Author: therawinformant

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.

Over the past few years, Slack (NYSE: WORK) attracted millions of users with its streamlined enterprise communication platform, which reduced the need for clumsy email chains and phone calls. Slack’s growth led to its direct listing on the NYSE last June, but the stock now trades slightly below its initial reference price of $26.

Investors seemingly lost interest in Slack after Microsoft (NASDAQ: MSFT) aggressively bundled its competing platform, Teams, with its other Office 365 products. Slack’s decision to file an antitrust complaint against Microsoft in Europe in July also suggested it was struggling to keep pace with its larger rival.

On its own, Teams doesn’t generate significant revenue for Microsoft yet. However, the strength of Microsoft’s other businesses lifted its stock nearly 50% over the past 12 months against Slack’s 5% gain. Will Microsoft continue to outperform Slack over the next year?

David vs Goliath

Slack’s revenue rose 57% to $630 million in fiscal 2020, which ended on Jan. 30, but its generally accepted accounting principles (GAAP) net loss widened from $141 million to $571 million. On a non-GAAP basis, which excludes stock-based compensation and other one-time expenses, its net loss narrowed slightly from $116 million to $113 million.

Microsoft’s revenue grew 14% to $143 billion in fiscal 2020, which ended on June 30, and its GAAP net income grew 13% to $44.3 billion. In other words, Microsoft can easily afford to operate Teams at a loss to push Slack out of the market.

Slack’s revenue streams

Slack operates a ‘freemium’ business model in which paid users gain access to unlimited messages, an unlimited number of integrated tools, better security services, and other perks.

In the first six months of 2021, Slack’s revenue rose 49% year over year to $417.5 million, as the shift to remote work throughout the pandemic boosted demand for its services. Its total number of paid customers grew 30% year over year to 130,000 in the second quarter, with a net dollar retention rate of 125% – which indicates it’s squeezing more revenues from its existing customers.

Slack is also gaining ground with larger enterprise customers: Its total number of paid customers with more than $100,000 in annual recurring revenue (ARR) grew 37% during the quarter, and its number of paid customers generating more than $1 million in ARR jumped 78%. Slack Connect, a new platform which allows companies to connect to each other on secure channels, also continued to expand.

Slack’s GAAP net loss in the first half of the year narrowed year over year from $393 million to $150 million, and its non-GAAP loss narrowed from $80 million to $16 million. That progress is encouraging, but Slack still expects to remain unprofitable by both measures for the full year.

Microsoft’s revenue streams

Microsoft splits its business into three core segments: Productivity and Business Processes, which sells productivity software like Office and Dynamics; the Intelligent Cloud, which includes its cloud platform Azure and server products; and More Personal Computing, which sells its Windows licenses, Xbox games and hardware, and Surface devices.

The pandemic throttled the growth of Microsoft’s Productivity and Business Processes unit as businesses shut down, but the growth of its Intelligent Cloud and More Personal Computing units – which benefited from stay-at-home measures boosting usage of cloud services and sales of PCs and gaming consoles – offset that slowdown.

Microsoft also repeatedly highlights the growth of its “commercial cloud” business, which encompasses all its revenue-generating cloud services. Its total commercial cloud revenue rose 36% to over $50 billion, more than a third of its top line, in fiscal 2020 – led by the growth of Azure, the world’s second largest cloud infrastructure platform after Amazon Web Services.

The forecasts and valuations

Slack expects its revenue to rise 38% to 39% in fiscal 2021, and for its non-GAAP net loss to narrow. Microsoft hasn’t provided any guidance beyond its first quarter yet, but analysts expect its revenue and earnings to rise 10% and 12%, respectively, for the full year.

Slack’s stock isn’t cheap at 16 times this year’s sales, and it’s unclear if it can hold Microsoft at bay while narrowing its losses. Microsoft’s stock also isn’t cheap at just over 30 times forward earnings, but its balanced growth throughout the COVID-19 crisis arguably justifies that premium. Microsoft also pays a forward dividend yield of 1%, while it will likely be years before Slack even considers paying a dividend.

The obvious winner: Microsoft

Based on these facts, it’s easy to see why Microsoft outperformed Slack over the past year. Slack is still growing, but it faces intense competitive pressure from Microsoft, it isn’t profitable, and its stock is expensive. Therefore, I believe the bulls will remain passionate about Microsoft but indifferent toward Slack over the next year.

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

More reading

• Amazon’s Luxury Stores just dealt another blow to department stores
• Apple, Amazon, Microsoft are bigger than EVERY unicorn combined
• Magellan (ASX:MFG) reveals best share buys for September
• Tesla (NASDAQ:TSLA) and Nikola (NASDAQ:NKLA) among most traded US shares last week
• 3 exotic ASX tech ETFs you might want to add to your portfolio today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Microsoft, and Slack Technologies and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon and Slack Technologies. 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 Better buy: Slack Technologies vs Microsoft appeared first on Motley Fool Australia.

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

from Motley Fool Australia https://ift.tt/2RIoFut

Unicorns are pretty impressive, and retail investors can get envious of being able to buy into them easily.

The definition of a unicorn is a private company that’s reached a valuation of US$1 billion ($1.37 billion). It’s an arbitrary threshold that indicates startup success.

Usually by then the founders and early investors will have become pretty wealthy.

But research firm CB Insights this week posted a graph that shows shareholders of publicly listed companies need not worry about missing out.

Every unicorn COMBINED is worth less than Apple, Amazon or Microsoft https://t.co/MVuiaqHdhU

(poll question follows) pic.twitter.com/Z9DUkEQSUc

— CB Insights (@CBinsights) September 15, 2020

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

The chart showed how all 488 unicorns in the world add up to a total value of US$1.54 trillion.

But just Apple Inc (NASDAQ: AAPL) by itself is worth $500 billion more – sitting at US$2.07 trillion. 

Amazon.com Inc (NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT), at US$1.65 trillion each, also outsize the entire cohort of unicorns on the globe.

It shows how tiny unicorns are compared to the vast pool of public companies out there for retail investors to put their money in.

How to emulate unicorn investment

And although not always true, once unicorns reach such a size, many will consider listing.

In the US, Airbnb and Palantir are startups that contributed to the very formation of the term “unicorn”. But they have announced their intentions to go public in the coming months.

In Australia, retail investors often don’t even have to wait until startups become unicorns. Limited private capital means emerging companies will take their chances at an initial public offering (IPO) well before they’re a billion-dollar company.

Xero Limited (ASX: XRO) was established in 2006, but went public on the New Zealand Exchange just one year afterwards. 

It started on the ASX in 2012 for $4.65 per share, and is now solely listed there at $90.90. That’s better than a 19-fold increase in just 8 years.

Afterpay Ltd (ASX: APT) started trading on the ASX in 2017 for $2.95 per share. Even after a correction this month it’s now at $75.01 – more than 2400% surge in 3 years.

Both these market darlings have been as good as investing in any emerging private company.

More reading

• Amazon’s Luxury Stores just dealt another blow to department stores
• Why Afterpay, Clinuvel, Kogan, & SEEK shares are storming higher today
• Better buy: Slack Technologies vs Microsoft
• Are biotech shares like Polynovo (ASX:PNV) a better buy than Afterpay?
• Forget Afterpay (ASX:APT) shares, buy these 3 growth shares

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of AFTERPAY T FPO, Amazon, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon and Apple. 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 Apple, Amazon, Microsoft are bigger than EVERY unicorn combined appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2RxvmPP

The BrainChip Holdings Ltd (ASX: BRN) share price has come under pressure again on Wednesday.

At one stage in morning trade the artificial intelligence technology company’s shares dropped as much as 20% to 39 cents.

The BrainChip share price has recovered a good portion of these declines now but is still down a sizeable 11% to 43.5 cents.

This is over 55% lower than the record high of 97 cents that its shares hit last week.

A fall from grace.

It certainly has been a fall from grace for the BrainChip share price in recent days.

Investors were fighting to get hold of the company’s shares this month after it announced a collaboration with VORAGO Technologies at the start of September.

This collaboration is intended to support a Phase I NASA program for a neuromorphic processor that meets spaceflight requirements. Management believes its Akida neuromorphic processor is uniquely suited for spaceflight and aerospace applications. This is because the device is a complete neural processor and does not require an external CPU, memory, or Deep Learning Accelerator.

While potentially working with NASA would be a great achievement, it’s still a long way from happening.

With the Phase I program, NASA invites companies to provide “concept of operations of the research topic, simulations and preliminary results. Early development and delivery of prototype hardware/software is encouraged.”

After which, a working prototype will be required in phase 2.

NASA explains: “Phase II deliverables include a working prototype of the proposed product and/or software, along with documentation and tools necessary for NASA to use the product and/or modify and use the software. Hardware products should include both layout and simulation.”

Clearly, there’s still a lot of work ahead for BrainChip and VORAGO. In light of this, I don’t believe this news warranted its shares rocketing higher and taking its market capitalisation well beyond $1 billion.

Where next for the BrainChip share price?

Barring some extraordinary developments, I think it is very unlikely we’ll see the BrainChip share price back at its previous highs any time soon (if ever).

As a result, I would suggest investors skip speculative shares like this and consider profitable tech companies such as Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

More reading

• Why the BrainChip (ASX:BRN) share price is crashing 21% lower today
• BrainChip (ASX:BRN) and Zip (ASX:Z1P) were among the most traded shares on the ASX last week
• Why Beach, BrainChip, Cleanaway, & Credit Corp shares are sinking lower
• Why Althea, BrainChip, Rio Tinto, & Starpharma shares are pushing higher
• 3 booming ASX shares for the new space age

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 Altium. The Motley Fool Australia owns shares of Appen 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 BrainChip (ASX:BRN) share price crashes a further 20% lower: Where next for its shares? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/33whaMt

The QBE Insurance Group Ltd (ASX: QBE) share price is not climbing higher with the market today.

In morning trade the insurance giant’s shares are trading flat at $9.28 following the release of an announcement.

What did QBE announce?

This morning QBE provided an update on its UK operations and the impact that a ruling by the High Court of England and Wales will have on its business.

According to the release, the High Court of England and Wales has handed down its decision in the test case commenced by the UK Financial Conduct Authority (FCA) in June 2020.

This test case was undertaken to resolve legal issues concerning the interpretation of common business interruption policy wordings.

This includes some policy wordings of QBE’s UK operations, in the context of whether those policy wordings respond to COVID-19 and related government mandated nationwide lockdowns.

The company advised that the Court ruled in favour of QBE with respect to two out of three of its notifiable disease policy wordings examined and in favour of insurers with respect to denial of access policy wordings.

However, the Court ruled in favour of the insured with respect to one of QBE’s notifiable disease policy wordings. This means that some of QBE policyholders are entitled to claim an insurance payout for business losses suffered when the UK went into lockdown between March and June because of COVID-19.

QBE is considering its options to appeal that decision.

What is the damage?

QBE estimates that its UK business interruption claims exposure is around $170 million before allowing for recoveries under its catastrophe reinsurance protections.

However, it believes that catastrophe reinsurance will limit the net cost of business interruption claims in its UK insurance business to $70 million. This already formed part of the $335 million net cost of COVID-19 allowed for in its recent half year results.

The company advised that it has the opportunity to apply to the Court for permission to appeal some or all of the ruling, with a decision expected to be then made in October.

And while it acknowledges that the estimated gross cost to QBE could increase or decrease, the net cost is not expected to vary.

More reading

• 4 ASX shares I would avoid for 2020
• QBE’s silence triggers shareholder outrage
• ASX 200 falls 1.8%, Afterpay drops 8%
• ASX 200 down 1.7%: Afterpay sinks on PayPal news, QBE sacks its CEO, bank shares lower
• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower

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.

The post QBE Insurance (ASX:QBE) share price on watch following UK COVID-19 court ruling appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3iFZIf2

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.

What happened 

Shares of Tesla Inc (NASDAQ: TSLA) rose on Tuesday, bolstered by a competitor’s struggles and excitement surrounding its upcoming “Battery Day” presentation. Tesla stock closed up more than 7%.

So what 

Reports that the Securities and Exchange Commission (SEC) is investigating rival electric-vehicle maker Nikola (NASDAQ: NKLA) for allegations of fraud are likely helping to prop up Tesla’s shares. In a scathing report on Thursday, short-seller Hindenburg Research accused Nikola of lying to investors about the true state of its battery technology and vastly overstating its progress toward the development of its electric truck.

After Nikola responded to some of Hindenburg’s claims on Monday, Hindenburg then argued its response was a “tacit admission of securities fraud.” Should the SEC agree with Hindenburg’s view, or if its investigation uncovers other instances of wrongdoing, Nikola’s ability to compete effectively in the electric vehicle market could be severely weakened.

Now what 

As its competitor wrestles with fraud allegations, Tesla is gearing up for its “Battery Day” on Sept. 22. Investors are looking forward to seeing what new technologies CEO Elon Musk unveils during his presentation. Excitement has been rising for Tesla’s battery-related growth opportunity, as fears surrounding climate change are bolstering demand for electric vehicles and clean energy storage solutions around the world. 

Judging by the recent gains, many investors are choosing to buy Tesla’s stock ahead of the event in anticipation of Musk’s forthcoming announcements.

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

More reading

• Is value investing dead?
• Tesla (NASDAQ:TSLA) and Nikola (NASDAQ:NKLA) among most traded US shares last week
• Why the Tesla (NASDAQ:TSLA) share price zoomed 12.5% higher
• Did Apple and Tesla stock splits signal the stock market top?
• How to tell if this is the end of the ASX bull market

Joe Tenebruso 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.

The post Why Tesla (NASDAQ:TSLA) stock jolted higher on Tuesday appeared first on Motley Fool Australia.

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

from Motley Fool Australia https://ift.tt/2RuvXBN

I think October is going to be a very volatile month for ASX shares. We are racing so fast towards the fiscal cliff that all of us can see it coming now. Specifically, we will see JobSeeker and JobKeeper payments reduced on 1 October .

Also, banks will start to renegotiate loans and call in bad debts. Meanwhile, the government’s Commercial Tenancy Code of Conduct has not been extended in Queensland or New South Wales at this stage. Outside of our own domestic economy, some companies are also at the mercy of large-scale trends and patterns that have been working against them all year. 

Here are 3 ASX shares that I would avoid buying between now and the end of October at least.

Shopping centre REITs

I really feel sorry for the two giant shopping centre real estate investment trusts (REITs). Scentre Group (ASX: SCG), the owner of the Westfield centres, and Vicinity Centres (ASX: VCX) are well managed ASX shares with solid balance sheets. Unfortunately, they have carried more than their fair share of the burden of the pandemic restrictions. The commercial tenancy code prohibits them from evicting tenants who have been unable to pay rent. At the same time, they must provide either rent deferment or cancellation of between 50% and 100%.

Both of these REITs have dutifully complied, and have in fact gone above and beyond what has been asked of them. It is bad enough that these companies face the extended lockdown restrictions in Victoria. However, Western Australia, South Australia and Victoria have also extended the tenancy code of conduct for 6 months or longer.

ASX shares in LNG

The oil price is under sustained pressure and struggling to remain above US$40 per barrel. Demand is still very low and will be until lockdowns are over and full scale international travel recommences. The world still has a glut of oil and Saudi Arabia has recently moved to sell at below the benchmark price. 

In the LNG space, PetroChina is forcing suppliers to reduce prices in the wake of years of large-scale losses. Many ASX shares in LNG are going to be struggling with this for several years to come. However, I believe Oil Search Limited (ASX: OSH) is the most exposed.

A producer of both oil and gas, the company has seen  a sharp decline in realised prices for its products. It is working hard to reposition itself and has slashed production costs. Nonetheless, the company is faced with a number of difficult issues for new project approvals, and has slashed growth capital. 

Fast fashion

Delloite Access Economics has modelled the reduction in the JobSeeker allowance and found it could lead to an additional 145,000 people unemployed. The key takeaway here is that consumers will have less money, so will spend less, and the resulting contraction will cause further unemployment. For me, this indicates bad times ahead for discretionary retail. Not only companies like Officeworks in the Wesfarmers Ltd (ASX: WES) group, but also retailers in the fashion sector.

As people try to cut discretionary spending, I think sales from companies like Lovisa Holdings Ltd (ASX: LOV) will be hardest hit. Moreover, I think prestige retailers such as jeweller Michael Hill International Ltd (ASX: MHJ) will see a sharp downturn in sales volumes. Personally, I like both these companies, but the lack of discretionary income will mean more spent on food and less spent on fun. 

More reading

• Coronavirus: Why the Scentre (ASX:SCG) share price can benefit from eased restrictions
• ASX 200 falls slightly, miners surge higher
• These were the worst performing ASX 200 shares last week
• 2 ASX shares that could rocket from viral cash hoarding
• Why retirees should add these solid ASX dividend shares to their portfolios

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 5 ASX shares to avoid in October appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2ZHm7kn

I believe there are a number of ASX shares that can provide an attractive mix of income and growth for investors.

Some shares offer growth but not much income like Altium Limited (ASX: ALU). Other ASX shares give investors plenty of income but not much capital growth like Telstra Corporation Ltd (ASX: TLS).

I think there are some ASX shares that offer the right mix of both:

WCM Global Growth Ltd (ASX: WQG)

This ASX share is a listed investment company (LIC). The job of a LIC is to invest in other businesses on behalf of shareholders. This particular LIC is run by California based asset management outfit WCM which was founded in 1976. The majority of WCM is owned by employees and it manages over $85.6 billion of assets.

There are two key criteria for any business to make it into the WCM portfolio. A business must have a rising competitive advantage (or expanding moat) and a corporate culture that supports the expansion of this moat. WCM believes the direction of a company’s economic moat is more important than its absolute width or size.

WCM focuses on businesses with a positive moat trajectory as measured by a rising return on invested capital (ROIC) compared to those with a large but static or declining moat. The LIC believes that corporate culture is a key determining factor for a business’ ability to achieve a consistently growing moat. I think it’s a great strategy. 

ASX shares aren’t targeted by WCM Global Growth, it’s an ex-Australia fund. The businesses that make up its largest holdings include Shopify, West Pharmaceuticals, MercadoLibre, Visa, Stryker, Taiwan Semiconductor, Tencent, Lululemon Athletica, Thermo Fisher Scientific and Ansys.

It has been a very strong performer. Over the past three years its portfolio return (before expenses but after management fees) has been 22% per annum. That shows the investment strategy really works.

At the current WCM Global Growth share price it’s trading at a 15% discount to the pre-tax net at 31 August 2020. It currently offers a partially franked dividend yield of 3%.  

Pacific Current Group Ltd (ASX: PAC)

Pacific describes itself as a boutique asset manager that applies its strategic resources, including capital, institutional distribution capabilities and operational expertise to help investment manager partners. It has 15 boutique asset managers across the world.

In terms of the dividend, Pacific is a very attractive ASX dividend share. The company grew its dividend by 40% to $0.35 per share in FY20. Not many businesses managed to report such a large increase to their FY20 dividend.

Pacific was able to achieve that large increase thanks to a big increase in the funds under management (FUM). In FY20 FUM, excluding acquisitions and sales, grew by 52% to $93.3 billion.

The ASX share reported that its underlying earnings per share (EPS) rose by 18% to $0.44 when excluding impairments of various assets. Pacific said that asset gathering efforts were impacted in this result due to the pandemic, so growth could be even better once COVID-19 subsides.

I’m not expecting huge capital growth from this investment idea, but steady high single digit or low double digit growth of underlying EPS could see the share price and dividend grow at an attractive rate too. The dividend doesn’t need to grow 40% per year for it to be a solid income idea at today’s prices.

Indeed, at today’s Pacific share price it offers a grossed-up dividend yield of 8.4%. The dividend has grown each year after the FY17 dividends. It’s valued at 11x FY21’s estimated earnings.

Foolish takeaway

Each of these ASX shares offer a good starting yield and could also generate pleasing capital growth as long as their underlying investments continue to perform well. If you’re looking for growth then I think WCM Global Growth is the better pick, but Pacific could be a really good option for dividends for at least the next few years.

More reading

• 5 quality ASX shares to buy in September
• 3 ASX dividend shares I’d buy with $3,000 today
• Buy Afterpay (ASX:APT) and these ASX shares before the tech rebound
• ASX shares to buy if there’s another crash
• 4 of the best ASX 200 shares to buy in September

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. 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 2 top ASX shares to buy for income and growth appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3hvUfGd

ASX tech shares have been rocketing in 2020 thanks to the likes of Afterpay Ltd (ASX: APT). The Afterpay share price has surged 144.9% higher but I think the tide is starting to turn. In my mind, biotech shares like Polynovo Ltd (ASX: PNV) are shaping up as the hot new buys in the market.

Why ASX biotech shares can outperform in 2020

The coronavirus pandemic has thrown a real spanner in the works. Dividends have been slashed, forcing many investors to look for growth instead.

That has seen tech shares like Afterpay continue to surge higher. Software-as-a-service (SaaS) businesses have managed to maintain revenue and keep costs low in 2020.

However, I think ASX biotech shares like Polynovo are looking like the next big thing.

To be clear, the fact that Polynovo has strong growth prospects is not a new idea. The Polynovo share price is up 21.0% this year alone and has a market capitalisation of $1.5 billion.

But COVID-19 has shown that the biotechnology sector has a lot of innovation ahead of it with some seriously strong research and development prospects.

The reason I like Polynovo is because of its strong track record and defined future strategy. The group’s NovoSorb BTM product has seen resounding success across the world in the dermal scaffolding market.

Now Polynovo is seeking to reach out even further. At the top of the list are the lucrative hernia and breast augmentation markets which could see Polynovo earnings soar.

It’s not just Polynovo that I like amongst the ASX biotech shares. I’m quietly bullish on the Mesoblast limited (ASX: MSB) share price after its recent success with the United States Oncologic Drugs Advisory Committee approving its remestemcel-L treatment for acute graft versus host disease.

Foolish takeaway

There’s no doubt that ASX tech shares like Afterpay have outperformed in 2020. However, I think it’s worth avoiding the trap of chasing gains that may have already gone and not buying in at the absolute top of the market.

ASX biotech shares could be on the rise with growing addressable markets and a solid track record. That’s why I think the Polynovo share price could be good value at $2.25 per share.

More reading

• Forget Afterpay (ASX:APT) shares, buy these 3 growth shares
• Is value investing dead?
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 falls slightly, miners surge higher
• BNPL shares like Afterpay (ASX:APT) and Zip (ASX:Z1P) are soaring today. Here’s why

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of POLYNOVO FPO. The Motley Fool Australia owns shares of AFTERPAY T 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 Are biotech shares like Polynovo (ASX:PNV) a better buy than Afterpay? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2Fxp4gG

The A2 Milk Company Ltd (ASX: A2M) share price is something of an enigma. Shares in the Kiwi dairy group have rocketed an eye-watering 2,485% higher in the last 5 years.

In contrast, the S&P/ASX 200 Index (ASX: XJO) is down 11.9% for the year and up 14.0% in the last 5 years, excluding dividends.

So, the best time to buy a2 Milk shares was 5 years ago, but is the next best time today?

Why the a2 Milk share price can outperform next year

One of the big factors behind the company’s success has been an effective market dominance strategy. The a2 Milk brand is highly recognisable and has gradually grown earnings across a variety of products and markets.

In fact, I think the increasingly targeted branding and growing brand recognition is a key reason to like the a2 Milk share price right now.

That brand strength looks set to continue with the Kiwi dairy group eyeing an expansion into Canada. a2 will be taking on the likes of Canadian dairy giant Saputo Inc. but I think it is up for the challenge.

a2’s full-year earnings result showed just how robust the company’s earnings profile is, which is underpinning its international expansion. The company posted a 34% increase in net profit after tax to NZ$385.8 million as earnings surged.

I think investors can have comfort that a cash cow company in its core markets provides the security to look further abroad for growth. The a2 Milk share price could also benefit from inorganic growth as it continues to acquire larger stakes in companies like Synlait Milk Ltd (ASX: SM1).

One reason for the strong earnings has been a clearly defined supply chain. Supermarket sales have surged in 2020 as coronavirus panic buying took hold and a2 Milk as a downstream supplier has been a major beneficiary.

Some investors have been put off by a less than stellar outlook for FY21. However, I think the company’s FY20 return on equity of 34% shows that it can still be profitable for investors.

Foolish takeaway

The a2 Milk share price is down 17.5% from its all-time high which could mean now is a good time to buy in at a reasonable price.

More reading

• 5 quality ASX shares to buy in September
• 3 warning signs for the a2 Milk (ASX:A2M) share price
• I’d buy A2 Milk (ASX:A2M) shares this week
• 3 ASX 200 shares I’d buy right now
• 3 ASX shares for beginners to buy

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 A2 Milk (ASX:A2M) share price can outperform in 2021 appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3c5NrxY