Stock Pick

  • Why I think Wesfarmers is the best ASX blue chip

    Wesfarmers share price

    I think that Wesfarmers Ltd (ASX: WES) is the best ASX blue chip share right now.

    Wesfarmers doesn’t exactly have a ton of competition for the title of best ASX blue chip. ASX banks like Westpac Banking Corp (ASX: WBC) and miners like BHP Group Ltd (ASX: BHP) have been patchy over the decades.

    The (mostly) retail conglomerate seems like a reliable pick in most aspects. Here are some of the reasons why I think it’s a good pick:

    Strong performing businesses

    The crown jewel of Wesfarmers is Bunnings. The hardware business is now the key profit centre after the divestment of Coles Group Limited (ASX: COL). In good economic times Bunnings is a solid performer with a healthy construction industry.

    During these COVID-19 times we saw that a lot of people went to Bunnings to do some home improvements during the lockdown.

    Wesfarmers revealed in its retail trading update that in the second half of FY20 to May 2020, Bunnings sales were up 19.2%. We also heard that Officeworks’ sales were up 27.8% and Catch’s gross transaction value sales were up 68.7%.

    I like businesses that can keep performing in all economic conditions.

    Investment flexibility

    One of the main things I like about Wesfarmers is its ability to regularly change what operating businesses it owns. It used to own Coles Group Limited (ASX: COL) and Kmart Tyre and Auto. Management was comfortable divesting those businesses.

    In recent times Wesfarmers has acquired Catch (an online retailer) and Kidman Resources (a lithium miner).

    Having the ability to evolve over time is important. The better growth opportunities may be in different industries in the coming years. Wesfarmers can pivot the overall business towards that growth will help it continue its solid earnings performance.

    Wesfarmers is focused on shareholder returns

    Ultimately, shareholder returns is what management should be focused on. As long as it doesn’t come at the expense of the long-term health of the company.

    I like how Wesfarmers is willing to try new things, such as the attempt to take Bunnings to the UK. But management are also willing to end initiatives when appropriate. The closure of many Target stores is one recent example.

    It’s a solid dividend share on the ASX and continues to reward shareholders.

    Foolish takeaway

    Wesfarmers certainly isn’t cheap at a share price of $44. But the ongoing strength of Bunnings, Officeworks and Catch justifies this price in my opinion. I’d be happy to buy a parcel of Wesfarmers at today’s price, but I’d only buy more if the ASX share market falls again.

    Until then, I think there could be even better growth share ideas out there, like these top stocks…

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    Motley Fool contributor Tristan Harrison 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.

    The post Why I think Wesfarmers is the best ASX blue chip appeared first on Motley Fool Australia.

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  • Macron Needs More than $17 Billion to Save Airbus

    Macron Needs More than $17 Billion to Save Airbus(Bloomberg Opinion) — The Covid-19 pandemic has brought the usually resilient aerospace industry to its knees. Air passenger traffic has collapsed by 90% in Europe and isn’t likely to get back to pre-virus levels for several years. Airlines are fighting for survival and have grounded their fleets. Passenger-jet makers Airbus SE and Boeing Co., after years of briskly building planes to meet booming demand, are slashing investments, jobs and production in a world where nobody wants new aircraft. Their suppliers are equally suffering.Nothing like this has been seen since the “Boeing Bust” of the early 1970s, when defense cutbacks, airliner belt-tightening and a consumer recession led to losses and bailouts across the industry. Boeing survived, but its hometown of Seattle was scarred by layoffs. A billboard was put up to reflect the mood: “Will the last person leaving Seattle turn out the lights.”French President Emmanuel Macron is understandably keen to avoid this kind of bust hitting Toulouse, where Airbus and other aerospace firms such as Latecoere SACA are based. His administration this week unveiled a string of measures, totaling 15 billion euros ($17 billion), to support the aviation industries, including loan guarantees, wage subsidies for furloughed workers and an investment fund for small businesses.For all the government’s talk of creating new, greener aircraft of the future, this is really about protecting the economy and strategic pride: There are 300,000 aerospace jobs in France, and the industry is a key export that posted a trade surplus of 31 billion euros in 2019.One has to wonder, though, whether even $17 billion is enough. Almost half the aid will go to Air France-KLM, in the form of loans and guarantees, in return for a reduction in carbon emissions and services on its domestic routes. Although the state has asked the carrier to be a “good customer” of Airbus, you can’t really force an airline to keep buying planes in a demand-led recession. As for the rest of the package, while it does offer some form of safety net for workers and engineers, it’s unlikely to offset the need for cuts. Jefferies analysts expect net aircraft orders (orders minus cancellations) at Airbus and Boeing to be -1,500 this year and zero the next. There’s also the risk that the scale of the damage, along with greater state intervention, will fan the flames of trade wars. We aren’t yet at the stage of nationalizations like that of Britain’s Rolls-Royce Plc in the 1970s, but the current combination of central-bank and fiscal stimulus does point to ever-more government nudging of supply and demand if the sector’s woes get worse.Boeing was recently in line to receive a whopping $60 billion in U.S. government aid — which it ended up turning down, but it may not have that luxury next time. In Europe, politicians are increasingly keen to invoke “sovereignty” on the world stage as a reason to step in to boost domestic industry, especially with Donald Trump imposing trade tariffs in response to a 16-year spat over aircraft subsidies. “We don’t intend to be the world’s village idiots,” French Finance Minister Bruno Le Maire said on Tuesday, referring to global protectionist trends.To be sure, there are some glimmers of hope out there, and for Airbus in particular. It can at least claim to be in a relatively stronger position than Boeing, which was at a “huge disadvantage” going into this crisis, according to Teal Group’s Richard Aboulafia. Airbus’s hugely successful A320 single-aisle planes look well placed for a world of downsizing, where less is more. Boeing, meanwhile, has the unenviable baggage of high debt levels and the huge reputational damage of the MAX aircraft catastrophe.But trying to preserve Airbus’s lead may clash with the reality that aerospace recoveries are slow and painful for everyone. Nick Cunningham, an analyst at Agency Partners, expects aircraft deliveries to remain depressed for years, with none of the usual growth levers — such as emerging-market demand — helping. Supply chains have been strained by the virus, and the wheels of visa-free travel in Europe still aren’t turning. Aerospace jobs and technological assets are worth fighting for, but they’re not saved yet.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.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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  • Afterpay share price up 7%, ASX 200 edges higher

    ASX 200

    The S&P/ASX 200 Index (ASX: XJO) managed to slightly rise by 0.06% today to 6,418 points.

    Australia continues to do well with the coronavirus, though it’s not eliminated from every state yet.

    Afterpay Ltd (ASX: APT) share price continues to soar, helping the ASX 200 rise

    The buy now, pay later sector continues to perform strongly.

    The ASX 200 instalment payment company saw its share price rise another 7.5% to $54.50. The market is becoming even more confident on the company’s future despite the ongoing wider coronavirus issues.

    Afterpay wasn’t the only one to rise in the sector. The Zip Co Ltd (ASX: Z1P) share price went up 3.4% and the Sezzle Inc (ASX: SZL) share price went up 7.5%.

    Christmas in June for shareholders of Harvey Norman Holdings Limited (ASX: HVN) investors

    The Harvey Norman share price rose by 7.3% today after the company made two announcements.

    Firstly, the ASX 200 retailer revealed a retail trading update. Australian franchisee total sales are up 17.5% in the FY20 second half to 31 May 2020.

    Looking at the company-operated stores overseas sales in this half-year to date in Australian dollar terms, Northern Ireland and Singapore suffered sales declines of 38.2% and 21.7% respectively. New Zealand sales were down 7.3% and Slovenia and Croatia sales were down by 5.5%. Malaysia sales were up 1.3% and Ireland sales were up 25.4%.

    In the other announcement, Harvey Norman announced a special fully franked dividend of 6 cents per share to be paid on 29 June 2020.  

    Kogan.com Ltd (ASX: KGN) capital raising

    The ASX 200 ecommerce business has gone into a trading halt to do a capital raising.

    Kogan is looking to raise $100 million from institutional investors and another $15 million from regular investors.

    The money will be used to fund potential acquisitions that the company may make where Kogan can utilise its efficiencies and digital model. Two recent acquisitions have been Dick Smith and Matt Blatt.

    The raising will be done at a share price of $11.45 per share.

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    *  Extreme Opportunities returns as of June 5th 2020

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    Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Sezzle Inc. 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 Afterpay share price up 7%, ASX 200 edges higher appeared first on Motley Fool Australia.

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