The A2 Milk Company Ltd (ASX: A2M) share price hit an all-time record high of $20.05 last Thursday. Rather than pushing higher, its shares fell 4.23% on Friday. Could this be an opportunity to buy a2 Milk shares at a discount? 

What caused the sell off of a2 Milk shares? 

On Friday, the a2 Milk share price fell on no news, despite the S&P/ASX 200 Index (ASX: XJO) closing up 0.10%.

The slump could be attributed to the a2 Milk share price rising 10% during the week, with shares hitting $20 for the first time and the company reaching a record $14 billion market capitalisation. Rather than pushing higher, investors might have taken this opportunity to sell shares to lock in profits. 

Is the a2 Milk share price a buy?

It is a fragile time to be buying shares, given how much the market has run up. Not only is the US and South America struggling to contain the coronavirus, but there are increasing fears of a second wave across Europe, China and Australia. Quantitative easing and record money supply across the world has created a serious discrepancy between the real economy and the markets. It is difficult to tell if the markets will continue pushing, or if a correction is imminent.

Despite the inherent risks in the broader economy and markets, I believe the a2 Milk share price is fair value at today’s prices. The company has a strong track record of consistent growth and the coronavirus may incite further tailwinds for its revenues moving forward. 

a2 Milk provided the market with a trading update and FY20 outlook on 22 April. The update highlighted that the business has continued to experience strong revenue growth across all key regions, particularly in its infant nutrition products sold in China and Australia. a2 Milk’s 3Q20 revenue was above expectations – the company attributed this result primarily to changes in consumer purchase behaviour and impulsive pantry stocking. 

The company’s 2H20 earnings before interest, tax, depreciation and amortisation margin is also anticipated to be higher than previously expected. Expanding margins have been driven by higher revenue from higher margin nutritional products, partly due to consumer pantry stocking in 3Q20, favourable foreign exchange rate movement, and lower than expected costs for travel. 

The overall performance for FY20 should see ongoing revenue growth across its key regions supported by its significant investment in marketing for China and US. Notwithstanding the uncertainty, it anticipates revenue for FY20 in the range of $1,700 million to $1,750 million. This would represent a 30.4% to 34.2% increase on FY19 revenue. 

Foolish takeaway

If the broader market is sold off, then the a2 Milk share price will get dragged down along with it. While I wouldn’t be in a hurry to buy a2 shares, I believe the company is fundamentally in a good place and continued earnings momentum should be expected. 

More reading

• Is there a better buy than JB Hi-Fi shares today?
• The NAB share price has fallen 24%. Should you buy?
• Where to invest $10,000 into ASX shares right now
• James Hardie share price in spotlight as it upgrades profit guidance
• My ASX share for the week

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 Is the a2 Milk share price a buy after falling nearly 5% on Friday? appeared first on Motley Fool Australia.

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The National Australia Bank Ltd. (ASX: NAB) share price has fallen 24.2% lower in 2020 but is the ASX bank share in the buy zone?

Why the NAB share price has slumped 24.2%

ASX bank shares were under real pressure during the February/March bear market. Investors panicked with many thinking that bank balance sheets could be stressed by mass loan defaults across the economy.

However, as we now know, this hasn’t proven to be the case. A combination of record government stimulus measures and a better-than-expected pandemic response has left the Aussie banks in a solid position.

So while the NAB share price is down 24.2%, it could have been much worse. The real question is whether or not NAB is a cheap buy at its current valuation.

Is NAB a cheap buy right now?

In order to determine whether the NAB share price is cheap, it pays to compare it to some of its peers.

The Westpac Banking Corp (ASX: WBC) share price is down 25.0% this year while Commonwealth Bank of Australia (ASX: CBA) shares have fallen 14.0%.

If we use the S&P/ASX 200 Index as a benchmark, which is down 11.1% for the year, then all 3 of these ASX 200 bank shares are underperforming in 2020.

While the big four are similar, it’s not as simple as saying that because NAB’s share price has fallen more than CommBank’s has, it’s an automatic buy.

NAB trades at a price-to-earnings (P/E) multiple of 16.8 times. Compared to CommBank which is at 12.46 and Westpac at 13.64, this would appear to make NAB a touch expensive.

It’s also true that NAB is yielding 6.1% right now compared to the higher-paying Westpac and CommBank yields of 9.6% and 6.3% respectively.

Of course, dividend yields can be misleading, especially with the ASX banks currently holding back on distributions under APRA’s orders.

However, from what I can see, the NAB share price isn’t a cheap buy right now. ASX bank shares, in general, could be undervalued, but I don’t think NAB is a real stand-out at $18.67 per share.

More reading

• Is there a better buy than JB Hi-Fi shares today?
• Is the a2 Milk share price a buy after falling nearly 5% on Friday?
• James Hardie share price in spotlight as it upgrades profit guidance
• ASX 200 Weekly Wrap: ASX back in the green
• Beat low interest rates with Telstra and these ASX dividend shares

Motley Fool contributor Ken Hall 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 The NAB share price has fallen 24%. Should you buy? appeared first on Motley Fool Australia.

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ASX shares continue to be a great place to invest money to make good returns over the long-term. I’m excited by many of the opportunities that I could put $10,000 into.

Not every ASX share looks great value at the moment. COVID-19 has caused a lot of uncertainty for the economy and the stock market.

There are some shares which I think are opportunities and others which could be worth leaving on the watchlist for now.

If I had $10,000, these are the ASX shares I’d pick:

A2 Milk Company Ltd (ASX: A2M) – $3,000 

A2 Milk has been one of the best ASX shares over the past five years. This COVID-19 period is a difficult time for many businesses, but A2 Milk continues to grow. A2 Milk said it’s expecting FY20 revenue to be in the range of $1.7 billion to $1.75 billion. This would be growth of 30% to 34% on FY19’s revenue.

The amount of growth that the ASX share can potentially achieve in North America alone is very attractive and it’s adding thousands of stores to its US distribution network every six months.

It’s currently trading at 28x FY22’s estimated earnings. I think that’s a reasonable price considering how much profit growth the company is creating each year.

Brickworks Limited (ASX: BKW) – $3,000 

I believe that Brickworks is a great value ASX 200 share at the moment. The company has already been making good shareholder returns for decades. At the current Brickworks share price I’d want to buy shares.

The best time to be greedy is when people are fearful about shares. COVID-19 is probably going to cause the Australian construction sector to have a difficult time over the next 12 months. But I think this is creating a good value opportunity to buy Brickworks shares whilst they are cheaper. I believe construction will return because it normally acts cyclically over time. Immigration will return at some point. 

Brickworks currently has a market capitalisation of $2.29 billion. Its industrial property trust stake is worth $710 million (growing) and its shareholding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is worth $1.84 billion. Those two divisions have a combined pre-tax value of $2.55 billion.

Pushpay Holdings Ltd (ASX: PPH) – $2,000

Pushpay is one of the most exciting ASX shares to me at the moment. Since the start of May the Pushpay share price has risen 90.7%. These COVID-19 conditions are causing more people to donate through Pushpay’s electronic giving system rather than alternative means.

In FY21 the company is expecting to at least approximately double earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF).

The ASX share continues to improve its gross margin at an attractive rate. In FY20 the gross margin rose from 60% to 65%. This means each new $1 of revenue is more profitable. Management are expecting even higher margins over time. 

US churches are a great growth area for Pushpay and represent a $1 billion revenue opportunity for Pushpay.

Magellan High Conviction Trust (ASX: MHH) – $2,000

Some of the best global shares aren’t on the ASX. Businesses like Alibaba, Alphabet, Microsoft, Facebook and Visa are listed overseas.

Magellan High Conviction Trust is a listed investment trust (LIT) which looks to invest in the best businesses in the world, like the ones I just mentioned.

The strategy for the LIT is to hold around 10 different shares – the ones that the investment team have the highest conviction in.

I like the idea of getting international share diversification. However, I don’t want to invest in many of the other businesses out there. I just want exposure to the best ones. I think that’s exactly what this LIT provides.

As a bonus, it comes with a 3% distribution yield target. I think that’s a nice mix of rewarding shareholders whilst benefiting from capital growth. It’s currently trading at a discount to its net asset value (NAV), but I’m a little concerned about the upcoming US election on the US stock market which is why I only allocated $2,000 to this pick.

Foolish takeaway

I really like each of these shares. Each of them gives Aussie investors exposure to growing non-Australian earnings. At the current prices I’m attracted to Brickworks and A2 Milk the most, I think they have very good investment returns potential at this level. 

More reading

• Is the a2 Milk share price a buy after falling nearly 5% on Friday?
• ASX share price winners and losers of last week
• My ASX share for the week
• Top brokers name 3 ASX 200 shares to buy next week
• Where to invest $10,000 into ASX shares next week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. 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 Where to invest $10,000 into ASX shares right now appeared first on Motley Fool Australia.

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