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.

Competition in the race for a coronavirus vaccine is hotter than ever, as a smattering of companies make steady headway through their clinical trials. Early leaders like Moderna (NASDAQ: MRNA) are facing new pressure from pharmaceutical giants such as Pfizer (NYSE: PFE) and AstraZeneca (NYSE: AZN) as the market recognises the increasing probability of multiple competing vaccine products by next year. At the same time, investors are carefully scrutinising the competitors to determine which will have the manufacturing and distribution capabilities that will be required to capture a significant portion of global demand. 

How can investors prepare for multiple companies to produce a successful coronavirus vaccine, given that it’s difficult to predict which efforts will succeed at all? Maintaining a diverse portfolio of the most promising contenders is one possible answer to this question, but it isn’t enough. Tossing vaccine developers’ stocks into a basket doesn’t account for the effect of competition on each company’s market share or its bottom line. Let’s envision a hypothetical situation in which two companies create an effective coronavirus vaccine to explore the effect of the competitive landscape.

Biotechs may be outmatched by pharmas

Let’s assume that one of two vaccine race winners is a biotech company along the lines of Moderna, and that the other company is akin to an established multinational pharmaceutical company like Pfizer. Let’s also assume that the smaller and leaner biotech company earns the appropriate regulatory approvals to sell its candidate two months before the pharma company as a result of initiating the development process slightly faster at the start of the pandemic. This is a reasonable assumption, as Moderna dosed its first clinical trial participant on March 16, whereas Pfizer and its collaborator BioNTech (NASDAQ: BNTX) didn’t start until more than a month later. Finally, let’s assume that the competing prophylactics are indistinguishable in terms of their safety, tolerability, and efficacy so that they’re easier to compare. 

Right off the bat, it’s obvious that the smaller company will struggle to manufacture enough doses to meet demand. Pfizer plans to produce at least 100 million doses this year, and around 1.3 billion doses of its inoculation using its manufacturing facilities by the end of next year if its candidate earns regulatory approval. Moderna, with minimal manufacturing capacity of its own, has initiated a slew of collaborations with larger companies that will only yield several hundred million doses in the same timeframe. Over the next decade, Moderna’s collaboration with Lonza (OTC: LZAGY) provisions for up to one billion doses per year, meaning that it will only match Pfizer’s output after a lengthy lag.

Biotech vaccine developers will also be at a major disadvantage when it comes to product distribution. Pfizer and other large pharma companies maintain relationships with hundreds of different distributors worldwide. This means that when customers, such as hospitals, seek to purchase the company’s vaccine, there is already a conduit in place that is able to facilitate the exchange. This conduit would reduce the amount of additional work and transaction costs required of the buyer and the seller alike. In contrast, many biotech companies like Moderna have no such infrastructure, so they’d need to build it from scratch to sell products at scale, incurring substantial costs and slowing vaccine deployment.

Plan your coronavirus portfolio accordingly

The implications of these disparities in manufacturing and distribution are difficult to overstate. In the first few years after safe and effective vaccines hit the market, larger competitors will be dominant simply because they won’t need to scale up their operations as aggressively or make as many new partnerships to match global demand.

At best, a company like Moderna would get a slice of the market early on. At worst, it might struggle to maintain its position in the face of a larger competitor flooding the market with a less expensive yet equally effective product. The fact that the smaller company had a head start or an abundance of government funding through Operation Warp Speed (OWS) for research and development doesn’t necessarily help it establish a massive foothold in the market.

If more than one company successfully produces a coronavirus vaccine, the next few years will probably be the most favorable for a company like Pfizer rather than one like Moderna. This isn’t to say that you should avoid including biotechs in your coronavirus portfolio because they’re too small to compete with the larger fish. Instead, it’s prudent to weigh your investments according to each company’s demonstrated ability and concrete plans to serve demand at a mass scale. Doing so will ensure that you’re less exposed to potential downsides from weaker-than-expected sales stemming from insufficient manufacturing output, while also leaving you exposed to the upside from successful vaccine deployment. If you’re lucky, you’ll have a handful of different winners in your back pocket.

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

More reading

• Coronavirus vaccine race: 7 key things you’ll want to know
• AstraZeneca coronavirus vaccine clinical trial paused
• How to invest in coronavirus vaccine stocks
• In the race for a coronavirus vaccine, can there be multiple winners?

Alex Carchidi 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 What if more than one company wins the coronavirus vaccine race? 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/32pcs3I

In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a solid gain. At the time of writing the benchmark index is up 0.5% to 5,890.5 points.

Four shares that have climbed more than most today are listed below. Here’s why they are pushing higher:

The Althea Group Holdings Ltd (ASX: AGH) share price has jumped 11% to 64.5 cents. Investors have been buying the cannabis company’s shares after it announced that its Canada-based Peak Processing Solutions business has obtained its Standard Processing Licence from Health Canada. Management notes that this is a major milestone and means that commercial operations can immediately commence in Canada.

The BrainChip Holdings Ltd (ASX: BRN) share price is up 2% to 66 cents. This morning BrainChip announced that it has validated the Akida Neuromorphic System-on-Chip (NSoC) design with functional silicon. The Akida NSoC is a complex integrated circuit that includes multiple interfaces, Data-to-Event Converters, a CPU complex, on-chip memory, and a neuron fabric to implement a complete neural network with no external components required.

The Rio Tinto Limited (ASX: RIO) share price is up a solid 3% to $103.05. As well as getting a boost from a rise in the iron ore price, this morning Macquarie reiterated its outperform rating and $114.00 price target on the mining giant’s shares. It notes that Rio Tinto is continuing to benefit from strong iron ore prices.

The Starpharma Holdings Limited (ASX: SPL) share price has stormed 7% higher to $1.71. This follows the release of an update on its antiviral nasal spray. According to the release, its SPL7013 spray is virucidal, inactivating more than 99.9% of SARS-CoV-2. This is the virus that causes COVID-19. In light of this, the company is now rapidly advancing development, regulatory, manufacturing, and commercialisation activities.

More reading

• Rio Tinto could pull a shock move to end crisis
• 3 booming ASX shares for the new space age
• BrainChip (ASX:BRN) share price rockets 24% higher on Akida update
• Turn $6k into $60k, a guide to growth investing
• ESG investing after the Rio (ASX:RIO) resignations

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 Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma Holdings 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 Why Althea, BrainChip, Rio Tinto, & Starpharma shares are pushing higher appeared first on Motley Fool Australia.

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

Rio Tinto Limited (ASX: RIO) might have booted out its CEO and two other senior executives, but critics still hold concerns about its governance.

Shareholder anger over the destruction of Juukan Gorge in May forced the mining giant into Friday’s bloodletting after 3 weeks of defending its processes. 

The Gorge was a location of great historical and cultural value in Western Australia.

ACCR legal counsel James Fitzgerald told The Motley Fool that the sackings were “just the first step”. The chief of superannuation fund HESTA, Debby Blakey, is still calling for an independent review – as is the National Native Title Council.

But what can Rio Tinto tangibly do to fix its culture and satisfy investor fury?

Rio Tinto is considered an Anglo-Australian company, being listed both on the ASX and on the London exchange (Rio Tinto plc (LON: RIO)).

One theory is that, despite the majority of its profits coming out of Australia, the company is dominated by British executives at the highest level.

And those European executives aren’t as sensitive to the destruction of Australian properties considered important to the local population.

Business Council of Australia president Tim Reed had a simple solution to this problem.

“I do think that companies need to be in close contact with the communities that they are a part of and the communities that they serve,” he told Sky News on Sunday.

“If moving the headquarters from London back to Australia enables Rio to do that then given the majority of their activity is here, I think that could be a very positive thing for the company to look towards.”

‘Very regrettable’ situation at Rio Tinto

The Business Council represents some of the largest publicly listed companies in Australia, including Rio Tinto. But Reed was honest about the impact of the mining giant’s actions.

“I think the situation at Rio is very regrettable and let’s not lose sight of the real impact here which is on the local Indigenous communities who forever have lost a deep part of their heritage, and that’s a loss to all of us here in Australia.”

National Native Title Council chief executive Jamie Lowe said Indigenous communities are not anti-development.

“They just want to be able to protect their most significant cultural heritage sites.”

He said reforms were needed in the entire industry, not just Rio Tinto.

“We do fear that if this is the behaviour of a company thought to have sector-leading standards, what is the risk another Juukan Gorge-type incident will happen again, without sector-wide reforms?”

Rio Tinto needed to engage with local communities regardless of where they are in the world, according to Reed.

“They are a global business and it would be just as devastating if something like this were to happen in another country as well.”

Rio Tinto’s share price was up 3.39% in early trading Monday to hit $103.25 at 11.03 am.

More reading

• Why Althea, BrainChip, Rio Tinto, & Starpharma shares are pushing higher
• ESG investing after the Rio (ASX:RIO) resignations
• Rio’s CEO walks the plank…
• ASX 200 drops 0.8%, Nearmap (ASX:NEA) sinks
• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower

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

The post Rio Tinto could pull a shock move to end crisis appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/32p29wH

The S&P/ASX 200 Index (ASX: XJO) has started the week in a positive fashion. In late morning trade the benchmark index is up 0.4% to 5,882.8 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Cleanaway Waste Management Ltd (ASX: CWY) share price is down 6.5% to $2.35. Investors have been selling the waste management company’s shares amid reports of poor workplace behaviour by its CEO, Vik Bansal. This morning it responded to the reports, advising that it takes the allegations of misconduct in the workplace very seriously. An investigation was conducted and Mr Bansal has acknowledged that his behaviour should have been better. In a separate announcement, it revealed the retirement of its chief financial officer, Brendan Gill.

The De Grey Mining Limited (ASX: DEG) share price has fallen 3% to $1.39. This morning the gold exploration company announced that it has received commitments for a placement of approximately 83.4 million shares priced at $1.20 per share to raise $100 million before costs. This placement price represents a sizeable 16.4% discount to the last close price. Managing Director, Glenn Jardine, commented: De Grey has never been better placed to achieve our goal of realising a Tier 1 gold project at Hemi.”

The Macquarie Group Ltd (ASX: MQG) share price is down 4% to $120.92. Investors have been selling the investment bank’s shares after it provided guidance for FY 2021. It expects to report a 35% decline in profit in the first half and then a 25% decline in the second half. I estimate that this will mean a full year profit of $1,903 million, down 30.3% year on year.

The Zip Co Ltd (ASX: Z1P) share price has continued its slide and is down almost 6% to $5.64. The buy now pay later provider’s shares have come under pressure this month amid concerns over increasing competition in the United States. This follows PayPal’s announcement of the impending launch of its Pay in 4 product.

More reading

• Why the De Grey Mining (ASX:DEG) share price tumbled 13% lower today
• Macquarie (ASX:MQG) share price sinks lower on FY 2021 guidance update
• 3 personal finance tips to help strong investing
• Afterpay (ASX:APT) share price facing new competitive pressure
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Macquarie 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.

The post Why Cleanaway, De Grey, Macquarie, & Zip shares are dropping lower appeared first on Motley Fool Australia.

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

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.

Since the beginning of the COVID-19 pandemic, high hopes have been placed on the potential for a vaccine. The U.S. government established Operation Warp Speed, a program with the goal of accelerating the development of safe and effective novel coronavirus vaccines. Biopharmaceutical companies both large and small shifted resources to focus on COVID-19 vaccine research.

Today, these efforts are closer to paying off than ever before. But what’s the real state of the coronavirus vaccine race? Here are seven key things you’ll want to know.

1. Who the leaders are right now

There are currently 180 COVID-19 vaccine programs in development, according to the World Health Organization (WHO). Thirty-five of those vaccine candidates are being evaluated in clinical studies with the rest in preclinical testing. Nine of the 35 clinical-stage COVID-19 vaccine candidates are in late-stage testing.

Chinese drugmakers Cansino Biologics, Sinopharm, and Sinovac Biotech are developing four of the late-stage coronavirus vaccine candidates. Russia is already allowing a COVID-19 vaccine developed by Moscow’s Gamaleya Research Institute of Epidemiology and Microbiology to be administered to some individuals, although the vaccine is still in late-state testing.

There are 4 late-stage COVID-19 vaccine candidates targeting the U.S. market:

• Pfizer (NYSE: PFE) partnered with BioNTech (NASDAQ: BNTX) to develop BNT162b2, a vaccine that uses modified messenger RNA (mRNA) to spur the body to produce antibodies to the novel coronavirus SARS-CoV-2.
• Moderna (NASDAQ: MRNA) is also developing an mRNA vaccine candidate, mRNA-1273. 
• AstraZeneca (NYSE: AZN) teamed up with the University of Oxford to develop AZD1222, which delivers genetic material from the SARS-CoV-2 spike protein using a weakened version of the adenovirus (a common cold virus).
• Johnson & Johnson (NYSE: JNJ) is starting its late-stage testing of Ad26.COV2.S this month.

2. When a vaccine will likely be available

There’s no way to be completely sure when a COVID-19 vaccine will be available. It’s possible that problems could arise in clinical studies. For example, AstraZeneca recently paused its late-stage clinical trial of AZD1222 due to a serious adverse reaction in a participant.

However, the chances appear to be reasonably good that a coronavirus vaccine will receive FDA emergency use authorization (EUA) before the end of 2020. Pfizer and BioNTech expect to seek authorization for BNT162b2 in October if late-stage testing goes well. AstraZeneca and Moderna might not lag too far behind.

It’s possible that there will be a phased roll-out of early COVID-19 vaccines. One potential scenario would be for healthcare workers and high-risk individuals to receive the vaccine first, followed by the rest of the population.

3. How safe and effective the vaccines will be

We won’t know how safe and effective individual COVID-19 vaccines will be until they’ve completed late-stage testing. However, to secure an EUA the FDA must determine that the benefits of the vaccine outweigh the risks. The agency has stated that it will review “the target population, the characteristics of the product, the preclinical and human clinical study data on the product, and the totality of the available scientific evidence relevant to the product” before granting an EUA. 

To win full FDA approval, a COVID-19 vaccine will have to demonstrate at least 50% efficacy in a placebo-controlled clinical study. It will also need to meet the general safety requirements for previously approved vaccines for infectious diseases. 

4. How many doses will be required

Most of the coronavirus vaccines in late-stage testing require two doses, typically administered four weeks apart. Johnson & Johnson’s investigational COVID-19 vaccine, however, requires only one dose.

5. How much a coronavirus vaccine will cost

Coronavirus vaccines will be provided to all Americans at no cost. Healthcare providers, though, could charge insurers for the cost of administering the vaccines.

6. Which vaccines could be in the second wave

Three COVID-19 vaccines are currently in phase 2 clinical testing, according to the WHO. These include vaccines developed by Novavax (NASDAQ: NVAX), German biotech CureVac (NASDAQ: CVAC), and Chinese drugmaker Anhui Zhifei Longcom. Inovio Pharmaceuticals (NASDAQ: INO) is awaiting FDA approval to begin phase 2 testing of its coronavirus vaccine candidate as well.

7. Which stocks are poised to win the most

Any of the stocks of companies that win FDA EUA or approval for their respective COVID-19 vaccines will likely perform well. However, the smaller biotech stocks would almost certainly enjoy bigger gains than the big pharma stocks. This could mean that BioNTech and Moderna could be the biggest winners among the leaders in the coronavirus vaccine race.

Keep in mind, though, that there’s still a risk that the vaccine candidates will stumble in clinical testing. The safer stocks to buy, therefore, will be those of large drugmakers such as AstraZeneca and Pfizer since the companies have enough product diversification to withstand a setback in their COVID-19 vaccine programs.

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

More reading

• 3 exotic ASX tech ETFs you might want to add to your portfolio today
• AstraZeneca coronavirus vaccine clinical trial paused
• How to invest in coronavirus vaccine stocks
• This is the one investment Warren Buffett says almost everyone should make
• In the race for a coronavirus vaccine, can there be multiple winners?

Keith Speights owns shares of Pfizer. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Johnson & Johnson. 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 Coronavirus vaccine race: 7 key things you’ll want to know 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/3kfCoVD

Cheap small cap stocks can be hard to find. Typically, they have a market capitalisation of between $50 million and $500 million. These smaller companies can get a bad rap for being more volatile than their larger ASX counterparts. However, there are a couple of great reasons to look at small cap stocks to add to your portfolio.

Firstly, they offer some potentially higher speculative returns. Secondly, they don’t always move with the main market, such as the S&P/ASX 200 Index (ASX: XJO). This can sometimes be a blessing in disguise.

The ASX 200 Index is looking a little flat right now. So, while it decides which direction it wants to move in, take a look at these two cheap small caps that are showing potential.

2 cheap small cap stocks to consider buying

BSA Limited (ASX: BSA)

About BSA

BSA Limited is a technical services organisation. It provides solutions to help clients implement the physical assets in the areas of building services, infrastructure and telecommunications. BSA runs its business and services through three main divisions – BSA Build, BSA Connect and BSA Maintain.

Additionally, BSA provides consulting services through its BSA Think arm. Consulting helps clients realise solutions by enabling them to tap into a knowledge and innovative ideas database in the following areas:

• Asset management
• Design and building information modelling (BIM)
• Energy management and sustainability
• Cost planning
• Project management
• Compliance and certification

BSA has a market cap of around $116 million. 

Opportunity

The BSA share price is currently selling for 27 cents at the time of writing. This is a substantial discount of more than 40% to its September 2019 highs of 46 cents. One thing I noticed about the BSA share price is that it has bounced higher several times before after reaching levels of 23 to 27 cents.

We are currently in that area of value again and, I believe, it’s an opportunity to pick up this small cap stock at a great price. A bounce here could see it back at levels higher than 40 cents, resulting in potential returns of 40% or more.

Financially, BSA is in a healthy position with assets exceeding liabilities. Consider BSA as one of the cheap small cap stocks for your portfolio.

Ava Risk Group Ltd (ASX: AVA)

About Ava

Ava Risk Group is a leading provider of risk management services and technologies. It services clients in the commercial, industrial, military and government sectors.

This company delivers solutions that are high tech and complex. It helps clients tackle risk management threats to perimeters, pipelines and data networks. Using bio metrics, card access control and locking, as well as secure international logistics, storage of high value assets and risk consultancy services, Ava delivers a suit of solutions. 

A point to note about Ava is that it actually has a group of companies with specialist skills under its brand:

• Future Fibre Technologies – a fibre optic, intrusion detection and location system specialist.
• BQT Solutions – a security card, bio metric reader and electromagnetic lock developer, manufacturer and supplier.
• Ava Global Logistics – a risk management specialist firm targeting the international logistics market.

Ava has a market cap of around $73 million. 

Opportunity

The Ava share price had been largely sitting in the range of 10 to 20 cents for around three years. In 2020 however, the Ava Risk Group share price has risen more than 100% to currently trade at 33 cents at the time of writing. Interestingly, the last time the Ava share price tried to break past the 30 to 36 cents range in 2016, it failed and fell back down to lows of around 15 cents. So we now have another opportunity to try and break past this resistance level. Breaking up and above 36 cents could see the share price attempt to revisit the previous lofty heights of more than $1.00 it saw in 2015.

Financially, Ava is in a healthy position with assets exceeding liabilities. 

Foolish takeaway

Cheap, small cap stocks can sometimes bring a world of trouble with them. These companies are often new or struggling financially.

The difference with these two companies is that they are financially healthy with asset bases exceeding their liabilities. Additionally, they have established businesses and client bases.

Buying small caps is no different to buying larger companies in that investors still need to do the appropriate research before jumping in. However, investors do need to be aware that smaller companies can often be more volatile than large caps. But having a small amount of exposure to cheap small caps in your portfolio can prove very rewarding if they perform well.

More reading

• Why Althea, BrainChip, Rio Tinto, & Starpharma shares are pushing higher
• Rio Tinto could pull a shock move to end crisis
• Why Cleanaway, De Grey, Macquarie, & Zip shares are dropping lower
• Coronavirus vaccine race: 7 key things you’ll want to know
• Why now is a good time to buy ASX defence shares

Motley Fool contributor glennleese 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 2 cheap small cap stocks appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3c2PGlC

As geopolitical tensions rise among global powerhouses, there has never been a better time to invest in ASX defence shares. And demand is increasing for breakthrough technologies and specialist equipment from Australian defence contractors.

Here’s why I believe these 4 ASX defence shares are undervalued and their share price could shoot higher in the coming years.

Austal Limited (ASX: ASB)

The shipbuilding giant designs and manufactures high performance vessels for commercial and defence customers worldwide. Most notably, Austal builds and services warships for the Australian Royal Navy and the United States Navy.

Early this month, the Australian shipbuilder delivered its expeditionary fast transport, USNS Newport to the US Navy. This brings the total number of ships built for the US Navy to 24, including 3 combat ships this year.

The Austal share price has sunk almost 16% after reporting its strong full-year results for 2020. The company has an order book of $4.3 billion to be fulfilled with 10 new ships to be built. As maritime relations become frosty between nations, I think the $3.16 Austal share price could be seen as a bargain in a few years.

Electro Optic Systems Hldg Ltd (ASX: EOS)

Electro Optic Systems is Australia’s largest aerospace entity. It’s also the largest defence exporter in the Southern Hemisphere, focusing on defence, space, and communications technology. Key applications include telescopes and dome enclosures, laser satellite tracking systems and fire control systems.

The defence company recently reported that it had resumed delivery of a major overseas contract worth $150 million. Electro Optic noted this was a key step in restoring cash flow that was disrupted by COVID-19.

The Electro Optic share price has misfired since reporting its FY20 results in late August, falling 17% to $5.13. As international borders start to reopen, the defence contractor is working towards clearing its $610 million worth of backlog products. In my opinion, this in-turn could lead the Electro Optic share price to dramatically rise.

DroneShield Ltd (ASX: DRO)

A leader in drone security technology, DroneShield designs and develops detection systems to protect people, organisations and critical infrastructure from drones.

The DroneShield share price has been making tailwinds in the past month thanks to a raft of positive announcements. Last week, the company secured funding from the US Defence Department to develop its DroneSheild Complete Command-and-Control (C2) system. The worldwide leader in drone security technology also received an order from a major Southeast Asian country.

The DroneShield share price is up 56% in the last 4 weeks from Friday’s market close of 20.5 cents. With a market capitalisation of $79 million, the company should reward shareholders if it can secure meaningful contracts in the future.

Orbital Corporation Ltd (ASX: OEC)

Advanced aerospace manufacturer, Orbital provides integrated engine systems for tactical unmanned aerial vehicles (UAV). Its tier 1 client base includes Insitu (a Boeing company), Northrop Grumman, Textron Systems and a large Singapore defence company.

Engine development works are under way as Orbital seeks to build a hybrid propulsion system for the next generation of vertical take-off and landing UAVs. The company hopes to improve earnings and profitability on the sale of its flight critical components under the Insitu long-term agreement. In addition, Orbital is targeting new customer contracts and involvement in defence UAV programs.

The Orbital share price has dropped more than 35% from its 52-week high to $1.05. The underlying importance of drone technology could be a major benefactor to Orbital’s bottom line. In light of this, I believe the Orbital share price is great value.

More reading

• 3 booming ASX shares for the new space age
• A definitive guide to September ASX share trends
• Why the DroneShield (ASX:DRO) share price is up even higher today
• Why the DroneShield (ASX:DRO), BrainChip (ASX:BRN) and Recce (ASX:RCE) share prices are rising today
• Electro Optic (ASX:EOS) share price up on resumed contract

Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited, Electro Optic Systems Holdings Limited, and Orbital Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings 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 Why now is a good time to buy ASX defence shares appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/33oOqW2

Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) remains the most shorted share on the ASX by some distance after experiencing another increase in its short interest. Almost 15.8% of its shares are held short at present. Short sellers appear to believe Webjet’s shares are overvalued given current trading conditions.
• Speedcast International Ltd (ASX: SDA) has seen its short interest remain flat at 10.6%. The communications satellite technology provider’s shares remain suspended whilst it completes its chapter 11 recapitalisation.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest reduce materially to 9.4%. Last week the department store operator’s shares crashed lower following the release of its full year results. Myer posted a 41.6% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $305.3 million.
• InvoCare Limited (ASX: IVC) has short interest of 9.2%, which is up week on week once again. Short sellers continues to increase their positions following a weak half year result by the funerals company.
• IOOF Holdings Limited (ASX: IFL) has entered the top ten with 8.5% of its shares held short. Short sellers don’t appear convinced by the company’s plan to acquire the National Australia Bank Ltd (ASX: NAB) wealth business, MLC Wealth for $1,440 million.
• Inghams Group Ltd (ASX: ING) has 8.2% of its shares held short, which is up slightly week on week. Short sellers aren’t giving up on the poultry company despite a high level of insider buying recently.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has also seen its short interest increase slightly to 8.1%. However, last week the biopharmaceutical company’s shares stormed higher after it announced plans to extend the use of its SCENESSE product to treat xeroderma pigmentosum.
• FlexiGroup Limited (ASX: FXL) has 7.7% of its shares held short, which is flat week on week. This morning the financial services company’s shares are pushing higher after it announced plans to expand its buy now pay later platform into New Zealand.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest rebound to 7.3%. Short sellers have been going after the regional bank this year after it warned that trading conditions were expected to remain tough for some time to come.
• Nearmap Ltd (ASX: NEA) has entered the top ten with 7% of its shares held short. Much to the delight of short sellers, last week the aerial imagery technology and location data company’s shares crashed lower following a surprise capital raising.

More reading

• Top brokers name 3 ASX shares to buy next week
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 drops 0.8%, Nearmap (ASX:NEA) sinks

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 owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended FlexiGroup Limited, InvoCare Limited, and Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Here are the 10 most shorted ASX shares appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2Fp567C

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.

Last month, Tesla (NASDAQ: TSLA) and Apple (NASDAQ: AAPL) carried out 5-for-1 and 4-for-1 splits respectively. Leading into the splits, both stocks furiously rallied to new highs on the news.

With investors treating both split decisions so bullishly, it’s important to highlight the splits’ influence on market fluctuations in the past, and if this is truly an investable event. Let’s take a closer look.

What is a stock split?

Stock splits occur when a company decides to expand its existing share count by a certain number. Every shareholder receives additional shares for each share they previously held. For example, Tesla’s 5-for-1 split resulted in shareholders receiving 5 shares for every 1 share previously held.

The new price per share is determined by dividing the previous share price by the factor by which the share float grew. This event has zero impact on a company’s valuation or future prospects. Instead of 1 share at $2000, you have 5 shares at $400.

Some historical context

Stock split popularity coincided with two noticeably troubling stock market crashes. The concept of a split was invented in 1927 where it was liberally used until the Great Depression ravaged markets in 1929.

Splits can make it easier for inexperienced investors to try their hand in investing, thinking they are getting compelling deals. Some investors in 1929, however, didn’t have access to investing resources and didn’t fully grasp the lack of effect a stock split has on value. The pain was quite real for some in the years that followed with stock market averages dropping by 80% by 1932.

What about the Dot-com bubble? Since 1980, markets have averaged 44 stock splits per year. From 1998-2000 — the peak of the Dot-com bubble — that number more than doubled to 91 average annual splits.

That noticeable bump again coincided with the market peaking and later experiencing a painful crash. Just like in 1929, stock splits were taken — by some — as an event making stocks more affordable and valuable to shareholders. That is simply not the case. For hot Dot-com stocks like Qualcomm it took until last year to reclaim its all-time highs of $89.66 — nearly 2 decades after the technology bubble popped.

Splits today

This year, Apple’s and Tesla’s share prices rocketed higher in the weeks leading up to the announced splits. For example, in the 2 weeks prior to the event Tesla’s equity value jumped 81% with no other news. The chart below clearly depicts the notable outperformance Tesla has enjoyed over the S&P 500 since the announcement was made August 11th. It has since given back over half of that equity bump, but the stock is still far outperforming the S&P 500, as shown below. Apple’s price action has been slightly less volatile but similar. While the wildly swinging charts of Apple and Tesla do look eerily similar to split stocks in 1929 and 2000, there is reason to believe this time is different. Why?

Today, cautionary resources on the irrelevant nature of a stock split are more readily accessible. Furthermore, the advent of fractional shares removed some of the demand for cheaper shares. Now investors can buy a small piece of an Apple share, rather than having to shell out well over $100 to do so. This essentially removes any unique benefit from splitting a stock. Fractional shares foster the same affordability for investors starting out that splits do, without all of the drama.

Another interesting difference between this period of high-profile stock splits vs. prior periods? A 2020 federal funds rate that is below 1% versus over 5% in 1929 and 2000. Today’s historically low interest rates provide weaker direct competition to equity.

With a Federal Reserve explicitly telling you it’s committed to higher inflation in recent meetings, that rate should continue to stay low and be a boon to equity valuations (raising rates is deflationary). While Apple and Tesla may be enjoying share returns due to a less-than-meaningful stock split, the returns could stick around amid monetary policy that is far more favorable than in 1929 or 2000.

So what? 

While I would totally avoid chasing parabolic stock price rises in response to stock splits, I do not believe this round of splits is depicting a market peak like it has in the past. Readily accessible resources on how little stock splits actually matter, fractional shares, and a Fed fixated on boosting inflation all provide a more comfortable setup for stock markets to continue pushing higher. Still, investors would be well-served tune out the noise associated with splits altogether.

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

More reading

• How to tell if this is the end of the ASX bull market
• 3 ways Aussies can buy Tesla (NASDAQ:TSLA) shares
• 3 exotic ASX tech ETFs you might want to add to your portfolio today
• Why Tesla stock jumped again on Thursday
• Can 5G save the smartphone market?

Bradley Freeman owns shares of Qualcomm. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Tesla. The Motley Fool Australia has recommended 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 Did Apple and Tesla stock splits signal the stock market top? 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/3hm7Hwc

It’s been a tough year for Sydney Airport Holdings Pty Ltd (ASX: SYD) shares. The travel industry has been hammered by the coronavirus pandemic and the Sydney Airport share price has slumped 34.3% lower.

However, I think there is still a lot to like about Sydney Airport shares. Here are a few things I’m weighing up to decide if they represent a good value buy today.

Why the Sydney Airport share price could be good value

I think you have to look at Sydney Airport shares as a long-term buy. Clearly, the company’s earnings will be significantly hampered until at least mid-next year but potentially for many years.

It’s best to look at Sydney Airport as an infrastructure company rather than a travel company. The group operates the busiest airport in the country and is underpinned by a blue chip asset base.

Sydney Airport just completed a $1.3 billion capital raising to maintain its balance sheet strength. Shareholders supported the raising with a 93% uptake rate at a 1.7% share price discount.

That flexibility will be the key to managing the COVID-19 impact and preparing for a rebound in coming years.

Traffic numbers have plummeted as state and international borders have been slammed shut. That means any hopes for short-term cash flow are probably misguided.

But if you look ahead, domestic and international travel will return. That means the Sydney Airport share price could be worth a look given the steep discount it’s trading at right now.

No doubt there are risks to buying any travel-related ASX shares right now. However, the company’s assets and operations are vital from an economic and national security standpoint.

Sydney Airport has historically paid a very healthy dividend as well. The long-term outlook still remains solid in my view.

With a market capitalisation of over $14.0 billion, I think Sydney Airport could be a buy. It has the size, strength and strong shareholder backing to withstand short-term challenges.

Foolish takeaway

I think it’s foolish to bet on the Sydney Airport share price as a short-term dividend play. The group’s shares are paying 6.9% on paper but I wouldn’t bank on that in 2020.

Instead, I look at Sydney Airport shares as a long-term infrastructure play. With a strengthened balance sheet and steep share price discount, the Aussie airport company could be in the buy zone.

More reading

• 5 things to watch on the ASX 200 next week
• Half of ASX 200 stocks at risk as China-Australia relations hit new low
• ASX 200 rises 1%, CSL (ASX:CSL) leads the way
• Why Jumbo, St Barbara, Sydney Airport, & Uniti shares are dropping lower
• Sydney Airport share price lower after completing $2 billion equity raising

Motley Fool contributor Ken Hall 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 Is the Sydney Airport (ASX:SYD) share price a cheap buy? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2Ro3P37