Author: therawinformant

It certainly has been an eventful day for the Temple & Webster Group Ltd (ASX: TPW) share price on Thursday.

In morning trade the online furniture retailer’s shares stormed 4.5% higher to a record high of $14.00. When its shares peaked at this level, it meant they were up a staggering 430% since the start of the year.

However, in afternoon trade the Temple & Webster share price has given back these gains and more.

At the time of writing the company’s shares are down over 2.5% to $13.02.

What is happening with the Temple & Webster share price today?

Firstly, the storming to a record high has been driven by the company’s strong performance during the pandemic thanks to the shift to online shopping.

This led to Temple & Webster recording a 74% increase in revenue to $176.3 million in FY 2020 and a material year on year increase in its operating earnings from $1.5 million to $8.5 million.

Management also revealed that its sales growth was strong early in FY 2021, putting the company in a position to deliver another impressive result.

Since then, the Federal Budget has been announced and tax cuts have been backdated to the start of the financial year. This will put more money in consumers’ pockets and could support Temple & Webster’s sales growth.

So why are its shares dropping lower now?

Investors have been hitting the sell button this afternoon after the company revealed that its chairman has offloaded the majority of his shares.

Insider sales rarely go down well with the market, especially when it is such a large portion of a director’s holding. This is because it is often interpreted as a sign that a share price may have peaked. 

According to the release, Stephen Heath has sold 150,000 of his 184,000 shares through an on-market trade on 31 August. Mr Heath received a total of $1,387,845 for the shares.

No explanation was given for why the notice was filed so late. Generally, directors have five days to inform the market of their trades.

More reading

• 2 hot e-commerce ASX shares to buy today
• Why IAG, Mayne Pharma, Mesoblast, & Temple & Webster shares are tumbling lower
• 3 ASX shares poised for huge growth in FY21
• 5 ASX shares held by leading fund managers
• 3 ASX shares making all-time highs today

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 Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group 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.

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I feel Magellan Financial Group Ltd (ASX: MFG) is one of the best performing ASX shares of the past decade. In fact, if a growth investor put $10,000 into Magellan shares on 2 January 2010, it would be worth over $700,000 based on today’s Magellan share price. This requires a share price compound annual growth rate (CAGR) of 53.3%. Furthermore, the company has continued to grow its earnings per share and dividend payments at an impressive rate. 

Magellan is an investment manager with a solid track record of outperformance. To illustrate further, yesterday the company announced cash inflows of $1.19 billion during September. This brings its total funds under management to $102.08 billion. These figures suggest to me that retail and institutional investors, as well as ASX growth investors, have trusted this company.

Is the Magellan share price still suitable for growth investors?

After such a prolonged period of growth, it’s fair to question whether the Magellan share price has reached a point where its growth, and the company’s earnings, will start to level out. Nonetheless, Magellan is still producing solid results, and has a large scale strategy to increase revenues even further.

Magellan recently announced it had taken a 40% stake in Barrenjoey Capital Partners, an unlisted, full service, investment bank planned for Australia. These types of companies work on complex issues between corporations and the financial markets. Specifically, they help to issue shares for initial public offerings (IPOs) or capital raisings, arrange for debt financing, and help to execute mergers and acquisitions. 

The Barrenjoey investment may cause some growth investors to be put off the Magellan share price since there are are plenty of local and international investment banks in Australia. However, Barrenjoey has already secured some of the best talent in the nation. The start-up has been poaching top flight executives from UBS Group AG (NYSE: UBS). This team has forged a trail of success starting from the wreckage of the global financial crisis.

In a telling move, each of the major names has either surrendered bonus payments to join Barrenjoey, or has been paid an equivalent bonus as part of a signing fee. In either case, it is a very strong vote of confidence in the new investment bank and the professionals set to lead it. 

Options for even more growth

Another interesting possibility for growth investors when considering today’s Magellan share price is the potential for the company to add further unlisted assets to its portfolio. 

Foolish takeaway

The Magellan share price is currently trading at a price-to-earnings (P/E) ratio of 28.9, which clearly prices in hopes for future performance. It also has a trailing 12-month dividend yield of 3.41%. In my view, this is a great company led by a great investor in Hamish Douglass. Even without the new venture, I believe the Magellan share price will continue to grow over the next 5 to 10 years. 

However, after also factoring in the new revenue stream and future potential, to me, Magellan shares become an even more compelling proposition. I believe the Magellan share price could be  poised for a potentially significant growth spurt which is quite rare for a large cap ASX share.

More reading

• Brokers name 3 ASX shares to buy right now
• Here’s why the Magellan (ASX:MFG) share price is pushing higher today
• 3 ASX shares I want to buy in October
• How to generate $50k a year from ASX dividends
• Top ASX Stock Picks for October 2020

Motley Fool contributor Daryl Mather 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 growth investors still have a lot to like about the Magellan (ASX:MFG) share price appeared first on Motley Fool Australia.

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Which ASX exchange-traded funds (ETFs) offer investors the most diversification today?

Diversification is one of those investing buzzwords that is probably used a little too much. I penned an article last week on the dangers of over-diversifying a portfolio, which might be worth a look in the context of this article. Even so, diversification remains (in my view) something that most ASX should aspire to in some form. And ETFs are an easy and efficient way of beefing up a portfolio’s diversification without too much effort.

The diversification problem with single-market ETFs

But which ETFs to choose? Well, it might seem logical to start with an index fund which tracks the S&P/ASX 200 Index (ASX: XJO), such as the iShares Core S&P/ASX 200 ETF (ASX: IOZ). These are by far the most popular ETFs in Australia, especially if we include the Vanguard Australian Shares Index ETF (ASX: VAS), which tracks the S&P/ASX 300 Index (ASX: XKO).

But these ETFs, although very diversified in their own right, pale in comparison with some other ETFs out there. For one, they hold either 200 or 300 companies in just the Australian market. In contrast, something like the Vanguard U.S. Total Market Shares Index ETF (ASX: VTS) holds more than 3,500 US shares. That’s more than 10 times as many different holdings than IOZ or VAS.

But all of these ETFs only track one single market (albeit with massive diversification within them). If an economy-wide malady, such as a national currency collapse, were to affect one of these markets, there could be insufficient diversification to protect investors.

So where to turn?

Are multi-market ETFs the answer?

Well, there are ETFs that cover multiple markets and countries. The Vanguard MSCI Index International Shares ETF (ASX: VGS) is one such option. VGS is still relatively heavily weighted towards US shares, which make up 68.1% of the funds’ 3,466 holdings. However, with more than 20 other countries also represented, at least you have this buffer. Another option is the Vanguard All-World ex-US Shares Index ETF (ASX: VEU), which has a similar number of total holdings, but excludes US shares for a far more balanced portfolio. The country with the most weighting in VEU is Japan, but this only represents 16.9% of the total funds’ holdings.

A final option to consider is the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). This fund is extremely diversified. It holds more than 5,200 individual holdings across 23 different markets like India, Taiwan, Brazil, Mexico, Chile, Egypt and Greece. However, this fund is heavily weighted towards Chinese companies, which make up 45.2% of the funds’ total holdings.

Foolish takeaway

Whilst I think a single market ETF (especially those covering the ASX or US markets) is a great investment for any investor, the reality is that these funds are not completely immune from a lack of diversification. As such, I think if you are heavily concentrated in these markets, a small to mid-size investment in a multi-market ETF might be a good way of adding some extra diversification to your portfolio. It might not be for everyone, but if it helps you sleep better at night, it might well be worth it.

More reading

• Look through short-term unpredictability for long-term ASX share price gains
• ASX 200 up 0.8%: Big four banks higher, CSL rises on vaccine update, Zip rockets
• 5 things to watch on the ASX 200 on Thursday
• Why you should wait another month to invest in ASX shares
• Has the Afterpay (ASX:APT) share price stalled?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares 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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The Aerometrex Ltd (ASX: AMX) share price has been on form on Thursday and is pushing notably higher.

In afternoon trade the aerial mapping company’s shares are up 4% to $1.23.

Why is the Aerometrex share price pushing higher?

Investors have been buying the Nearmap Ltd (ASX: NEA) rival’s shares today after the release of a positive trading update.

That update revealed that the company has delivered significant growth in its aerial imagery subscription service MetroMap following the signing of Suncorp Group Ltd (ASX: SUN), Geoscape Australia, and a number of other corporates during the first quarter.

According to the release, Suncorp has selected Aerometrex’s subscription-based service MetroMap as its aerial imagery provider for data analytics. It will provide the banking and insurance giant with geospatially accurate imagery over more than 8.5 million residences across capital cities and selected regional towns in Australia.

Combined with its Geoscape Australia deal, management estimates that these two contracts are worth a minimum of $860,000. They also represent an important step forward for MetroMap in the areas of insurance and AI-derived data generation, respectively.

Thanks partly to these deals, at the end of the quarter the company’s annualised recurring revenue (ARR) increased 65.7% quarter on quarter to $2.75 million.

Management believes this reflects the growing uptake of MetroMap by large corporate organisations as well as SMEs. It also notes that this growth has been largely achieved during the period most affected by general economic uncertainty over COVID-19.

What is MetroMap?

MetroMap is an online imagery web-serving application offering Aerometrex’s high-quality and accurate imagery to its customers via a DaaS (Data as a Service) subscription model.

The product offers its subscribers four captures per annum for each major capital city, in addition to annual rural and regional city captures. Management notes that the service fulfils all of the quality and accuracy requirements of sophisticated geospatial data users and provides an easy-to-consume product for the corporate market, via a web browser interface.

The company estimates that there is a current addressable market in Australia of approximately $75 million to $80 million annually. It feels this provides it with a significant market to grow into.

More reading

• Which ASX ETFs offer the most diversification?
• Why the Gibb (ASX: GIB) share price is up 266% today
• 3 key takeaways from the Transurban (ASX:TCL) AGM
• 2 hot e-commerce ASX shares to buy today
• Why Macquarie (ASX:MQG) analysts are tipping share price gains for this ASX retail landlord

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 Nearmap Ltd. The Motley Fool Australia has recommended 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 Here’s why the shares of this Nearmap (ASX:NEA) rival are surging higher today appeared first on Motley Fool Australia.

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The GIBB River Diamonds Ltd (ASX: GIB) share price has shot up 266.67% at the time of writing to 16 cents. This came after the company announced a major gold discovery at its Neta prospect.

What was the discovery?

Gibb announced a major drilling discovery at its Edjudina Gold Project in Western Australia. This included 36 metres at 4.0 grams per tonne of gold from 4 metres.

The company said the discovery made was at the company’s Neta prospect, which was previously host to the historic Neta mine that operated in the early 1900s and had grades of up to 47.4 grams per tonne of gold. The company has named it the “Neta Lodes” discovery.

Additional drill intersections announced as part of the Neta Lodes discovery included 18 metres at 3.10 grams per tonne from 28 metres, 8 metres at 2.91 grams per tonne from 26 metres and 1 metre at 35 grams per tonne from 7 metres.

Gibb has an option to acquire 100% of the Edjudina Gold Project.

About the Gibb share price

Gibb River Diamonds is a diamond and gold explorer and producer with projects in Western Australia. The company has been listed on the ASX since 2008.

Gibb posted a loss of 0.291 cents per share in the year to 30 June 2020. It has cash of $683,106 at 30 June 2020, down from $1,272,846 at 30 June 2019.

In September, Gibb raised $1.096 million through a share purchase plan at 5 cents per share.

The Gibb share price is up 3100% since its 52 week low of 0.5 cents, and up 167% since the beginning of the year. The Gibb share price is up 433.33% since this time last year.

More reading

• 3 key takeaways from the Transurban (ASX:TCL) AGM
• 2 hot e-commerce ASX shares to buy today
• Why Macquarie (ASX:MQG) analysts are tipping share price gains for this ASX retail landlord
• Why the Ampol (ASX:ALD) share price is on the rise today
• Here’s why the Soul Patts (ASX:SOL) share price is at a new 52-week high

Motley Fool contributor Chris Chitty 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 Transurban Group (ASX: TCL) share price has been out of form today.

In afternoon trade the toll road operator’s shares are down over 1% to $13.99.

This follows the release its annual general meeting presentation and quarterly update this morning.

In light of the large amount of information that it released today, I thought I would summarise what I’ve learned into three key takeaways. They are as follows:

Traffic volumes are improving.

During the first quarter of FY 2021, Transurban’s Average Daily Traffic (ADT) decreased by 25.2% compared to the prior corresponding period. Management notes that impacts across each of its markets varied depending on the level of government restrictions in place in response to COVID-19. Positively, during the quarter, Sydney’s ADT increased by 1.5% on the prior corresponding period to 847,000 trips. This appears to demonstrate that volumes will recover quickly once restrictions in other markets ease.

Transurban is well-placed for the future.

In his address, Transurban’s Chief Executive, Scott Charlton, spoke positively about the future and noted that the company is well-placed for growth. Mr Charilton commented: “With $19 billion of critical infrastructure projects across Australia and North America in our pipeline, it is safe to say we still have a busy few years ahead of us.”

He then added: “The five regions we operate in all have large populations, and despite the temporary impacts from COVID-19, they are all expected to continue to grow substantially over the medium and long term. And this growth will require continued infrastructure investment to ensure these cities continue to have efficient and productive transport networks.”

Looking for US equity partners.

Another interesting takeaway from today’s update was that the company is looking to strengthen its capital position by taking on equity partners for its Greater Washington Area assets. It revealed that it has commenced a process for the potential introduction of equity partners and expects a successful agreement to release significant capital into the business. In addition to this, it notes that if it is successful on the Elizabeth River Crossings opportunity, management would look to bring a partner into that asset as well.

More reading

• ASX 200 up 0.8%: Big four banks higher, CSL rises on vaccine update, Zip rockets
• Why ARB, Accent, Bigtincan, & Transurban shares are dropping lower today
• Why the Federal Budget is good for the Transurban (ASX:TCL) share price
• Ignore the noise and focus on these ASX shares instead
• 5 things to watch on the ASX 200 next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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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Some of the hottest ASX shares right now are e-commerce businesses.

COVID-19 has been a really difficult period for many parts of the economy. However, businesses that service customers through e-commerce in some way have adapted and seen a rapid increase in demand.

Some businesses have simply cannibalised their own sales from bricks and mortar stores and replaced them with online sales. But online-only businesses have done very well and could keep growing if their recent updates are anything to go by.

Kogan.com Ltd (ASX: KGN)

Kogan.com aims to offer customer low-costing products across a wide range of areas.

Its platform sells a wide array of electronics like phones, computers, cameras and drones. It also sells various home items like appliances, furniture, games, shoes and clothing, sports equipment and so on.

I think one of the most compelling parts of the e-commerce ASX share is that it sells a variety of other services including Kogan Mobile, internet, energy, credit cards, insurance, cars, superannuation and home loans. The more customers it can attract, the more add-on services the business can provide, and the more valuable that customer is for Kogan.com.

Kogan.com has been doing very well. Gross sales in FY20 climbed 39.3% to $768.9 million and gross profit rose 39.6% to $126.5 million. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 57.6% to $49.7 million and net profit after tax (NPAT) rose by 55.9% to $26.8 million.

July 2020 saw gross sales rise by 110%, gross profit went up 160% and Kogan.com made over $10 million of adjusted EBITDA in just one month. In August 2020, gross sales grew 117%, gross profit went up by 165% and adjusted EBITDA soared 466%.

Based on the rising number of customers, I think the e-commerce ASX share has very promising growth prospects. Over August, Kogan.com grew its active customers by 152,000 to 2.46 million.

At the current Kogan.com share price, it’s trading at 37x FY23’s estimated earnings. I also like that the company is growing its dividend for shareholders. 

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is an online-only retailer of furniture and homewares. It has grown at a very strong rate since COVID-19 started impacting Australia.

The e-commerce ASX share generated positive cashflow in FY20, with annual revenue jumping by 74% to $176.3 million and EBITDA rocketing 467% higher to $8.5 million.

It was the last FY20 quarter that particularly caught my attention – FY20 fourth quarter revenue went up by 130%. I believe that FY21 will be another strong year with financial year to date (to 27 August 2020) revenue growing by 161% and EBITDA of $6 million. Remember FY20’s entire EBITDA was $8.5 million.

I believe there has been a permanent shift to online shopping for some consumers. It has brought forward the adoption of e-commerce and this can help businesses like Temple & Webster expand and invest faster than it would have.

The business is expanding very well and it could make bolt-on acquisitions as time goes on with some competitors struggling in the current environment.

At the current Temple & Webster share price it’s trading at 58x FY23’s estimated earnings. However, it was announced today that a director recently sold around $1.4 million of shares, so that’s not exactly a positive sign.

Foolish takeaway

When looking out three to five years, I think these two could be two of the best performing ASX shares because of their e-commerce models. They’re doing a great job at attracting new customers and winning market share.

At the current share prices I’d probably go for Kogan.com because of the nature of its network effects. It could convert some of its one-time customers into repeat customers who sign up for membership and use various other services. This would mean much more profit, at a higher margin, for Kogan.com. 

More reading

• Why IAG, Mayne Pharma, Mesoblast, & Temple & Webster shares are tumbling lower
• With even Kogan (ASX:KGN) eyeing a return to the office, where next to invest?
• 4 stellar ASX growth shares to buy right now
• 3 ASX tech shares to buy and hold for the next decade
• Meet the ASX 200 stock with a dividend yield that’ll hit ~14% in FY22

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 Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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.

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The share price of brick and mortar retailers, and their landlords, have been some of the hardest hit by the lockdowns and social distancing measures put in place to contain the pandemic.

Retail developer and owner Aventus Group (ASX: AVN) is no exception.

The Aventus share price plummeted 54% from its 19 February all-time high through to its all-time low on 27 March. Although it’s gained strongly since that low, up 71% at time of writing, the Aventus share price is still around 22% down from its 19 February peak.

Year to date, shareholders are nursing losses of 17%. By comparison the S&P/ASX 300 Index (ASX: XKO) is down 8% in 2020.

But according to Macquarie Group Ltd (ASX: MQG) analysts, the outlook for Aventus’ shareholders is looking far brighter in the light of this week’s federal budget proposal.

What does Aventus Group do?

Aventus Group owns, manages and develops large format retail centres in Australia. Its portfolio is comprised of 20 retail centres valued at $2.2 billion. That portfolio encompasses 536,000sq m in gross leasable area.

The company’s 70 in-house professionals provide their expertise in investment management, asset management and corporate services. Aventus boasts consistently high occupancy, positive leasing spreads and low incentives across its portfolio.

Aventus has a market capitalisation of $1.3 billion and pays an annual dividend yield of 4.9%, unfranked.

Why could the Aventus share price be set for some big gains?

The new federal budget, outlined by Treasurer Josh Frydenberg on Tuesday, opens wide the fiscal spending taps. Among the new measures, pensioners will receive an additional $2.6 billion in support payments, and Australian workers will receive almost $18 billion in tax cuts.

The budget also contains novel measures to reimburse businesses employing young people by up to $200 per week. This, and other spending measures, should see more consumers open their wallets and spend big.

Combined with the new business investment tax breaks, I believe Aventus can expect most of the tenants at its 20 retail centres to see a marked uptick in their turnover heading into Christmas. As such, this should mean Aventus can expect to see rents coming in reliably and on time.

Although the Aventus share price is down 0.4% in early afternoon trading, I agree with Macquarie that the mid to longer-term outlook for shareholders appears promising.

More reading

• Buy Fortescue (ASX:FMG) and this ASX dividend share for income
• 2 top ASX dividend shares for income investors to buy today
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• 2 high yield ASX dividend shares to buy next week
• Not sure about Westpac (ASX:WBC)? Buy these ASX dividend shares instead

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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 Ampol Ltd (ASX: ALD) share price is pushing higher today as the company provided an update regarding the performance of the Lytton refinery. The fuel and convenience giant also announced it would be undertaking a review of the refinery. At the time of writing, the Ampol share price is trading 1.72% higher at $24.77.

What does Ampol do?

Ampol, formerly known as Caltex, is a fuel supplier and convenience retailer. The company is involved in the purchase, refinement and sale of petroleum products and the operation of convenience stores. Ampol operates throughout Australia and on the north island of New Zealand.

Ampol’s roots track all the way back to 1900 and the company has been listed on the ASX in its current form since 1980. The fuel provider is an established part of the S&P/ASX 200 Index (ASX: XJO).

How has the refinery performed?

As expected, the refinery made an unaudited loss of $82 million in Q3, which takes the total loss for the year to $141 million. Furthermore, the impact of COVID-19 has already largely been priced in to the Ampol share price and, as such, the loss is of no surprise. It’s quite likely that the bounce in the Ampol share price today reflects the fact that shareholders were expecting a worse outcome.

Lytton refinery is now back in operation with production for Q4 expected to be 1.3 billion litres (BL). This will take the full year production for 2020 up to 3.4 BL, down from 5.8 BL for FY2019.

Refinery review

Due to the challenging conditions experienced as a result of the pandemic, Ampol will commence a comprehensive review of the Lytton refinery and its related supply chains to determine the best operating model over the medium term.

The review will consider options for the facility’s operations and the markets it serves. These options may involve closure, with permanent transition to an import model or the continuation of existing refining operations among other alternate models of operation.

Ampol Managing Director and CEO, Matt Halliday, said:

The review will consider all relevant strategic, economic and operational factors, including the recent measures announced by the Australian Government to support refining and bolster fuel security, and the potential impacts on employees, suppliers and other stakeholders.

About the Ampol share price

With the Ampol share price up 1.72% in trading today, shareholders are clearly beginning to see the light as the refinery’s large loss has not stopped investors bidding up the price today.

However, the Ampol share price is still trading around 27% down for the year so far, with the decline in oil prices slashing its margins.

More reading

• Macquarie says ASX value shares will outperform growth stocks from here
• Meet the ASX sector that is cum-consensus upgrade for FY21

Motley Fool contributor Daniel Ewing 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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Washington H. Soul Pattinson and Co Ltd (ASX: SOL) shares are surging today and have just hit a new 52-week high. The SOL share price has been on a tear over the past week, rising 9.4% from around $23.30 last Friday to $25.48 today at the time of writing. Earlier today, Soul Patts shares hit their new high of $25.49, a level not seen since April 2019. It’s been a slow but steady rise for the company in recent weeks too. The SOL share price is also up more than 21% over the past month and more than 46% over the past 6 months.

So what’s behind this extraordinary rally?

What does Washington H. Soul Pattinson do?

Soul Patts is a pretty special company. It has a rather unusual structure, functioning more as a listed investment company (LIC) today than its original structure as a pharmacy chain (although it still maintains its pharmacies). As such, it owns large stakes in a diversified portfolio of ASX companies.

Some of its top holdings are as follows:

• a 25.3% stake in TPG Telecom Ltd (ASX: TPG)
• a 43.9% stake in Brickworks Limited (ASX: BKW)
• a 50% share of New Hope Corporation Limited (ASX: NHC)
• a 19.3% stake in Australian Pharmaceutical Industries Ltd (ASX: API)
• an 8.6%  share of BKI Investment Co Ltd (ASX: BKI)
• a 22.6% stake in Clover Corporation Limited (ASX: CLV)

In addition to these positions, Soul Patts also owns a portfolio of unlisted assets. These range from a mining company to a corporate advisory firm.

Why is the Soul Patts share price at a new 52-week high?

It’s not immediately clear what has triggered the surge in the SOL share price this week to a new 52-week high. Just yesterday, however, the company did tell the markets that two of its directors have picked up additional shares. Thomas Millner reportedly picked up an additional 40,000 shares between 30 September and 5 October, while Robert Millner picked up 45,000 shares over the same period. This obviously tells us that the directors are bullish on their company at the current share price and are willing to put their money where their mouths are, so to speak.

Additionally, some of the shares in Soul Patts’ portfolio have also been rising in value in recent weeks, helping to increase the value of the company’s holdings. These include New Hope, which is up nearly 13% in the past month, and Brickworks, up 11.5%.

All of these factors combined are, in my view, what is behind this new 52-week high for Soul Patts shares.

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Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company 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 Here’s why the Soul Patts (ASX:SOL) share price is at a new 52-week high appeared first on Motley Fool Australia.

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