Author: therawinformant

Spirit Telecom Ltd (ASX: ST1) released its Q1 FY21 update to the market today, sending its shares flying in opening trade. The Spirit share price rocketed up 10.8% to 41 cents before dropping back to 39 cents, up 5.4%, at the time of writing. This compares to the All Ordinaries Index (ASX: XAO) which is marginally higher at 0.8% to 6,396 points.

Let’s take a look at how Spirit performed over the first quarter.

Record performance

Spirit announced record growth and scale in its quarterly update for the period ending September 30. The results were underpinned by the company’s strategy in the acquisition of 7 businesses and by improving internal efficiencies.

Total revenue for the quarter came to $15.6 million, up 149% year-on-year (YoY), and 30% above Q4 FY20. The result was predominately from recurring revenue which represented $9.2 million, up 78%. The solutions and projects division created revenue of $6.2 million, jumping 507% over the prior corresponding period.

TCV sales increased 124% YoY to $8.4 million, with pending installations at $2.7 million and IT services and technology sales at $8.9 million. The uplift was driven by expansion into managed services, including orders placed for the school’s notebook program.

Spirit recorded a healthy balance sheet of $30.1 million in cash and available debt as of 30 September.

Outlook

The company anticipates future growth coming into the second and third quarter for FY21. Spirit noted that its resellers segment was picking up with 70+ new resellers signed nationally, and more in play.

In addition, the telecom provider will launch new Spirit-branded mobile products and bundles across Australia in Q2–Q3.

The first unified voice communications platform, LiveCall and LivePBX will aim to operate at 75% gross margin.

Spirit advised it expects to see material demand for its products for the rest of the financial year. This is due to the Federal Government budget tax incentives that allow businesses to spend on IT needs.

In the acquisition space, the company said it was considering multiple targets as it focused on revenue growth.

What did management say?

Spirit managing director Sol Lukatsky welcomed the robust Q1 result. He said:

We have been able to integrate the businesses efficiently, enabling us to leverage the cross-sell opportunities that have been created. We have successfully bundled services and provided a product with outstanding customer service which has led to organic growth. This has been particularly pleasing to achieve during the COVID-19 pandemic.

With our latest acquisitions – VPD Group, Reliance, Beachhead and Altitude IT – we’ve grown our geographic footprint and expanded our national network for reselling products via Spirit Solutions Partners. This is another avenue for both organic and acquisitive growth into FY21 and beyond.

How has the Spirit share price tracked?

The Spirit share price has risen 95% since the beginning of the calendar year. With a market capitalisation of $200 million, the Spirit share price is trading just below its all-time high of 45 cents.

More reading

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• Why the Mount Gibson (ASX:MGX) share price is moving higher today
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• Optiscan (ASX:OIL) share price flat on FDA update
• What’s driving the PayGroup (ASX:PYG) share price higher today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SPIRIT TC FPO. 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 Spirit (ASX:ST1) share price is shooting the lights out today appeared first on Motley Fool Australia.

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The Service Stream Limited (ASX: SSM) share price is edging higher today following an update on its agreement with the NBN.

At the time of writing the essential network services provider’s shares are up slightly to $2.18.

What did Service Stream announce?

This morning the company released an update on its Operations and Maintenance Master Agreement (OMMA) with NBN Co.

According to the release, the two companies have extended the OMMA for an additional six-month period from the end of December 2020.

It also includes the option for the NBN to extend the agreement for a further six months to December 2021. The OMMA contract has been running since 2015.

Today’s agreement will see Service Stream continue to be responsible for performing operations and maintenance field services for the NBN. This includes service activations and service assurance activities.

OMMA services will be provided across the NBN’s fixed line multi-technology network.

This includes Fibre to the Node (FTTN), Fibre to the Premise (FTTP), Fibre to the Basement (FTTB), Fibre to the Curb (FTTC) and Hybrid Fibre-Coaxial (HFC) technologies within defined contracted areas across Queensland, New South Wales, Australia Capital Territory, Victoria, Western Australia, and the Northern Territory.

What is the contract worth to Service Stream?

The revenue generated under the OMMA contract will be dependent on NBN activation and maintenance work volumes.

However, management notes that the agreement generated approximately $330 million in FY 2020 and $280 million in FY 2019.

Service Stream’s Managing Director, Leigh Mackender, was very pleased with the contract extension.

He commented: “We are delighted that by further extending the OMMA agreement, nbn has demonstrated continued confidence in Service Stream’s ability to support its national operations and the enhancement of its customers’ experience as they connect to the National Broadband Network.”

Mr Mackender also appears optimistic that this could be the start of a much longer agreement.

“We look forward to participating in nbn’s commercial procurement process to support a longer-term agreement being secured, post this current extension,” he concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• These were the best performing ASX 200 shares last week
• ASX 200 jumps 2.4% higher, numerous shares rise
• Why the Service Stream (ASX:SSM) share price is surging 14% higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream 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.

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On Tuesday morning the Commonwealth Bank of Australia (ASX: CBA) share price is pushing higher following the release of its annual general meeting update.

At the time of writing, the banking giant’s shares are up 2% to $70.04.

As the bank’s annual general meeting has gone virtual because of the pandemic, I thought I would summarise the event for shareholders and readers.

Three key takeaways from the Commonwealth Bank annual general meeting are as follows:

Commonwealth Bank is in a strong position.

The company’s Chair, Catherine Livingstone AO, acknowledged that the next 12 months will be difficult, but she remains positive due to its strong position.

She commented: “Although the year ahead will involve challenges and uncertainty, the Bank faces this environment in a strong position. Our business is performing strongly, and we have a resilient balance sheet, which means we are well placed to continue delivering on our purpose.”

Customers are happy with the bank.

CEO and Managing Director Matt Comyn revealed that customer satisfaction is at a high level despite the difficult trading conditions. In fact, Commonwealth Bank is leading the way in the industry.

Mr Comyn explained: “In our latest DBM net promoter score results, which is our measure of customer advocacy, we are for the first time #1 across consumer, business and institutional customers. We’re also ranked #1 in net promoter score for internet banking and our mobile app.”

But Commonwealth Bank isn’t resting on its laurels. The CEO advised: “We are investing in our business and institutional banking experiences through enhancements to our service, data and technology capabilities.”

New branding.

The CEO also spoke about Commonwealth Bank’s branding update, which has seen the bank embrace an all gold logo.

He commented: “Today you’ve seen examples of the Commonwealth Bank’s new brand, our first update in almost 30 years. We believe the time is right to refresh our brand to symbolise the work we’ve done to be better, the work we still have to do, and the brighter future we are committed to helping Australia achieve. It also represents our determination to be the bank you want us to be: the bank for all Australians, the bank for businesses and the bank for the country.”

More reading

• 5 things to watch on the ASX 200 on Tuesday
• CBA (ASX:CBA) share price higher on COVID-19 loan deferral update
• ASX 200 down 0.1%: CBA’s COVID-19 loan deferrals improve, Link receives takeover approach
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• Forget term deposits and buy these ASX dividend shares instead

Motley Fool contributor James Mickleboro 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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The HUB24 Ltd (ASX: HUB) share price has surged higher following the release of its first quarter update.

At the time of writing the investment platform provider’s shares are up 5% to a record high of $21.79.

How did HUB24 perform in the first quarter?

HUB24’s update revealed that its strong form continued in the first quarter of FY 2021.

For the three months ended 30 September, the company reported record first quarter net inflows of $1.36 billion and an average monthly net inflow of $454 million.

Combined with a positive market movement of $436 million, this lifted its Funds Under Administration (FUA) to $19 billion at the end of September. This was a 32% increase on the prior corresponding period and has increased HUB24’s platform market share to 2.1%.

What were the drivers of its growth?

Management advised that its strong flows were driven from both new and existing licensee channels across self-licensed and boutique advisers, brokers, and large national accounts.

This includes advisers winning new clients as well as funds being transitioned from incumbent platforms.

Pleasingly, management remains positive on the future and notes that its new business pipeline continues to grow.

It signed 27 new licensee agreements during the September quarter, with both large boutique licensees and self-licensed practices.

Management commented: “HUB24 is confident that the new business pipeline will continue to grow as additional opportunities emerge given adviser movement from institutional licensees and further industry consolidation.”

“Given market dynamics, HUB24 continues to be a platform of choice as advisers look for stability, delivering innovative product solutions that provide their clients with choice and customer service excellence,” it added.

In addition to this, the company notes that business development activity across all states is continuing as advisers adapt to the current environment. Furthermore, the HUB24 team continues to leverage growth opportunities from within its existing customer base while actively pursuing new relationships.

Rate cut impact.

The company also provided commentary on the impact it is experiencing from the ultra low cash rate.

“HUB24 is continuing to absorb some of the impact of the historically low interest rates since the Reserve Bank of Australia (RBA) cash rate reductions announced in March 2020. Should the RBA announce a further rate reduction, HUB24 expects to absorb this reduction which will negatively impact platform segment revenue until interest rates begin to rise,” it concluded.

More reading

• Leading brokers name 3 ASX shares to sell today
• Up 99% in 3 months, can the HUB24 (ASX:HUB) share price double again?

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 Hub24 Ltd. The Motley Fool Australia has recommended Hub24 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 Why the HUB24 (ASX:HUB) share price surged to a record high today appeared first on Motley Fool Australia.

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Some ASX mining stocks could come under pressure on reports that China may be banning the use of Australian coal.

Several sources have confirmed to the Australian Financial Review that Chinese authorities have been telling their local traders to stop buying coal from us.

The ban includes thermal coal, which is used in power plants, and coking coal that is used in producing steel.

ASX miners hit by China coal ban

The AFR quoted one Chinese analyst saying he believed the move is “a political sanction against Australia”.

It is also alleged that Beijing only issued a verbal ban. This is because it didn’t want to leave evidence of trade protectionism that could be used against it in the World Trade Organisation (WTO).

However, the financial impact of the ban on Australian coal producers is unclear. Power plants that use Aussie thermal coal have used up their coal import quota two months ago.

Why share prices of ASX miners are reacting differently

This could explain why the share prices of ASX coal producers responded differently when reports of the ban started leaking yesterday.

The Whitehaven Coal Ltd (ASX: WHC) share price crashed by over 5% to 98 cents. But the New Hope Corporation Limited (ASX: NHC) share price dipped 0.8% to $1.30 and South32 Ltd (ASX: S32) share price was flat at $2.19.

Roughly half of Whitehaven’s coal is coking (used for steel), which may be more impacted by the unofficial Chinese ban.

New Hope produces thermal coal from two open cut coal mines in South East Queensland, while South32 produces a diverse range of minerals other than coal.

ASX stocks used as pawns on Sino-Australia chess board

“We are aware of these reports and have had discussions with Australia’s resources industry, who have previously faced occasional disruptions to trade flows with China,” Trade Minister Simon Birmingham said in a statement reported in the AFR.

“Australia will continue to highlight our standing as a reliable supplier of high grade resources that provide mutual benefits.”

Several ASX stocks have been used as pawns in the escalating tensions between Canberra and Beijing. The Treasury Wine Estates Ltd (ASX: TWE) share price and Australian Agricultural Company Ltd (ASX: AAC) share price have also felt the heat.

China is using Australian wine, beef and barley to punish Australia after Prime Minister Scott Morrison called for an independent investigation into the origins of COVID-19.

Given our economic over-reliance on the Asian giant, investors should be prepared for more volatility ahead!

More reading

• Why you may not need ASX REITs for dividends
• Top brokers name 3 ASX shares to buy next week
• ASX renewable vs coal shares: Which will win?
• These were the best performing ASX 200 shares in September
• ASX 200 ends the day flat, BOQ (ASX:BOQ) shares drop on impairments

Motley Fool contributor Brendon Lau owns shares of South32 Ltd. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates 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.

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ASX Ltd (ASX: ASX) has been heavily criticised for problems with its new website, which went live on Monday.

After testing and trial runs, the system went fully public on Monday. But it was plagued with issues on day one – including not being able to show company announcements in the midst of the annual general meetings season.

“ASX announcements are currently not displaying on the ASX website,” stated ASX Ltd’s Twitter account.

“All company announcements are available to view via brokers and news agencies.”

Can’t believe that this Market Operator can NOT get anything right….this is an enormous FAIL for #ASX …
Regulators seriously need to break-down this monopolist…#ASX lack innovation in the TECH space.!!

— siciliavin (@siciliavin) 12 October 2020

https://platform.twitter.com/widgets.js

Previously, when I was logged in, I tried opening various pages and was unable to with a message that ‘connection was reset’. Now I’ve been logged out and when I try login in I get the same message. The previous website was so well designed; this one is a step backwards.

— Craig Boston (@cnboston) 11 October 2020

https://platform.twitter.com/widgets.js

Even the website’s intentional designs were panned, with many social media users criticising putting previously accessible information behind a user login wall.

The Motley Fool has contacted ASX Ltd for comment.

ASX has a monopoly, remember?

Some users said the failures reminded investors that the company runs a monopoly.

In the UK, publicly listed companies are allowed to choose from a few different providers to meet their mandatory disclosure obligations. These include news agencies.

In Australia, all ASX companies must go through ASX Ltd to post their announcements.

OpenMarkets chief executive Ivan Tchourilov told the Australian Financial Review that the ASX stranglehold in Australia, like any monopoly, was unhealthy.

“The industry is concerned that ASX has too much power to dictate play and there isn’t much of an opportunity for competitors to create a diverse environment that will ultimately benefit customers,” he said.

More reading

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• Why the Purifloh (ASX:PO3) share price crashed to a 2-year low today

Motley Fool contributor Tony Yoo 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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The COVID-19 recession has seen anxious Australians lock up their wallets to save their money.

Unfortunately for ASX-listed retailers, like Wesfarmers Ltd (ASX: WES), JB Hi-Fi Limited (ASX: JBH), Super Retail Group Ltd (ASX: SUL), Myer Holdings Ltd (ASX: MYR) and Harvey Norman Holdings Limited (ASX: HVN), Christmas is not expected to bring much joy.

Research firm IBISWorld revealed this week that negative shopper sentiment combined with high unemployment and tumbling discretionary incomes could devastate the sector.

“Consumer electronics retailing is expected to be 2.7% lower this December, relative to last Christmas. Department store turnover is expected to be 1.0% lower, at $2.8 billion,” said IBISWorld senior industry analyst Yin Yeoh.

“Although many households are likely to receive a cash injection from the recent Federal Budget, there is a high likelihood that these funds will be saved rather than spent, providing little help to the ailing retail sector.”

Consumer goods retail lost 15.8% in revenue over the 2019-20 financial year, and is forecast to dip another 2.1% in the current year.

The Christmas winners

Although in the minority, there are some retailers who will have a good time this Christmas.

For example, Australians are expected to drink away their worries this festive season. 

Alcohol retailing this December is expected to surge 3.6% year-on-year, to hit $1.6 billion, according to IBISWorld.

The theory is that Australians can’t holiday overseas this Christmas so they will be forced to spend within the country.

As such, the supermarket sector will also benefit.

Grocers like Woolworths Group Ltd (ASX: WOW),  Coles Group Ltd (ASX: COL), and  Metcash Limited (ASX: MTS) will be licking their lips at IBISWorld’s prediction that sales will increase 2.8% year-on-year this December, to reach $11.1 billion.

“Families are expected to go all-out on their Christmas feasts this year, with many Australians celebrating their ability to reunite with family after states reopen borders and ease social distancing regulations,” said Yeoh.

She warned, however, these companies aren’t necessarily up for a windfall.

“While the upcoming Christmas season provides major opportunities for supermarkets and liquor retailers, growing competition in these industries is expected to exert downward pressure on prices and profit margins.”

Christmas is now November

The last five years has seen Christmas shopping habits shift to November as American customs like Black Friday and Cyber Monday seep into Australia.

This pattern, IBISWorld says, will continue this year.

“A 7.8% decline in discretionary income this year is likely to cause some consumers to postpone expensive gadget purchases,” said Yeoh.

“However, consumers are still expected to take advantage of Cyber Monday and Amazon Prime sales. Other large players, such as JB Hi-Fi and Harvey Norman, are likely to offer discounts during the same period, in an effort to retain market share.”

Prospects for retailers next year are a bit brighter, although still very dependent on the ongoing pandemic.

“The outlook for the retail sector, and the economy overall, is largely dependent on the rate of new COVID-19 cases across the country,” Yeoh said.

“Australia is making promising progress in this regard, which should make retailers optimistic for a rebound next year.”

More reading

• 3 unstoppable ASX shares to buy with $3,000
• Why Woolworths is too expensive right now
• Ignore EBITDA and P/E ratios? This fundie does
• If you LOVE a Bunnings sanga, you might LOVE the stock…
• 2 of the best ASX dividend shares you can buy today

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths 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.

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The Telstra Corporation Ltd (ASX: TLS) share price will be on watch on Tuesday after the release of its annual general meeting presentation.

What did Telstra announce at its annual general meeting?

At the annual general meeting the telco giant provided investors with a breakdown on its performance in FY 2020 and the impacts of the pandemic on its operations.

But arguably the most important subject the company covered was its dividend for FY 2021.

The Telstra share price has come under significant pressure since the release of its full year results in August due to concerns that its earnings guidance for the year ahead implied a sizeable dividend cut.

However, as I have mentioned numerous times since then, Telstra’s accounting earnings are now notably lower than its free cash flows.

In light of this, I suggested that a switch to a free cash flow-based dividend policy would be more appropriate and could be a way for the company to maintain its 16 cents per share dividend.

At its annual general meeting, Telstra spoke about its dividend and the potential for such a shift in policy.

What did Telstra say?

Telstra’s Chairman, John Mullen, commented: “The board is acutely aware of the importance of the dividend to shareholders, and we understand the nervousness from some that COVID and other pressures may force Telstra to again cut its dividend.”

“Andy [Penn] has previously said that to maintain the dividend at 16c within our Capital Management framework post the nbn, we need to achieve Underlying EBITDA in the order of $7.5-$8.5b, and I want to assure you that we are absolutely aspiring to achieve this.”

“The board clearly understands the importance of the dividend and if necessary is prepared to temporarily exceed our capital management framework principle of paying an ordinary dividend of 70- 90% of underlying earnings to maintain a 16c dividend,” he added.

This would depend on several factors, which include:

“1. whether an underlying EBITDA of $7.5b to $8.5b post the rollout of the nbn is achievable. 2. whether the free cash flow dividend payout ratio remains supportive and we retain a strong financial position. 3. whether there are other factors that would make the payment of the dividend at that level imprudent,” Mr Mullen explained.

However, the chairman has warned investors that these comments are not “a guarantee of any level of dividend into the future.”  

Rather, it is to demonstrate “the board’s commitment to doing all that it can responsibly do to maintain the current dividend and eventually increase it again over time.”

More reading

• Telstra share price and 1 other ASX telecom trading near all time lows
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• Why I would buy these ASX dividend shares in October
• 4 high quality ASX blue chip shares to buy right now
• 3 reasons the Telstra (ASX:TLS) share price is a buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Investing in the stock market is a proven way to grow wealth over time, and the sooner you get started, the better. But deciding how to invest can be challenging. If you opt for a collection of individual stocks, you’ll need to spend time researching each company and making sure it’s the right fit for your portfolio. If you go with index funds, you won’t have to put in the same amount of legwork, but you may lose out on certain benefits that individual stocks have to offer.

For many investors, index funds are actually a good way to go. But here’s why you may want to hand-pick your stocks instead.

Hand-picking your stocks allows you to choose companies that fit in with your personal investing strategy and appetite for risk. Say you’re really not keen on putting airline stocks in your portfolio because you think that’s a risky prospect given the hit the industry has taken during the coronavirus pandemic. If you buy S&P 500 Index (INDEXSP: .INX) funds, you’ll be stuck with airline stocks in your portfolio, whether you like it or not. By choosing your own stocks, you avoid companies or industries you’d rather steer clear of.

2. You can avoid stocks that don’t align with your ethics

Some people buy stocks because they believe in a company’s growth potential. Other people buy stocks because they believe in the products or services being offered by a particular company, or because they believe in its mission. As just mentioned, when you buy index funds, you don’t get to dictate which stocks land in your portfolio and which don’t. This means that if you have a problem with a specific company from an ethical standpoint, you could end up having to invest in it anyway.

Imagine you’re not a fan of tobacco companies. Since Philip Morris International Inc (NYSE:PM) is part of the S&P 500, if you buy funds based on that index, you’ll end up owning its shares, which could pose a moral dilemma for you.

3. You’ll have the potential to beat the market

Index funds aim to match the performance of the indexes they’re tied to – not beat it. If you want your portfolio to deliver returns that exceed those of the broader market, then you’ll need to assemble your own mix of stocks – ones with supreme growth potential and a clear edge over the competition. Beating the market isn’t easy, but with the right approach, it can be done – but not with index funds.

What’s the right move for you?

Ultimately, the decision to buy individual stocks versus index funds should boil down to how confident you are in your ability to choose the right companies, and how much time you’re willing to spend in the process. If you’re up for the challenge, then hand-picking stocks could be a great strategy that rewards you over time. But if you’d rather keep things simple on the investing front, then there’s nothing wrong with reverting to index funds and enjoying the automatic diversity they allow for.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• This ASX share is recession-proof
• 3 unstoppable ASX shares to buy with $3,000
• Telstra share price and 1 other ASX telecom trading near all time lows
• $10,000 invested in the CSL (ASX:CSL) IPO is worth how much now?
• 2 robust ASX 200 blue chip shares to buy today

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 3 reasons to hand-pick stocks instead of buying index funds appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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A fund manager has revealed his tip for an ASX share that might actually prosper during an economic downturn.

Pengana Capital Group Ltd (ASX: PCG) portfolio manager Chris Tan told The Motley Fool that his fund had kept an eye on automotive parts provider Bapcor Ltd (ASX: BAP) for “a long time”.

“It was always just a bit too expensive and COVID-19 allowed us the opportunity to buy it,” he said.

“We probably started buying in late February or early March, but we had done a lot of work on it and were able to just keep adding as it went down into the crazy times.”

Bapcor shares have risen almost 150% since the depths of the COVID-19 panic. They were trading for $7.85 at close of trade on Monday, after they were as low as $3.15 in late March.

“We see that as a business that is really, really resilient,” Tan said in this week’s Foolish Q&A. 

“Recession-proof almost.”

Tan explained that in times of economic distress, consumers tended to avoid buying new cars, preferring to maintain existing vehicles for longer.

“(With) new car sales shrinking for two years in a row, the fleet of second hand or older vehicles on the road is just getting larger,” he said.

“Bapcor will make their money servicing or supplying mechanics who service the after-warranty or second-hand car market.”

After performing a capital raising, the company is also in fine shape structurally.

“They’re now poised to consolidate more smaller competitors. So there’s good industry structure as well,” said Tan.

“There’s really [only] two main players, Bapcor and Repco… And there’s an Asian growth story further down the line as well.”

Read The Motley Fool’s full exclusive interview with Chris Tan right here.

More reading

• Why NEXTDC (ASX:NXT) and these ASX 200 shares just hit record highs
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• Ignore EBITDA and P/E ratios? This fundie does
• Why the Bapcor (ASX:BAP) share price just zoomed to a record high

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. 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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