Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy?

ANZ’s share price has been on a bit of a rollercoaster in recent months. During the first COVID-19 share market crash it fell by 48% to $14.10 in March. It then rose 49% to peak at $21 last week. Interestingly, the ANZ share price has fallen 12% from that post-crash high last week.

ASX investors may have pushed the ANZ share price a little too far. There is certainly a lot of positive news around. Australia’s coronavirus, infection numbers are very low. The cost of jobkeeper was overestimated by $60 billion, which means the economy didn’t need as much support as first feared.

ASX banks like ANZ are an important part of the Australian economy. A good economy is important for the performance of the banks. The other large ASX banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) are also key parts of keeping Australia’s economic cogs turning.

ANZ recently announced its initial estimation of the expected effects on COVID-19 on its profit. The ANZ share price has fallen so hard because of the fears about the coronavirus impacts.

In the recent ANZ half-year result the major ASX bank announced that statutory profit was down 51% compared to the prior corresponding period. The decline was driven by credit impairment charges of $1.674 billion, which included increased credit reserves for COVID-19 impacts of $1.031 billion. In that same result ANZ reported that its (continuing) cash profit dropped by 60% to $1.4 billion.

The large decline in profit and uncertainty caused by COVID-19 caused the ANZ board to defer the decision about the dividend to a later date. This may mean there is going to be a large dividend cut later, particularly as APRA wants banks to manage their capital this year.

Is the ANZ share price a buy?

The ANZ share price is currently trading at a level we saw during some parts of the GFC, though ANZ went as low as $12 in early 2009.

Warren Buffett once said some wise words for times like this: “Be fearful when others are greedy and greedy when others are fearful.” The market seems to be fearful with the ANZ share price, so perhaps it is a medium-term opportunity?

However, I’m not totally convinced that it is a good opportunity. It seemed like a more obvious bet at under $15.

The RBA interest rate is now 0.25%. The lower the official interest rate, the harder it is for banks to maintain their net interest margin (NIM). Transaction accounts are a good example of this effect. Banks aren’t likely to charge customers for keeping cash in the bank, so a reduction of the official rate by 0.25% means less margin for the bank if it reduces the loan interest rate for borrowers.

The dividend was an alluring reason for income-focused investors to buy ANZ shares. But it’s hard to say what the bank’s dividend policy will be going forward. More cash profit retained should translate into more earnings growth and a higher ANZ share price. However, large fully franked dividends are a good way to reward shareholders. It’ll be interest to see what the ANZ board does. 

If I were part of the bank’s leadership I’d consider a 50% dividend payout ratio. That could be a fair balance between dividends and future growth.

Foolish takeaway

I don’t think the ANZ share price is a bargain right now. But I don’t think it’s expensive either. Pleasingly, Australia’s economy seems to have moved into the recovery phase now, so hopefully the worst of the COVID-19 effects has passed. However, I believe the best way to growth your wealth could be to pick shares with better growth prospects. ANZ is already a large, mature business with a big market share of the mortgage market. 

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Motley Fool contributor Tristan Harrison 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.

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Here’s why the VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) is my favourite ASX exchange-traded fund (ETF).

ETFs come in all shapes and sizes. The cheapest and most popular tend to be plain Jane index funds like the Vanguard Australian Shares Index ETF (ASX: VAS). Most investors would be fine just sticking to these kinds of funds for simple and cheap passive investing.

But I like to think outside this box when it comes to ETF investing. And VanEck’s MOAT delivers a unique combination of active and passive investing that I think will continue to deliver for investors.

Why MOAT is my favourite ASX ETF

MOAT is slightly different from your average ETF in that it tracks an ‘actively managed’ index rather than a market-weighted passive index like the S&P/ASX 200 Index (ASX: XJO). This index is managed by Morningstar, which chooses a basket of US-listed shares that display characteristics of a ‘wide moat’.

A moat is a term first coined by Warren Buffett and refers to the concept of an intrinsic competitive advantage that a company can have that protects it from the competition (much like a moat protects a castle).

Think about how Apple’s brand enables the company to charge more than its competitors for its iPhones. Or how Coca-Cola is the most popular cola drink, as well as the most expensive. Or how some people will only fly on Qantas Airways Limited (ASX: QAN) planes.

MOAT aims to only hold companies with this kind of pricing power. On its most recent update, this ASX ETF names Amazon.com, Nike, Facebook, Pfizer and American Express as among its top holdings. When we look at these companies, they all have some unique advantage over any potential competition – whether it be branding, monopolistic market share or exclusive drug patents.

Having these unique advantages increases the chances of a company outperforming other shares in the market over time in my view.

How does MOAT measure up?

Talking the talk is all well and good, but does MOAT walk the walk?

Well, over the past 5 years, MOAT has delivered an average annual return of 15.69% per annum. By comparison, the ASX 200 has delivered just 4.2% per annum over the past 5 years.  Even the US S&P 500 Index has returned 12.91% per year.

I like those numbers, and it gives me confidence that MOAT will continue to bring home the bacon. This fund has a winning, market-beating strategy and will continue to sit in its well-deserved place in my portfolio as long as it keeps it up. That’s why MOAT is my favourite ASX ETF and one that I think merits consideration for any ASX investor.

More reading

• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• ASX 200 falls 2%, ASX travel shares drop heavily
• Clinuvel share price jumps as investors favour healthcare
• Why the ASX 200 tumbled lower on Monday and 2 shares to buy
• Should you buy ASX shares during this market selloff?

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of American Express, Coca-Cola, Facebook, Nike, Pfizer and VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook and Nike. The Motley Fool Australia has recommended Facebook, Nike, and VanEck Vectors Morningstar Wide Moat ETF. 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.

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Australian growth investors certainly are lucky. Right now, I believe there are a great number of growth shares that could provide investors with strong returns over the next decade.

Three which I think are well worth considering are listed below. Here’s why I think they could be future market beaters:

Bravura Solutions Ltd (ASX: BVS)

Bravura Solutions is the financial technology company behind the Sonata wealth management platform. This popular platform is used in the wealth management and funds administration industries to connect and engage with clients via computers, tablets, or smartphones. Demand for the platform has been growing very strongly in the past few years and shows no signs of slowing. Combined with recent acquisitions that open the company up to new and lucrative markets, I believe Bravura is well-positioned to deliver solid long term earnings growth.

Nearmap Ltd (ASX: NEA)

Another ASX growth share to consider buying is Nearmap. It is an aerial imagery technology and location data company with operations in the ANZ and North American markets. These two regions currently provide Nearmap with a total addressable market (TAM) of $2.9 billion per year. This is materially more than the annualised contract value (ACV) of $103 million to $107 million it expects to achieve in FY 2020. Given the fragmented nature of the market and its high quality offering, I believe Nearmap can capture a growing slice of this market over the next decade. It also has the option to increase its TAM by expanding into other territories in the future.

Zip Co Ltd (ASX: Z1P)

A final growth share to consider buying is Zip Co. I’ve been very impressed with the performance of the buy now pay later provider over the last couple of years and particularly during the pandemic. In respect to the latter, Zip Co has continued to deliver rapid sales and customer growth over the last few months. I’m confident there will be more of the same in the future due to the growing popularity of the payment method and its expansion internationally. 

More reading

• Got $5,000 spare? Consider Wesfarmers shares and these 2 other ASX companies
• Keep a watch on the Zip Co share price and 1 other ASX tech this June
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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. owns shares of Bravura Solutions Ltd, Nearmap Ltd., and ZIPCOLTD FPO. The Motley Fool Australia has recommended Bravura Solutions Ltd and Nearmap Ltd. 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 top ASX growth shares I would buy for the 2020s appeared first on Motley Fool Australia.

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