The S&P/ASX 200 Index (ASX: XJO) is relatively flat today after a week of solid gains – up 0.21% at the time of writing to 5,831.3 points. If you’ve been watching the progress of the ASX 200 over the last month, you might be getting excited. That elusive 6,000-point threshold seems tantalisingly close at these levels.

As is normally the case, our market rally is being mirrored over in the United States of America. Since 23 March 2020, the S&P 500 Index (which measures the performance of the 500 largest companies in America) has rallied over 36%. The ASX 200 has rallied by over 28% since the same day (coincidentally the market bottom for both indexes).

An ‘unloved but welcome’ share market rally?

But according to MarketWatch, analysts from US investment banking giant, Goldman Sachs are calling this an “unloved but welcome” share market rally. Goldman’s analysts have set a ‘target’ for the S&P 500 of 3,000 points by the end of the year.

This morning (our time), the S&P 500 closed at 3,055.73 points. This means Goldman is assuming the markets stay more or less flat at these levels for the rest of the year.

So how does Goldman Sachs justify this semi-bearish target? The analysts describe the recent rally we’ve just experienced as a “remarkable journey”. But it’s also one they see as most likely stopping due to “numerous medical, economic and political risks dot the investment landscape”.

They postulate that “in the near-term, the index could move to 3,200 but any bumps in the road to economic reopening or further political risks could send the index to 2,750”.

As such, Goldman’s analysts are predicting that the US share market rally has already priced in a strong economic recovery.  Thus, the fulfilment of this prediction will not result in markedly higher share prices, rather providing “validation” of the current levels.

What would this mean for ASX shares?

As I alluded to earlier, the ASX 200 is more connected to the S&P 500 and the broader US markets than many investors realise. If Goldman Sachs’ predictions turn out to be accurate, I think it’s a reasonable conclusion to make that the ASX 200 will also be relatively flat for the rest of the year, as most of the concerns Goldman has can be translated effectively to the ASX 200 as well.

But, of course, successful investing isn’t about trying to predict where the markets will be in six month’s time in my view. It’s about finding high-quality companies at great prices that you can hold as long-term investments. Whether or not Goldman Sachs’ analysis is a means to this end is up to you!

More reading

• The 3 ASX tech stocks that helped this fund manager outperform in May
• Is the a2 Milk share price too high to buy?
• ASX 200 investor in your 40s? 3 shares to buy now
• ASX 200 down 0.1%: Big four banks drag ASX lower ahead of RBA meeting
• Is the Newcrest Mining share price a buy?

Motley Fool contributor Sebastian Bowen 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 Could Goldman Sachs’ 2020 predictions for the US share market spell the end of the ASX 200s remarkable rise? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3eFw86J

The Decmil Group Limited (ASX: DCG) share price has been cut in half today after shares resumed trading on the ASX for the first time since mid-May.

Decmil offers a range of services to the Australian resources, infrastructure, transport and energy sectors, specialising in engineering, construction, and maintenance. 

The company has a blue-chip customer base across its core markets, which includes big ASX names like BHP Group Ltd (ASX: BHP), Woodside Petroleum Limited (ASX: WPL) and Origin Energy Ltd (ASX: ORG).

Why the Decmil share price has been cut in half

At the end of last month, Decmil announced a $50 million equity raising to strengthen its balance sheet and provide working capital to fund its pipeline of opportunities.

The equity raising is being undertaken via a pro-rata entitlement offer on the basis of 4.2 new shares for every 1 existing share – at an issue price of 5 cents per share. This represents a 75% discount to Decmil’s last trading price of 20 cents per share on 18 May.

As a result, Decmil shares were punished when they were reinstated to official quotation this morning. As part of being reinstated, Decmil announced the successful completion of the bookbuild for the institutional component of its equity raising.

The company received $30 million of commitments during the institutional bookbuild, along with commitments to partially underwrite up to ~$11 million of the retail component.

Decmil will issue around 600 million ordinary shares under the institutional offer. These shares are expected to commence trading on Wednesday, 10 June 2020.

With the retail entitlement offer being partially underwritten, the equity raising will raise a minimum of $41 million and a maximum of approximately $50 million.

The retail offer is expected to open on Friday, 5 June 2020 and close on Wednesday, 17 June 2020.

Management commentary

Commenting on the rationale behind the equity raising last week, CEO Dickie Dique said:

“Decmil had some significant challenges as we entered 2020, including a tight balance sheet. This capital raising addresses that issue and will set us up well to continue pursuing and delivering profitable new contract opportunities”.

“With a reset balance sheet, ongoing contract wins and a refreshed structure, Decmil will be well placed to continue our business turnaround. We also expect that significant infrastructure spending in Australia over the next few years will further drive this turnaround and return Decmil to robust profitability and strong shareholder returns,” he added.

At the time of writing, the Decmil share price is sitting 50% lower for the day at 10 cents per share after plunging 62.5% at the open.

More reading

• 3 founder-led ASX shares to buy for strong long-term returns
• Zip Co share price rockets 44% higher on U.S. expansion news
• Is the CSL share price a buy?
• Could Goldman Sachs’ 2020 predictions for the US share market spell the end of the ASX 200s remarkable rise?
• The 3 ASX tech stocks that helped this fund manager outperform in May

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 Decmil share price is plummeting 50% today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3cqY3FW

The performance of ASX shares last month defied the market adage of selling in May. But there’s one fund manager whose smile is bigger than most.

This is listed investment manager Monash Absolute Investment Company Ltd (ASX: MA1) as it reported a 12.8% gain in the value of its portfolio in May, which is nearly double the gain on the S&P/ASX 200 Index (Index:^AXJO).

There are a few factors that pumped up the fund’s alpha (performance above the wider market), but its managers credit three ASX tech stocks for doing more of the heavy lifting.

Firing the afterburner

One was the Afterpay Ltd (ASX: APT) share price, which surged 52% last month on the back of two announcements.

The buy now, pay later darling attracted a large investment from China tech titan Tencent Holdings Ltd, which quelled doubts about Afterpay’s outlook and valuation.

Afterpay then surprised the market by announcing it hit five million active customers in the US – a 30% to 40% increase over its weekly run rate from January to February.

However, in a sign that the Afterpay share price may be close to fair value, the fund sold some of its holdings although it said Afterpay remains one of its largest holdings.

Good buy

The second stock that made a big contribution to Monash’s big month was the Kogan.com Ltd (ASX: KGN) share price.

The online retailer’s stock jumped 41% in May as it was one of the few that benefited from the COVID-19 lockdown that drove people to shop on the web.

“We had sold out of Kogan in late February on COVID-19 concerns about its supply chain. The stock subsequently fell and rebounded,” said the fund manager.

“Once it was clear to us there [sic] supply chain issues were limited we bought back into the stock.

“A week after we rebuilt our position it had a positive business update and the stock price continued run.  It ran all the way through May too and we started to take profits.”

The fund manager completely sold out of the stock after making around 50% profit.

Paying off

Another stock that Monash did well out of was EML Payments Ltd (ASX: EML) share price, which jumped 30% that month.

The fund sold some of its holdings before the payment solutions group withdrew earnings guidance due to the coronavirus turmoil even though it said business trends remained favourable.

“With EML however, we managed to rebuild our position close to that low point, in mid-March,” said the fund manager.

“A strong rally started soon after when EML announced a renegotiated outcome for its PFS acquisition, resulting in a strong capital position. A further business update later in May was well received by the market.”

Monash sold a modest amount of shares in EML to control its portfolio weighting.

More reading

• 3 founder-led ASX shares to buy for strong long-term returns
• Could Goldman Sachs’ 2020 predictions for the US share market spell the end of the ASX 200s remarkable rise?
• 3 investing secrets for success with ASX shares
• Is the a2 Milk share price too high to buy?
• ASX 200 investor in your 40s? 3 shares to buy now

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Emerchants 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 The 3 ASX tech stocks that helped this fund manager outperform in May appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3eFs6eB