Author: therawinformant

The Piedmont Lithium Ltd (ASX: PLL) share price has return from its lengthy suspension with a bang on Monday.

The lithium miner’s shares rocketed as much as 83% to a record high of 27 cents at one stage in late morning trade.

At the time of writing, the Piedmont Lithium share price is up 53% to 23 cents.

Why is the Piedmont Lithium share price rocketing higher?

Investors have been fighting to get hold of the company’s shares on Monday after it announced a binding sales agreement with electric vehicles giant Tesla.

According to the release, Piedmont Lithium has signed an agreement for an initial five-year term for the supply of spodumene concentrate (SC6) from its North Carolina deposit. The deal includes the option to extend it for a further five years by mutual agreement.

Piedmont and Tesla have agreed a fixed commitment which represents approximately one-third of the lithium miner’s planned SC6 production of 160,000 tonnes per annum. It also includes an option for additional SC6 upon Tesla’s request.

While no financial terms have been revealed, management notes that these sales are expected to generate between 10% to 20% of its total revenues from its proposed integrated mine-to-hydroxide project for the initial five-year term.

However, it is worth noting that the agreement is conditional upon the two parties agreeing to a start date for deliveries. This will be between July 2022 and July 2023, depending on their respective development schedules.

“Excited to be working with Tesla.”

The company’s Chief Executive Officer, Keith D. Phillips, revealed that the company was very pleased with the agreement and looks forward to disrupting the current value chain.

He commented: “We are excited to be working with Tesla, which represents the start of the first US domestic lithium supply chain and a disruption to the current value chain. This Agreement highlights the strategic importance of Piedmont’s unique American spodumene deposit and confirms the trend toward spodumene as the preferred feedstock for the lithium hydroxide required in high-nickel batteries.”

More reading

• Why Tesla’s record vehicle deliveries sound better than analysts might think
• Tesla stock will surge 27% to $500, according to this analyst
• Why this fundie still sees an ASX tech share surge
• How Elon Musk’s Tesla delivered a body blow to these ASX stocks
• Elon Musk’s ‘Battery Day’ could see these ASX mining shares soar, and volatility hits the markets

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 and recommends Tesla. 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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At the weekend I looked at how $20,000 investments in a few popular ASX shares had fared over the last 10 years. You can read about those investments here.

But that was then and this is now. So where could we find similarly strong returns over the next 10 years?

Listed below are three top ASX shares that I think could generate strong returns for investors in the future. Here’s why I would invest $20,000 into them today:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

The first option to consider buying with these funds is the BetaShares NASDAQ 100 ETF. I think it could provide strong returns for investors over the next decade thanks to the high quality companies included in the fund. The BetaShares NASDAQ 100 ETF gives investors a piece of the 100 largest non-financial companies listed on the famous NASDAQ exchange. This means investors will be getting exposure to the likes of Amazon, Apple, Facebook, Microsoft, Netflix, and Google parent company, Alphabet.

NEXTDC Ltd (ASX: NXT)

Another option to consider for a $20,000 investment is NEXTDC. It is a leading data centre operator which owns a growing collection of world class centres in key locations across Australia. NEXTDC has been experiencing very strong demand for capacity in its data centres over the last few years. This continued in FY 2020, leading to the company delivering a 23% increase in EBITDA to $104.6 million. The good news is that the cloud computing boom still has a long way to run and NEXTDC appears perfectly positioned to benefit.

VanEck Vectors China New Economy ETF (ASX: CNEW)

A final option to consider for a $20,000 investment is another exchange traded fund. This time it is the VanEck Vectors China New Economy ETF, which gives Australian investors access to the growing Chinese economy. This is through a total of 120 promising companies with very strong growth prospects. The fund’s focus is on companies making up ‘the New Economy’. These are sectors such as technology, healthcare, consumer staples, and consumer discretionary. If the Chinese economy continues its strong growth over the next decade, I expect these companies to grow along with it.

More reading

• 10 fantastic ASX shares to buy in October
• 3 of the best ASX growth shares you can buy right now
• Want to invest in US shares? This ETF is a top option
• 2 ASX shares I would recommend to a beginner investor
• Where to invest your Telstra (ASX:TLS) dividends

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 BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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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Three ASX shares stood out to me after Friday’s mini rally in mortgage-related companies. The market was clearly excited by the prospect of easing responsible lending laws. Banks led the charge with the Westpac Banking Corp (ASX: WBC) share price rocketing up by 7.39%. However, I see banks as a problematic area to invest in. The regulator, Australian Prudential Regulation Authority (APRA), has already limited what they can pay in dividends. In addition, banks are still feeling the impacts of loan repayment holidays.

However, the mortgage sector is very large and there are a number 0f companies that did very well on Friday outside of banks. In fact, when there is a ray of optimism in the residential housing sector, you get an idea of just how large the impact is.

ASX shares for mortgage brokers

Mortgage brokers are high margin operators not subject to the same regulations as authorised deposit taking institutions (ADIs). They are distribution channels for the mortgage industry, helping clients to secure secured loans for residential housing predominantly. 

The first that caught my attention was Mortgage Choice Limited (ASX: MOC) which saw its share price rise by 7.14% on Friday and has rocketed 10% higher at the time of writing today. The company showed a high level of resilience through the coronavirus pandemic lockdown with only a 16% fall in annual net profit after tax (NPAT). Mortgage Choice is currently selling at a price to earnings ratio (P/E) of 12.6, which is lower than its 10-year average of 17.6. It also has a trailing 12 month dividend yield of 6.9%. 

The second mortgage broker, and one I have liked for a while, is Australian Finance Group Ltd (ASX: AFG). This ASX share saw its price rise by 5.41% on Friday alone. Unlike Mortgage Choice, Australian Finance Group saw its statutory NPAT rise by 15%. It also saw residential settlements rise by 9% to $34.1 billion. Part of the company’s revenue streams are drawn from renewed interest in Residential Mortgage Backed Securities (RMBS). These are a specific type of bond that are secured against a large pool of residential mortgages (home loans). 

Mortgage insurance

Genworth Mortgage Insurance Australia Ltd (ASX: GMA) is a pure-play mortgage insurance company. It saw its share price jump by a massive 10.21% on Friday. Like the other mortgage brokers, Genworth is selling at historically low P/E multiples. Nevertheless, the company has a TTM dividend yield of 10.86%, which is very strong. The company reported a bad first half of FY20 from January to June, however it has a solid balance sheet with only a minor increase in net liabilities. 

If the housing sector gets a boost due to the easing of lending laws, then Mortgage Choice will also see an increase in top line revenue. Personally, I expect to see the company’s share price rise further as the market turns its attention to recovery.

More reading

• ASX 200 shares to buy for housing boom
• Westpac (ASX:WBC) and 2 more ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• Top brokers name 3 ASX shares to buy next week
• ASX 200 finishes the week with a bang

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.

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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Northern Star Resources Ltd (ASX: NST)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating and lifted their price target on this gold miner’s shares to $16.60. The broker notes that Northern Star is aiming to increase its production by 40% through to FY 2023. It is also targeting a 10% reduction in costs. In light of this and its favourable dividend policy, the broker thinks Northern Star would be a good option for investors looking for exposure to the gold sector. I agree with Macquarie and think Northern Star could be a good option.

Premier Investments Limited (ASX: PMV)

Analysts at UBS have retained their buy rating and lifted the price target on this retail conglomerate’s shares to $20.50. UBS notes that Premier Investments delivered a result in line with expectations in FY 2020. Looking ahead, the broker expects its earnings to decline in FY 2021 because of COVID-19 headwinds. However, longer term, UBS is very positive on the company’s prospects. This is thanks partly to the global expansion of the Smiggle brand and its improving margins due to a shift in its sales mix. While it isn’t my favourite option in the retail space, I think it is worth considering.

Suncorp Group Ltd (ASX: SUN)

Another note out of the Macquarie equities desk reveals that its analysts have upgraded this insurance and banking giant’s shares to an outperform rating with an $11.00 price target. The broker made the move largely on valuation grounds. It notes that Suncorp’s shares are trading at a significant discount to the market average. It feels this is unwarranted and believes that the bank provisions it has made are reasonable. I think Suncorp could be worth a closer look if you’re a value or income investor.

More reading

• 5 things to watch on the ASX 200 on Monday
• ASX 200 finishes the week with a bang
• ASX 200 up 1.5%: Big four banks rocket higher, Premier Investments delivers record profit
• Why Adbri, Brickworks, Northern Star, & Westpac shares are surging higher today
• Premier Investments (ASX:PMV) share price on watch after record profit result

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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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Paradigm Biopharmaceuticals Ltd (ASX: PAR) updated the market today on its phase III trial and product registration in Europe. The news shot the Paradigm share price 8.3% higher to $2.47 at the time of writing. In comparison, the All Ordinaries Index (ASX: XAO) is trading marginally higher today at 0.2% to 6,152 points.

Let’s look at what Paradigm announced.

European Medicines Agency meeting

Paradigm received positive feedback from a meeting with the European Medicines Agency (EMA) for its product Zilosul. The company is developing Zilosul to treat chronic knee pain resulting from osteoarthritis (OA). Today’s regulatory milestone will provide a clear pathway for Zilosul registration in Europe.

The meeting with EMA covered key elements of Paradigm’s phase III trials, pre-clinical and manufacturing processes. EMA agreed on the proposed adaptive clinical trial design, including the conduct of two global, multicentre and randomised studies. This will include moderate to severe patients who have failed to respond to non-steroidal anti-inflammatory drugs and paracetamol. Evaluation will be done through WOMAC pain and WOMAC function, and the use of a saline placebo arm. In addition, Paradigm confirmed that the trial would not include an active comparator.

The meeting is expected to support Paradigm’s submission of a marketing authorisation application (MAA) in Europe targeting knee OA.

The company plans to submit the same phase III clinical trial protocol to the United States Food and Drug Administration (FDA). Paradigm hopes to receive similar feedback in its Type C meeting that will assist its IND and subsequent NDA submission. The company advised it will present its Type C briefing book to the FDA in the coming weeks.

What did management say?

Paradigm’s chief medical officer, Dr Donna Skerrett, was upbeat about the feedback for Zilosul, saying:

Paradigm is very pleased with the valuable guidance received from the EMA which provides clear direction as we advance our Phase 3 registration program toward bringing Zilosul to market.

The company remains focused on further demonstrating, via our Phase 3 clinical trials, the potential for Zilosul to be a treatment for the huge population of people suffering with chronic knee pain as a result of OA. This is another step toward our aim to have the pivotal protocol acceptable in all major jurisdictions providing Paradigm with a clarified path to global approval of Zilosul should our clinical trials be successful.

About the Paradigm share price

The Paradigm share price reached an all-time high of $4.50 before the onset of COVID-19, falling more than 72% in March. However, the Paradigm share price has since recovered from its 52-week low of $1.08, up 127%.

More reading

• Why Flight Centre, OneVue, Paradigm, & PointsBet shares are charging higher
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• Village (ASX:VRL) share price edges lower after BGH takeover update
• Pure Foods (ASX:PFT) share price lifts, bucking the falling market
• Here’s why Soul Patts (ASX:SOL) is the king of ASX dividend shares

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Balancing growth and income is a delicate balance when investing in ASX shares. Although there are rare ASX companies out there that can and do provide both capital growth and dividend income for their shareholders, many others get hung up trying to deliver one, the other or both. This can be very damaging for shareholders over the long term, as the fortunes of companies like Westpac Banking Corp (ASX: WBC) have recently shown.

So here are 2 ASX shares that I think are striking the right balance with providing both growth and income today.

2 ASX shares I would buy for both growth and income today

WAM Global Ltd (ASX: WGB)

WAM Global is my fist ASX share to buy for growth and income today. This company is a listed investment company (LIC), which means it’s really an investment vehicle that buys and sells shares on behalf of its shareholders. In WAM Global’s case, this involves scouring the world’s share markets for undervalued growth companies. It currently holds a diverse mix of international shares, which include (as of 31 August) Microsoft Corporation (NASDAQ: MSFT), Tencent Holdings Ltd (HKG: 0700), Electronic Arts Inc (NASDAQ: EA) and Hasbro Inc (NASDAQ: HAS).

I like WAM Global as a strong dividend growth share. It only started life back in 2018, but since then, it has rapidly amassed a substantial profit reserve and has begun paying a rapidly-rising stream of fully franked dividends. Its last announced dividend (to be paid on 30 October) will come in at 4 cents per share (cps). That’s 33% higher than its 2020 interim dividend of 3 cps and a 100% increase on 2019’s final dividend of 2 cps.

That gives WAM Global a trailing dividend yield of 3.33% on current prices, or 3.81% if we annualise the 4 cps dividend. Given this rapid rate of acceleration for this company’s payout, I’m very confident that WAM Global will continue to deliver both growth and income well into the future.

CSL Limited (ASX: CSL)

CSL is my second growth and income share to consider today. This company is a healthcare giant and also the largest company on the ASX at the current time. CSL has amassed a reputation as a large-cap growth share for many years now — evidenced by the CSL share price climbing from $88.50 in 2015 to today’s share price of $297.55 (at the time of writing).

But while on this growth runway, CSL has also been quietly growing its dividend payouts as well. Its current trailing dividend yield of 0.99% might not sound too exciting. But when you consider that CSL has raised its payouts for 7 consecutive years, including again this year, the picture starts to look more interesting.

And when you see that these increases have taken the CSL dividend from US$1.02 in 2015 to what will be US$2.02 in 2020, it starts to get very exciting. As such, I think CSL is another top ASX share to buy for both growth and income today.

More reading

• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• 3 of the best ASX healthcare shares to buy and hold
• 10 fantastic ASX shares to buy in October
• 3 five-star ASX 200 shares to buy in October
• The Aussie dollar at a critical juncture and could turn fortunes for these ASX stocks

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of WAMGLOBAL FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Hasbro and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Electronic Arts and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. 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 Mesoblast limited (ASX: MSB) share price has been a very strong performer on Monday.

In afternoon trade the allogeneic cellular medicines developer’s shares are surging over 8% higher to $5.32.

This leaves the Mesoblast share price trading within sight of its record high of $5.43.

Why is the Mesoblast share price surging higher today?

Investors have been scrambling to buy the company’s shares on Monday ahead of a major announcement later this week.

Last month Mesoblast had a meeting with the Oncologic Drugs Advisory Committee (ODAC) of the United States Food and Drug Administration (FDA).

That meeting was to discuss its remestemcel-L (RYONCIL) product candidate as a treatment for paediatric steroid-resistance acute graft versus host disease (paediatric SR-aGvHD).

Positively for Mesoblast, the ODAC voted overwhelmingly in favour that the available data supports the efficacy of remestemcel-L in paediatric patients with SR-aGvHD.

This is important as the ODAC plays a big role in whether certain drugs get approval or not. Failure to gain the support of the ODAC would make it close to impossible to then gain FDA approval.

So with the ODAC in favour of RYONCIL, the company stands a good chance of gaining approval when the FDA reviews it on Wednesday (United States time).

If it gains approval, then it could be a very lucrative product for Mesoblast. At present there is no FDA-approved treatment options. As such, RYONCIL has the potential to fill a significant unmet medical need.

Should you invest?

Based on its current valuation, I suspect the market is pricing in a reasonably high probability that the company will be granted approval by the FDA.

In light of this, I wouldn’t be in a rush to invest in Mesoblast’s shares at this point.

But it certainly will be worth keeping a close eye on its progress. Especially given the other potential treatments it has in the works.

These certainly are exciting times for shareholders, but I’m just not overly excited about the current share price.

More reading

• 5 things to watch on the ASX 200 next week
• Why Mesoblast (ASX:MSB) and this ASX 200 share have doubled in value in 2020
• Are biotech shares like Polynovo (ASX:PNV) a better buy than Afterpay?
• ASX 200 falls slightly, miners surge higher
• The Mesoblast (ASX:MSB) share price surges on award win

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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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) has fought back from a morning decline and is trading higher. At the time of writing the benchmark index is up 0.1% to 5,971.8 points.

Here’s what is happening on the market today:

A2 Milk shares crash lower.

It has been a very disappointing start to the week for the A2 Milk Company Ltd (ASX: A2M) share price. It is crashing lower on Monday after the infant formula and fresh milk company released an update on its outlook for FY 2021. Due largely to weakness in the daigou channel, management expects its first half sales to be down 3.9% to 10.1% compared to the prior corresponding period.

Travel shares surge higher.

A number of travel shares are storming notably higher on Monday. This appears to have been driven by a major improvement in COVID-19 infections in Victoria and the possibility of a travel bubble opening soon between Australia and New Zealand. Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) shares are up over 7% at lunch.

Iress increases takeover offer for OneVue.

The Iress Ltd (ASX: IRE) share price is pushing higher today after announcing an increase in its takeover offer for OneVue Holdings Ltd (ASX: OVH). The financial technology company has made a final offer of 43 cents per share, up from 40 cents per share previously. The company made the move after receiving feedback from OneVue shareholders. The OneVue board continues to recommend the offer.

Best and worst performers.

The best performer on the ASX 200 on Monday has been the Webjet share price with a gain of over 8%. Optimism that the travel market may recover quicker than expected appears to have given travel shares a boost. The worst performer is the a2 Milk share price by some distance with a 9% decline. This follows the release of its aforementioned outlook update this morning.

More reading

• ASX 200 shares to buy for housing boom
• Why Flight Centre, OneVue, Paradigm, & PointsBet shares are charging higher
• Why a2 Milk, Blackmores, Ramelius, & Synlait Milk shares are tumbling lower
• 3 ASX shares with dividend yields above 10%
• OneVue (ASX:OVH) share price zooms higher after Iress (ASX:IRE) increases takeover offer

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and IRESS 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 announcement by Treasurer Josh Frydenberg to ease responsible lending laws. This is part of a wider group of measures designed to head off the worst of the coronavirus pandemic’s economic impacts. The initial impact on the S&P/ASX 200 Index (ASX: XJO) shares was in the banking and mortgage related sectors. 

Westpac Banking Corp (ASX: WBC) saw the largest share price rise of the big four banks last Friday with a jump of 7.39%.  Other mortgage lenders such as Mortgage Choice Limited (ASX: MOC) also saw its share price jump up by 8.98%.  While mortgage insurance company Genworth Mortgage Insurance Australia Ltd (ASX: GMA) saw its share price jump by a massive 10.21%.

Nevertheless, this is not the full extent of the impact. There are a range of ASX 200 shares that stand to gain from increased spending, including the real estate sector. 

Housing sales

Residential housing companies have seen share prices fall due to inactivity caused by the COVID-19 lockdown. Nonetheless, there are now two very strong indicators of potential growth over the next 18–25 months. Most notable, of course, is the likelihood of loosening the responsible lending laws. Moreover, recently the Commonwealth Bank of Australia (ASX: CBA) forecast an uptick in housing sales towards the end of 2021.

Australia’s largest residential construction companies are privately owned. However, companies like Stockland Corporation Ltd (ASX: SGP) and Mirvac Group (ASX: MGR) are two of the largest ASX 200 shares in the country. Both companies have billions in residential housing pipelines, as well as healthy balance sheets. In addition, both companies are selling at historically low prices.

Companies like REA Group Limited (ASX: REA) and Domain Holdings Australia Ltd (ASX: DHG) are likely to see increased volumes. Arguably more so as companies will have to market heavily to overcome the absence of international buyers. 

Building materials

This is an area where I believe there are a lot of opportunities, although not readily obvious. For example, ASX 200 share Boral Limited (ASX: BLD) is currently restructuring after several years of poor performance. The company has a new CEO and is working through a review of all elements of the business. It also counts Kerry Stokes’ company, Seven Group Holdings Ltd (ASX: SVW) as a substantial shareholder, recently taking two board seats at Boral.

Other companies of interest include building products company CSR Limited (ASX: CSR), and James Hardie Industries plc (ASX: JHX). The latter being the world’s largest manufacturer of fibre cement products.  I am also watching Brickworks Limited (ASX: BKW). After posting a 93% increase in statutory net profits after tax, I think it is very undervalued.

More reading

• 3 ASX shares with dividend yields above 10%
• 3 cheap ASX shares in the buy zone today
• How to make money by investing in ASX 200 shares
• Westpac (ASX:WBC) and 2 more ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks. The Motley Fool Australia has recommended REA Group 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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I think the MFF Capital Investments Ltd (ASX: MFF) share price is a buy at the current level. The listed investment company (LIC) seems well positioned to me.

What is a LIC?

The job of a LIC is to invest in other assets on behalf of shareholders. Most of the time LICs invest in shares, but investment businesses can invest in other assets like bonds, property or anything else a company can invest in.

There are some very old LICs out there which manage billions of dollars such as Argo Investments Limited (ASX: ARG) and Australian Foundation Investment Co.Ltd. (ASX: AFI).

What about MFF Capital?

MFF Capital is reasonably old when it comes to the LIC sector, it has been going for well over a decade.

These days it is managed by Magellan Financial Group Ltd (ASX: MFG) co-founder Chris Mackay. I think Mr Mackay was one of the best fund managers in the 2010s. He was right to heavily allocate money to the US market as the share market there performed strongly and the Australian dollar weakened compared to the US dollar (which improved returns for Australian investors).

MFF Capital aims to invest in businesses which are competitively advantaged and are priced attractively.

The MFF Capital share price has done very well over the past decade. According to CMC, its total shareholder return over the past 10 years has been an average of 17.6% per annum.

What type of shares is MFF Capital invested in?

Two of MFF Capital’s best investments have also been two of its largest and longest-held. At the end of August 2020, 18.7% of its portfolio was invested in Visa shares and 17.9% was invested in Mastercard shares.

More than a third of the portfolio is invested in those two payment businesses. I think that’s a good call with the rise of e-commerce and cashless transactions.

Home Depot is the only other ‘high’ conviction idea with a 9.6% weighting.

Other investments with an investment of more than 0.5% of the portfolio at the end of last month were: CVS Health, Berkshire Hathaway, Microsoft, Flutter Entertainment, CK Hutchison, JP Morgan Chase, Lloyds Banking, Lowe’s and US Bancorp.

I think the above names could help the MFF Capital share price continue its good long-term performance.

Why I think MFF Capital is worth buying today

MFF Capital has been a great investment over the past decade. It currently has a very large cash position – at 31 August 2020, 37.9% of its portfolio was net cash. That’s very defensively positioned and most of that cash is in US dollars.

The Australian dollar is weakening compared to the US dollar. It’s being speculated that the Reserve Bank of Australia (RBA) may cut the interest rate a little further than the already low rate of 0.25%. That may increase MFF Capital’s value in Australian dollar terms.

I also think that as the US election gets closer, and in the short-term after the election, there could be some market volatility. MFF Capital could be mostly protected from the volatility with its cash position and it could snap up share opportunities with that same cash pile.

Mr Mackay has expertly steered MFF Capital through the last decade and I think a prudent approach for the next six months to twelve months is the right thing considering all of the uncertainty relating to COVID-19 (and the election). It’s not guaranteed that the global economy will bounce back as some people are hoping it will.

I do believe you need to be positive about the long-term, but being cautious in the short-term could be the right thing to do.

At the current MFF Capital share price it’s trading at a 7% discount to the pre-tax net tangible assets (NTA) at 18 September 2020. I think that’s an attractive price to buy shares today.

More reading

• 3 ASX dividend shares to buy for 2021
• 2 ASX shares I would buy for growth and income this week
• Here’s how to make a $1 million portfolio by investing $1,000 a month
• 3 top ASX shares I would love to buy this September
• 2 ASX dividend growth shares I would buy right now

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd. 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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