted trading. The channel is recovering slowly and in May its sales have recovered to 50% of pre-pandemic expectations.

It has been a similar story in the industrial channel. This channel produces cream products which are used in food service and hospitality industries. Sales in April were approximately 55% of pre-pandemic expectations and are forecast to be 45% in May.

Finally, its export channel has underperformed during the pandemic. Sales to China are down 35% compared to expectations. However, management notes that the channel has started to recover now.

What does this add up to?

The sum of the above is a much weaker second half result. And given the importance of its second half to its overall result, its full year result looks set to fall well short of expectations.

Management explained: “Typically, the second half of the financial year is a significant sales and margin contributor to the overall result: normally the second half contributes over 60% of full year operating EBDITA. For FY2020, the combination of the level of sales, changed sales mix from March to June, the impact of doubtful debts and an unrecovered higher seasonal milk pricing will materially impact the second half operating EBDITA relative to pre COVID 19 plans.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freedom Foods 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.

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The Acrux Limited (ASX: ACR) share price has taken off this morning, bolting out of the gates to be up by as much as 62.96% in early trade. At the time of writing, Acrux shares are still sitting 40.74% higher at 19 cents per share, taking its current market capitalisation to around $32 million.

Acrux is an ASX pharmaceutical share dedicated to developing and commercialising topical pharmaceuticals. The company currently has 3 pharmaceutical products approved and marketed, along with a portfolio of generic topical products in development. It was established in 1998 and its operations extend to the US and Europe.

Why is the Acrux share price shooting higher?

This morning, Acrux revealed it has entered into an exclusive sales, marketing and distribution agreement with US-based private company TruPharma. 

According to TruPharma’s website, “TruPharma has a proven track record of building niche product portfolios and getting difficult products FDA-approved and into the market”.

Subject to approval by the US Food and Drug Administration (FDA), TruPharma will be responsible for the commercialisation of 6 existing products from the Acrux pipeline. This includes the sponsorship and management of each FDA application, management of commercial manufacturing, marketing and distribution of each product.

The 6 products are at various stages of development and have not been lodged with the FDA.

In turn, Acrux and TruPharma will share the gross profits generated from the sales of the products. Unless otherwise agreed, the agreement for each product will have a 10-year term from launch.

Commenting on today’s update, CEO and managing director, Michael Kotsanis, said:

“We are excited to enter into this agreement with TruPharma and we look forward to developing a long-lasting relationship between the two companies. The agreement marks a significant step forward in achieving Acrux’s transition into the generics market.”

More reading

• Appen share price falls after positive update fails to impress
• Why Costa, Freedom Foods, Sonic, & Westpac shares are tumbling lower
• Will the Wesfarmers share price climb higher in 2020?
• Why the Freedom Foods share price crashed 19% lower today
• Build wealth for life with these 2 ASX 200 shares

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 Why the Acrux share price skyrocketed 63% this morning appeared first on Motley Fool Australia.

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