Stock Pick

  • Why the AFIC share price could be cheap today

    Businessman paying Australian money, ASX shares

    The Australian Foundation Investment Co.Ltd. (ASX: AFI) or “AFIC” share price could be a cheap buy today.

    AFIC is a listed investment company (LIC) that has a $7.6 billion market capitalisation right now. The Aussie company is perhaps best known for being a tried and true dividend share, even when times are tough.

    But after slumping 12.8% lower in 2020, is the Aussie LIC in the buy zone?

    Why the AFIC share price could be cheap today

    AFIC invests in a diversified portfolio of 8 to 100 companies across a range of industries. Given the scope of its investments, I like to compare the Aussie LIC to the S&P/ASX 200 Index (ASX: XJO).

    While the AFIC share price is down in 2020, the benchmark ASX 200 index has also fallen 10.9%.

    That could mean the Aussie LIC is in the buy zone but it may not be enough. One of the big advantages of LICs like AFIC is their historical dividend performance.

    Even during the GFC, AFIC managed to still pay a strong dividend to investors. That’s impressive and one of the many reasons AFIC is a staple in a lot of Aussie portfolios.

    Let’s consider an exchange-traded fund (ETF) as an alternative to AFIC. The Vanguard Australian Shares Index ETF (ASX: VAS) tracks the ASX 300 and is down 10.5% this year.

    This Vanguard ETF is yielding 4.34% right now while AFIC is paying 3.84%. That could mean the AFIC share price isn’t as cheap as it initially looks.

    However, it’s not that simple. If AFIC manages to maintain its dividends even as we see more ASX shares slash distributions later this year, that could be worth more than capital stability for many investors.

    Foolish takeaway

    I think AFIC is a solid ASX share in most portfolios. The Aussie LIC provides diversified exposure and its management fee is a lowly 0.13% per annum.

    Whether the AFIC share price is cheap or not remains to be seen in 2020 but it could be a good buy after its 12.8% fall.

    If you’re looking to diversify your portfolio in 2020, don’t miss these top picks today!

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

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    Motley Fool contributor Ken Hall owns shares of Vanguard Australian Shares Index. 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 AFIC share price could be cheap today appeared first on Motley Fool Australia.

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  • Royal Caribbean (RCL): Tempting? Sure, But It Might Not Be a Buy Just Yet

    Royal Caribbean (RCL): Tempting? Sure, But It Might Not Be a Buy Just YetWhoever invested in Royal Caribbean (RCL) a month ago has seen returns in the shape of 45%. As liquidity boosting measures have been put in place, and cruise lines are aiming to resume operations later in the year, optimism has sent these stocks soaring. Zoom out though, and on a year-to-date basis, RCL is still sinking 59% into the red.This fact indicates how far the industry has fallen since the pandemic’s onset. As further evidence of the struggles faced by cruise lines in these COVID-driven times, barely a month after Royal Caribbean sold over $3 billion in senior secured notes at high interest rates to raise cash, the cruise ship operator is raising additional funds to keep it afloat.The embattled cruise line is tapping the hole in the wall by pricing $2 billion in bonds and convertible notes. Looking more closely at the offerings, they are split in two: $1 billion senior guaranteed notes paying 9.125% interest due in 2023, and $1 billion in convertible senior notes due 2023 at 4.25%, which are convertible at a 25% premium.RCL will create a new, wholly owned subsidiary that will own all of the equity interests in seven of its ships, which will guarantee the senior notes.William Blair analyst Sharon Zackfia believes the cash will be an additional lifeline, should the cruise line remain chained to the harbor for an extended period.The 5-star analyst said, “With Royal’s monthly cash burn in a zero revenue environment estimated at $260 million to $285 million (including interest expense and necessary capital expenditures, but excluding cash refunds of deposits and inflows from new and existing bookings), the additional capital raise adds approximately seven months to Royal’s liquidity runway in a zero-revenue environment, effectively funding the company for at least another 12 months.”While Zackfia is “encouraged by Royal’s ability to continue to access funds,” the analyst reiterates a Market Perform (i.e. Hold) rating “based on limited visibility on the pace of recovery given uncertainty on the timing of a resumption of sailing.” Zackfia has no fixed price target in mind. (To watch Zackfia’s track record, click here)Turning now to the rest of the Street, where based on 9 Buys, 4 Holds and 2 Sells, the analyst consensus rates RCL a Moderate Buy. However, the average price target comes in at $54.17, and implies a modest downside from current levels. (See RCL stock analysis on TipRanks)

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  • Woolworths facing fresh threat from Amazon.com

    The ASX is facing a big indiscriminate sell-off this morning but the Woolworths Group Ltd (ASX: WOW) share price might have another headache to deal with.

    On-line shopping titan Amazon.com, Inc. started selling alcohol online with free delivery for Amazon Prime subscribers, reported Nine News.

    The move was to capitalise on strong demand for alcohol during the COVID-19 lockdown with Aussies flocking to online platforms for contactless delivery.

    Demerger under a cloud

    The launch of alcohol on Amazon poses a fresh challenge to Woolworths on a few fronts. Our supermarket giant is looking to demerge its Endeavour Drinks business, which houses Dan Murphy’s and BWS, among others.

    The coronavirus pandemic is complicating the process and news that the world’s largest retailer is muscling in on the lucrative market will cast a further cloud over the demerger.

    How prices compare

    The drinks sold on Amazon is priced favourably to Dan Murphy’s. According to Nine News, a case of VB beer on Amazon costs $51.90 for 30 cans.

    Dan Murphy’s price is a tat cheaper at $51.85 – but Dan Murphy’s charges between $6.90 and $15 for delivery while Amazon’s delivery free with its $6.99 per month Prime subscription.

    A case of Jacob’s Creek Double Barrel Chardonnay at Dan Murphy’s is $119.70 plus delivery. Amazon is selling the same for $108 – again with free delivery for Prime members.

    Amazon competing with our supermarkets

    Woolies shareholders are hanging out for the Endeavour spin-off given that stocks which undertake such a separation tend to outperform the S&P/ASX 200 Index (Index:^AXJO).

    But Woolworths is facing more than one battle front with Amazon. Experts believe it’s only a matter of time before Amazon starts selling fresh produce online and in physical stores, just as it’s doing in the US.

    It isn’t only Woolworths that is facing the Amazon challenge. Archrival Coles Group Ltd (ASX: COL) is also vulnerable to losing market share to the US retailer, while grocery distributor Metcash Limited (ASX: MTS) is another that will be impacted.

    Can ASX supermarket stocks keep outperforming?

    These stocks have held up very well through the COVID-19 bear market thanks to their defensive income and the grocery panic buying .

    The Metcash share price is up 12.5% since the start of 2020, while the Cole’s share price is ahead by nearly 7% and the Woolworth share price is 2% in the black.

    This stands in contract to the 11% loss on the ASX 200.

    Shareholders will be hoping they can keep outperforming during these uncertain times even with Amazon nipping at their heels.

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

    Learn More

    *Extreme Opportunities returns as of June 5th 2020

    More reading

    John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. BrenLau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Amazon. 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 Woolworths facing fresh threat from Amazon.com appeared first on Motley Fool Australia.

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