Stock Pick

  • Are ASX bank shares finally back in the buy zone?

    Holding piggy bank in hands, long term shares, shares to buy and hold

    Fuelled by surging ASX bank shares, the S&P/ASX 200 Index (ASX: XJO) has had a truly extraordinary week – and we still have one more day of trading left!

    Since Monday, the ASX 200 has risen from 5,497 points to close today at 5,851.1 points – a swing over 6.5%.

    Driving this, the big four ASX bank shares have taken off this week in a big way.

    Let’s take Commonwealth Bank of Australia (ASX: CBA). It was asking just $58.80 a share on Monday morning. Today, investors were seeking $65.73 a share at market close. That’s a four-day turnaround of almost 12% – as I say, extraordinary stuff.

    It’s an even better story with Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB) shares, all of which are up more than 20% since Monday. You can’t make this stuff up.

    So what’s going on here? And more importantly, are the ASX bank shares a buy today?

    Why ASX bank share prices are raising the roof

    In my view, what’s happening with the ASX bank shares is a pure shift in sentiment towards the economy, rather than anything specific to the banking sector.

    Banks are one of the most economically-reliant companies on the ASX. That means they are usually more profitable when the broader economy is going well, and decidedly less so if the economy is going poorly or is in a recession.

    Ever since the outbreak of the coronavirus pandemic, the market has more or less valued the banks at ‘recession prices’, which explains why the big four ASX banks have seen their market capitalizations smashed in 2020 so far.

    But this sentiment has decisively shifted this week. Why? Well, it’s likely to be a combination of factors. States around the country are increasingly lifting coronavirus-related restrictions and lockdowns, which is bringing thousands of businesses out of hibernation.

    And just today, the Reserve Bank of Australia (RBA) governor Philip Lowe told a Senate hearing that the RBA expects there to be less economic damage than they first feared.

    As you can imagine, these developments have likely contributed to a huge boost in confidence around where the economy is heading in the short- to medium-term.

    Are the ASX bank shares a buy today?

    Even though ASX bank shares are storming higher this week, I’m not too interested myself.

    We still don’t know the extent of the economic damage that will stem from the coronavirus. We still don’t know how badly the banks will be hit for the rest of 2020 and in 2021 and beyond. And we still don’t know when the banks (who have always been known for their dividend payments) will be able to pay dividend cheques anywhere near the levels they used to.

    As such, I think there are better places to put your money today. And if you were really bullish on ASX bank shares, you probably should have been buying last week!

    So instead of the ASX bank shares, why not check out the Foolish dividend pick below!

    NEW: Expert names top dividend stock for 2020 (free report)

    When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*

    Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.

    This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed-up dividend.

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    Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. 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 Are ASX bank shares finally back in the buy zone? appeared first on Motley Fool Australia.

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  • Jamie Dimon Captures the Stock Market Moment

    Jamie Dimon Captures the Stock Market Moment(Bloomberg Opinion) — Don’t fight the U.S. Federal Reserve — repeat that mantra until it sticks.Jamie Dimon, the boss of JPMorgan Chase & Co., put it well this week. “This wasn’t the bazooka,” he said, referring to Jay Powell’s response to the coronavirus crisis. “The Fed took out the whole military and applied it. Just announcing these programs reduced spreads (the difference between corporate bond yields and their benchmarks) in the market. It’s going to save a lot of small businesses.” In the past month, the equity market’s glass has gone from pretty much empty to at least half full and that’s down to the coordinated fiscal and monetary effort from authorities far and wide. You want some quantitative easing? Please, have some more and take some for the journey home. Even those foot draggers at the European Union are talking about radical fiscal action. We won’t really see a V-shaped economic recovery, but it seems seem like we’ve stopped the L.Nonetheless, this is a recovery based so far on asset-price inflation rather than any economic data. Central bank and government action may have restored financial valuations but real incomes will still suffer dramatically for a long while to come. Unemployment and diminished consumption cannot be magicked away.The stock market is looking even further into the distance than usual to justify its valuations, which is sometimes hard to square away against a constant stream of dire economic statistics and evaporating company earnings. Since QE came to life during the global financial crisis, it has paid for investors to cast aside their usual forward-earnings analysis and focus instead on the rising tide of money. The central banks have learned their post-2008 lessons and have barely put a foot wrong this time. This is having uneven effects, however. The bulk of the stimulus is coming into investment-grade assets because that’s where central banks feel more comfortable. Credit spreads have recovered most in BBB and A-rated bonds. High-yield yield assets improved sharply at first, but this has abated. The spread between the yields on investment-grade debt and those of junk bonds is still nearly double the levels seen in February. Similarly, new debt issuance is motoring again but only for the better-quality names. While U.S. banks such as Citigroup Inc. and Wells Fargo & Co. are returning for the fifth or sixth time this year to replenish capital, the junk sector has been restricted to one-off selective deals — often with eye-watering yields.The change in stock market sentiment isn’t just about QE. The oil price collapse has come and gone and fears of a devastating second wave of Covid-19 are easing. Short-selling bans have quietly been lifted in several European countries too, and some of the recent improvement may be explained by that. The sound of economies cranking back into life can just about be made out over the whirring of the monetary printing presses, allowing even bombed-out old economy stocks to recover, not just the new technology darlings.Notably, some of the recent action has been in high-dividend stocks, which had been forced to skip shareholder payouts at the height of the crisis. Investors had feared that the dividend bans might last several years; now they think it may be a quarter or two. Many investment funds work off a dividend-yield model.Investment managers may be doing the natural thing right now and chasing the rising stock market indexes, but that doesn’t mean they’re brimful of confidence. The Bank of America fund manager survey for May shows extreme bearishness pervades, with only 10% expecting a V-shaped recovery and 68% expecting stock prices to fall. Given the recent positive news on the virus and the gradual ending of lockdowns, the June survey might be different.The fiscal response will determine how the economy recovers over the long term but the monetary triage has worked better than anyone could have expected in those ugly days of March. For that we should be grateful, and for the stock market’s semi-rational exuberance.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • These ASX healthcare shares could bring your portfolio to life

    blocks spelling health and wealth

    With almost every country in the world experiencing growth in the number and proportion of older people in their population, demand for healthcare services looks set to grow strongly over the next few decades.

    I believe this makes the healthcare sector a great place to make buy and hold investments.

    But which ASX healthcare shares should you buy? Here are two to consider snapping up:

    Pro Medicus Limited (ASX: PME)

    The first ASX healthcare share to consider buying is Pro Medicus. It is a fast-growing provider of a full range of radiology IT software and services to hospitals, imaging centres, and healthcare groups globally. The product which I think has the potential is its Visage 7 platform. It delivers fast, multi-dimensional images streamed via an intelligent thin-client viewer. This makes it vastly superior to cumbersome legacy systems and has a proven return on investment for users.

    Also supporting its growth is the Visage RIS product. It is a comprehensive, enterprise-class, and state-of-the-art radiology information system. It is being used by two of the biggest radiology providers in Australia on long term contracts. Combined with its high margins, I believe these platforms leave Pro Medicus well-positioned to deliver strong earnings growth over the next decade and beyond.

    Ramsay Health Care Limited (ASX: RHC)

    Another ASX healthcare share to consider buying is Ramsay Health Care. It is one of the world’s leading private healthcare companies. Ramsay currently owns and operates a total of 480 facilities across 11 countries. From these facilities it looks after 8.5 million patients each year at present.

    This makes it the market leader in the Australia, France, and Scandinavia markets. Due to its strong market position, I believe Ramsay Health Care will benefit greatly from the increasing demand for healthcare services in the future. This could make it well worth looking beyond the short term headwinds it is facing and focusing on the bigger picture.

    And here are more top shares to consider. All five recommendations below look dirt cheap after the crash…

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    James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Ramsay Health Care 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 These ASX healthcare shares could bring your portfolio to life appeared first on Motley Fool Australia.

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