Author: therawinformant

The De Grey Mining Limited (ASX: DEG) share price has returned from its trading halt and is tumbling lower today.

In early trade the gold-focused mineral exploration company’s shares were down as much as 13% to $1.25.

They have since recovered from most of this decline but are currently still down 4% to $1.38.

Why is the De Grey share price tumbling lower?

Investors have been selling De Grey’s shares this morning after it announced a $100 million capital raising.

According to the release, the company 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.

Management advised that the placement was in high demand and was more than three times overbid. It feels this provides a strong endorsement of its assets.

The company experienced high levels of institutional participation in the placement. This includes many Australian funds and global precious metals and other specialist resource funds from the Northern Hemisphere.

Major shareholder DGO Gold Ltd (ASX: DGO) has committed to invest a further $12 million. This will result in a holding of 15.8% at completion. The company’s non-executive director, Peter Hood, has also committed to a further investment of $360,000. Though, these remain subject to shareholder approval.

Why is De Grey raising funds?

The proceeds of the placement will be used to fund a number of operational activities.

These include ongoing extension and definition drilling of the Hemi discovery, testing of mineralised intrusions close to Hemi, regional exploration of intrusion and shear-hosted targets, enhanced site infrastructure, and early stage project de-risking studies.

The company’s Managing Director, Glenn Jardine, commented: “The Hemi discovery in the Mallina Basin is rapidly moving towards our goal of defining a Tier 1 project with true district-scale potential. Mineralisation in the Hemi area has been identified over an area spanning +2,500m north-south and +2,000m east-west, with depths of +400m in areas tested.”

“We already have 2.2 million ounces of Mineral Resources from our shear hosted deposits and expect to add substantially to this through the delivery of a maiden Mineral Resource Estimate for the Hemi discovery by mid-2021,” he added.

Before concluding: “De Grey has never been better placed to achieve our goal of realising a Tier 1 gold project at Hemi.”

More reading

• Why Brainchip, De Grey, Mesoblast, & SKYCITY shares are pushing higher
• De Grey share price rockets 17% higher on new gold find
• Why Brainchip, De Grey Mining, Nufarm, & Pointsbet shares are storming higher
• Why Bega Cheese, De Grey Mining, Northern Star, & Reece are storming higher
• Meet the group reaping the biggest profit from the gold bull run

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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Despite a recent blip, the share price of IDP Education Limited (ASX: IEL) has rallied strongly over the last few weeks. Since the beginning of August, shares in the company have surged well over 40% higher to $19.21 as at the time of writing. And while this is still well short of the 52-week high of $25.17 IDP’s shares posted back in February, it is a reassuring sign for a company that has been hit hard by COVID-19 travel restrictions.

IDP Education organises study placements for international students. Prior to the COVID-19 pandemic, IDP was on an exciting growth trajectory. By February, FY20 year-to-date revenue had already surged 22% higher year-on-year to $480 million, driven by increasing student volumes. The company was also strengthening its sales pipeline, with applications up 42% year-on-year.

All this meant that FY20 was shaping up to be a breakout year for IDP. And the market agreed: in the 2 weeks after its first half results announcement in February, IDP shares skyrocketed almost 50%.

But then COVID happened, and just as it seemed like things were really starting to get going, the wheels fell off. In April, the company was forced to admit that the measures governments were putting in place to halt the spread of coronavirus were having a material impact on its operations. Schools and universities in its destination markets (like Australia, the UK and the US) were closing, and international travel was being severely restricted.

Despite reassurances by the company that it was cutting costs and making efforts to strengthen its balance sheet, the share price collapsed – dropping as low as $9.90 by mid-March. A year that was shaping up to be the best in the company’s history was fast turning into one it would sooner forget.

So, what changed?

Investors responded favourably to IDP’s full year results announcement, released to the market in the second half of August. The company reported an 11% year-on-year uplift in earnings before interest and tax to $107.8 million, while net profit after tax and amortisation rose 3% to $70.4 million.

Additionally, IDP delivered on the promises it had made to shareholders back in March. The company ended FY20 with over $300 million in cash, thanks to a $254 million equity raise and a $175 million working capital facility. It also slashed overhead costs by $35 million over the second half of the financial year.

IDP also boosted its online and digital presence in response to COVID-19. Many of its International English Language Testing System (IELTS) in-person centres were closed due to the pandemic, so IDP rolled out an online alternative that still allowed students to progress their study applications during lockdowns.

Should you invest?

With restrictions on international travel still likely to persist well into 2021 – not to mention the stop-start way many economies are trying to emerge from COVID-19 lockdowns – the road ahead could still be very bumpy for IDP, particularly over the near-term.

However, the company is flush with cash at the moment and it is managing its costs responsibly. It also still has a strong sales pipeline with demand for overseas study from international students remaining robust throughout the pandemic. So, although there is still plenty of risk, IDP Education is doing everything it can to position itself for a strong rebound once international travel restrictions ease.

More reading

• Top brokers name 3 ASX shares to buy next week
• Goldman Sachs tips IDP Education (ASX:IEL) share price to charge higher
• Why Afterpay, Clinuvel, IDP Education, & Saracen shares are charging higher
• Why the IDP Education share price rocketed 50% higher in August
• These were the best performing ASX 200 shares in August

Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty 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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The chances of a second market crash could remain elevated over the coming months. Rising unemployment coupled with weak GDP growth may cause investor sentiment to decline.

While this may cause paper losses for investors, it could also present a rare buying opportunity. Sharp stock market declines are relatively uncommon, and have historically been followed by sustained bull markets.

As such, buying cheap stocks in a bear market may improve your long-term financial prospects, and could even help you to retire early.

A second stock market crash

Considerable risks remain in place that could cause a second market crash. As well as the prospect of a further rise in coronavirus cases, other threats could derail the financial performances of companies and cause investor sentiment to weaken.

For example, the US election later this year may lead to fiscal policy changes that cause investors to adopt a more cautious attitude towards equities. Similarly, Brexit could lead to reduced business confidence that acts as a short-term drag on investor sentiment.

Therefore, investors may yet experience another opportunity this year to buy stocks at extremely low prices due to a market crash.

A rare event

Even though the prospects for a second market crash may be relatively high, history shows that bear markets are uncommon. In fact, the last major decline in stock prices occurred over a decade ago. Therefore, most investors are only likely to experience a handful of bear markets during their lifetimes.

This means that taking advantage of the low prices created by a stock market decline could be very important to your retirement prospects. They may enable you to buy high-quality businesses at relatively low prices. History shows that no bear market has ever lasted in perpetuity – even if at the time it felt as though a bull market was unlikely to ever return. Therefore, through buying a diverse range of stocks during rare opportunities when they are cheap, you could improve your prospects of retiring early.

Retirement prospects

While stock prices could be volatile for some time after the recent market crash, equity prices are likely to rally over the long run. With most investors having a number of years left until they plan to retire, they are likely to have sufficient time for their holdings to recover – even if there is a second downturn this year.

Therefore, if a high-quality stock is trading at a low price today, buying it for the long run could be a shrewd move. Certainly, a second market decline could make it even cheaper. But, in many cases, that outcome has been priced in by investors through lower valuations. Therefore, building a portfolio over the coming months, and continuing to add to it even if there is a further bear market, could be a sound overall strategy.

More reading

• Did Apple and Tesla stock splits signal the stock market top?
• Is the Sydney Airport (ASX:SYD) share price a cheap buy?
• Why the De Grey Mining (ASX:DEG) share price tumbled 13% lower today
• Can IDP Education bounce back stronger after COVID-19?
• Macquarie (ASX:MQG) share price sinks lower on FY 2021 guidance update

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

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The Macquarie Group Ltd (ASX: MQG) share price has come under pressure on Monday following the release of an update.

At the time of writing the investment bank’s shares are down 4.5% to $120.60.

What did Macquarie announce?

Ahead of its appearance at the virtual Jefferies Asia Forum this week, Macquarie released an update on its short term outlook.

According to the release, Macquarie expects market conditions to remain challenging in the near term. Especially given the significant and unprecedented uncertainty caused by the COVID-19 pandemic and the uncertain speed of the global economic recovery.

And while the company acknowledges that these trading conditions make short-term forecasting extremely difficult, it is providing guidance for FY 2021 this morning.

Macquarie currently anticipates its first half result to be down approximately 35% on the prior corresponding period. And although it expects an improvement in the second half of FY 2021, it is still guiding to a second half decline of 25% over the second half of FY 2020.

However, this remains subject to a large number of factors. These predominantly include the duration and severity of the COVID-19 pandemic, the speed of the global economic recovery, and global levels of government economic support.

In addition, other more traditional factors include the completion rate of transactions and period-end reviews, the impact of foreign exchange, potential regulatory changes and tax uncertainties, market conditions, and the impact of geopolitical events.

What does this mean for the full year?

In the first half of FY 2020 Macquarie posted net profit after tax of $1,457 million. For the full year it recorded a net profit after tax of $2,731 million, which implies a second half profit of $1,274 million.

Based on this, in FY 2021 Macquarie looks set to deliver a first half profit of $948 million and a second half profit of $955 million. This will bring its full year profit to $1,903 million, down 30.3% year on year.

One positive is that its capital position appears strong. Management advised that it continues “to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment.”

More reading

• 3 personal finance tips to help strong investing
• Why you should use the market sell-off to buy these ASX stocks
• Latest ASX stocks top brokers are urging you to buy today
• New to investing? Here are 5 ASX dividend shares to buy now
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

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The Four Corners episode on The New Space Age aired on 31 Aug 2020. As always, the program presented a fantastic documentary, this time on the rush into space and the part Australia is playing in it. Moreover, it also focused on the international tensions and competitiveness arising out of the space race. In addition, throughout the program, several themes emerged in which some ASX shares are already deeply embedded.

Whilst I believe Australia does not have enough companies working in this area, those that have made inroads are punching above their weight.

Space situational awareness

This was one of the most fascinating parts of the program for me. Every time humans send something into space, we create more space junk in orbit. Current scientific consensus is that there are around 500,000 pieces of space debris larger than 1 cm in Earth’s orbit. Travelling at 30,000 km per hour, junk as small as 1 cm will severely damage or destroy a satellite on impact.

Electro Optic Systems Holdings Limited (ASX: EOS) is one of the early pioneers in this area through its sensor technology. For over 40 years, this ASX share’s laser technology has been the standard for all space data and catalogues. Moreover, Electro Optic space tracking and debris monitoring systems now provide the benchmark for space catalogue acquisition and maintenance.

Situational awareness is increasingly important to identify active and expired satellites and orbital debris to reduce the likelihood of collisions. In addition, Electro Optic has built and operates the world’s only autonomous (robotic) space laser tracking system.

Computing power in space

Brainchip Holdings Ltd (ASX: BRN) has developed an artificial intelligence (AI) technology that is ideally suited for use in space. Moreover, this ASX share has recently partnered with space mission veteran Vorago Technologies. To illustrate further, Vorago is currently in the process of planning for 19 upcoming space missions.

The Brainchip technology is well suited to space missions because it is an advanced AI chip with a low power requirement. The chip is a complete neural processor and does not require an external CPU, memory or deep learning accelerator. The reduction in component count, size and power consumption are paramount concerns for aerospace and spaceflight applications. In addition, because of the nature of this new technology, it provides for continuous operation when new discoveries or unforeseen circumstances occur.

ASX shares for space materials

Carbon composites are used throughout most assets that travel into space. It is lighter, can handle high temperatures, and has very low thermal expansion. Xtek Ltd (ASX: XTE) is a defence materials ASX share which signed an agreement with the Australian Space Agency in 2019. The agreement was to further develop its lightweight composite materials for application within the space flight industry.

Furthermore, Xtek has been working with private firm, Skykraft, since 2019. This resulted in a grant from the Space Agency to design a small satellite launch stack. Skykraft is developing technology to launch what it calls constellations of satellites. These are low orbit satellites that work together on a areas such as communication, travel, banking, and security.

The concept of constellation of satellites is not new. NASA has tried this before with large satellites. However, due to cost reductions brought about by Elon Musk’s SpaceX, lightweight Xtek materials are likely to enable constellations of small scale satellites.  

Foolish takeaway

Yet again, ASX shares are punching above their weight in an industry of global importance. Moreover, companies like Electro Optic are already deeply ingrained in the management of issues related to space missions. I believe Brainchip is also likely to see its technology become the new standard for computing power in space, particularly given the advanced nature of its chip. Lastly, the Xtek work with Skykraft is also carving out a new niche in the space industry. If successful, it will also change how we engage with the final frontier. 

Aside from their work in space, each of these ASX shares plays a key role in defence and security markets globally.

More reading

• BrainChip (ASX:BRN) share price rockets 24% higher on Akida update
• Turn $6k into $60k, a guide to growth investing
• A definitive guide to September ASX share trends
• Why the DroneShield (ASX:DRO) share price is up even higher today
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower

Daryl Mather owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings 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.

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The BrainChip Holdings Ltd (ASX: BRN) share price is rocketing notably higher again on Monday morning.

At the time of writing the ultra low power high performance artificial intelligence technology provider’s shares are up a massive 24% to 80 cents.

What did BrainChip announce?

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.

It is comprised of cores that are organised in groups of four to create nodes, which are mesh networked. These cores can be implemented for either convolutional layers or fully-connected layers.

Management notes that this flexibility allows users to develop networks with ultra-low power Event-Based Convolution as well as Incremental Learning. The nodes can also be used to implement multiple networks on a single device.

“Significant achievement.”

The company’s CEO, Louis DiNardo, was very pleased with the development.

He commented: “We have validated the functionality of the Akida silicon and performed significant testing. The devices received from the MPW [Multi-Project Wafer] will provide engineering samples and evaluation boards for our early access customers.”

“Now our focus is on continued development of software and firmware drivers. We expect to produce a production mask set in the fourth quarter of 2020 and then move forward with volume production wafer fabrication, assembly and test operations.” Mr DiNardo added.

The CEO concluded: “The BrainChip team is very proud of this significant achieve and milestone in our quest to introduce Akida and achieve commercial success with a revolutionary product that solves the real-world challenges of implementing artificial intelligence at the Edge.”

More reading

• 3 booming ASX shares for the new space age
• Turn $6k into $60k, a guide to growth investing
• A definitive guide to September ASX share trends
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower
• Why the Jaxsta share price rocketed by over 300% today

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

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The PointsBet Holdings Ltd (ASX: PBH) share price has been a positive performer on Monday morning.

At the time of writing the sports betting company’s shares are up 2.5% to $11.20.

This latest gain means that the PointsBet share price is up 145% since the start of the year.

Why is the PointsBet share price pushing higher today?

Investors have been buying PointsBet shares after it announced its launch into another state in the United States.

According to the release, PointsBet has launched in the State of Illinois and has taken its first bet.

This launch represents the company’s fourth online sportsbook operation in the United States. Though, it won’t be long until PointsBet is taking bets in a fifth and sixth state. The company has plans to launch in Colorado and Michigan in the near future.

The company’s USA CEO, Johnny Aitken, was very pleased with the launch.

He said: “The PointsBet team is excited to share that we are now officially live in Illinois, our fourth state of operation in the US. The passionate sports fans in the state can now experience our leading online sports betting product and see for themselves why we’ve long stated that the best product experience will win.”

“PointsBet possesses competitive advantages by owning our technology environment from end to end, such as unrivaled speed and ease of use on a personalized platform. We, together with our partner Hawthorne Race Course Inc, are excited to provide the Illinois consumer with exactly what they’ve been craving,” he added.

The company is aiming to leverage its NBCUniversal partnership in the state.

Mr Aitken said: “Representing the first state to launch following our transformational partnership with NBCUniversal, PointsBet will utilise NBC Sports’ premium television and digital assets to promote the PointsBet brand across the sixth largest US State by population.”

Though, the company isn’t the only one launching in Illinois. PointsBet is the fourth betting company in the state, so competition will be reasonably strong. However, the NBCUniversal agreement may just give it an edge.

More reading

• Should you buy the PointsBet (ASX:PBH) share price after its capital raising? 
• Why Accent, Afterpay, Nine, & PointsBet shares are dropping lower today
• Why the PointsBet (ASX:PBH) share price tumbled 21% lower today
• Top ASX growth shares to buy in September 2020
• Why PointsBet launched a $353 million capital raising

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

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Active investing will earn greater returns in a volatile market. That’s not just my opinion, but a view in the Australian Financial Review back in 2018. Moreover, I believe active management in growth investing is always more effective. This is even more valid when markets are as volatile as they have been this year. 

Growth investing is specifically aimed at finding companies that are likely to see fast share price growth in a relatively short period of time. For example, if you had invested $10,000 into Northern Star Resources Ltd (ASX: NST) on 10 January, 2010 it would have been worth more than $3.7 million on 2 January, 2020. Growth shares rarely pay dividends, at least not in the early days, and they are increasingly hard to find.

Here are a few guides to finding good growth shares in 2020, along with some recommendations where I would invest $2,000 each.

The market for growth investing

Any good growth share needs a large addressable market. For example, much of the hype around Afterpay Ltd (ASX: APT) has been based on the large potential market. Another share with a large addressable market is BrainChip Holdings Ltd (ASX: BRN). Unfortunately, it is no longer one of the best kept secrets on the ASX.

BrainChip is an artificial intelligence (AI) company. It already has products in the market that have been deployed for security purposes in several sectors. This includes systems for facial recognition of known criminals and terrorists, as well as monitoring casino tables.

Most recently it has entered into proof of concept partnerships for its neuromorphic chip. This is a first of a kind technology that will be a step change to AI capability. Already it is working on NASA partnerships, as well as gaming, autonomous vehicles, and smart cities. This is obviously a massive addressable market, and it is still growing. 

The competitive ‘moat’

The moat is a term coined by Warren Buffet to define a company’s barrier to entry. For instance, while Afterpay and the other buy now, pay later companies have a massive addressable market; very few of them have anything like a competitive advantage. 

Moats can come in many forms, however I have always favoured growth shares with valuable intellectual property (IP). To illustrate, BrainChip, which already has a large addressable market, also has much of its value locked up in patents and IP. Another company that has a strong moat due to intellectual property is Recce Pharmaceuticals Ltd (ASX: RCE).

Recce (pronounced “Recky”) has been pioneering a new line of synthetic antibiotics through painstaking research and development, . The company is specifically targeting super-bugs that are resistant to orthodox antibiotics. Another of the company’s targeted infections is sepsis, or blood poisoning. In 2017, according to The Lancet, sepsis killed 11 million people globally amid 48.9 million reported cases, yet still there is no treatment for it. 

As with all growth investing opportunities, Recce has a fantastic competitive advantage built from its hard fought and won IP. It also has a great and diverse addressable market.

Repeat purchases

Customers are likely to buy products from each company several times. Another example of this could be Jumbo Interactive Ltd (ASX: JIN). Jumbo sells lottery tickets online for Tabcorp Holdings Limited (ASX: TAH), charities and councils and schools globally. As a lottery seller it is the consummate repeat purchase product.

What is more, the addressable market is quite large. Within Australia, 28% of lottery sales are online, globally it is closer to 10%. Moreover, just the charity lottery sales alone are worth $26 billion. Lastly, it has a fantastic moat or barrier to entry. That is, the government restricts and regulates lottery sales. As a solid growth investing opportunity, Jumbo has a lock on most of these within Australia already. Moreover, it increases its exclusive representation with every charity and third party it signs up.

Foolish Takeaway

For anyone focused on growth investing, you will need a share price to grow by at least 10 times the original investment, or a ten bagger. I believe that each of these companies are likely to be at least ten bagger companies over the next 3 – 5 years. Each of them has a large addressable market and a strong competitive advantage. However, it is the repeat purchase nature of their products that will allow them to grow almost exponentially in the years to come.  

More reading

• 3 booming ASX shares for the new space age
• BrainChip (ASX:BRN) share price rockets 24% higher on Akida update
• A definitive guide to September ASX share trends
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower
• Why IGO, IPH, Jumbo, & Whitehaven shares are pushing higher today

Daryl Mather owns shares of Recce Pharmaceuticals Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. 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.

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The Westpac Banking Corp (ASX: WBC) share price has been under pressure in 2020.

Shares in the Aussie bank are down 30.5% to $16.81 per share and are underperforming the S&P/ASX 200 Index (ASX: XJO). 

Despite its struggles in recent times, is the ASX bank share in the buy zone at its current price?

Why the Westpac share price could be a buy

The first factor that I see is the heavy share price declines in 2020. The Westpac share price is trading down 30.5% from where it started the year.

Of course, the coronavirus pandemic has hit ASX shares hard. The banks could be especially vulnerable to a recession through lower loan quality and higher impairments.

However, a 30% discount is nothing to sneeze out. If you value the Westpac share price based on future cash flows, a couple of years of lost earnings may not justify a 30% share price drop.

There’s also the strong dividends on offer. Westpac shares are currently yielding 10.4% which makes it worth watching.

Of course, that may well change by the time Westpac reports its half-year earnings on 2 November. I think we will see a dividend cut in line with APRA’s recommendations, but the banks will continue to churn out big profits.

That could mean the Westpac share price is a cheap buy with solid long-term income prospects.

Foolish takeaway

I think an investor’s position on ASX bank shares really comes down to how they see COVID-19 playing out.

If you think we’ll see a quicker than expected recovery then I think the Westpac share price is a buy.

However, a long, drawn out recession could be bad news for the banks. I think we’d see more defaults and lower earnings in a low interest rate environment.

More reading

• How to position your ASX share portfolio for a downturn
• The Boral (ASX:BLD) share price back in the M&A spotlight as Stokes buys another 45m shares
• Is another stock market crash coming?
• ASX 200 Weekly Wrap: ASX 200 hits 4 straight weeks of losses
• 5 things to watch on the ASX 200 on Monday

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.

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Since the March bear market, it’s been largely good news for ASX shares. The S&P/ASX 200 Index (ASX: XJO) has bounced back strongly as many top companies have surged in value.

It’s easy to invest when the market is hot. It’s much harder to know how to position your portfolio for a market downturn.

Here are a few tips which I think could be helpful in preparing your portfolio for a recession in the short to medium-term.

Avoid ASX shares that need discretionary spending

This one seems like a bit of a no-brainer. Recessions mean job losses and job losses mean people don’t have spare cash to spend on non-essentials.

I’d say that luxury retailers are the obvious candidate here. It could also include buy now, pay later (BNPL) providers like Afterpay Ltd (ASX: APT) based on lower volumes.

BNPL services could be in high demand as people look to reduce payments. However, that would normally see a spike in defaults which is not good news for companies like Afterpay.

Invest in non-cyclical shares

If discretionary spending is set to fall in a recession, companies with non-cyclical earnings could be the answer.

Companies like Coles Group Ltd (ASX: COL) provide essential products and services. That means a recession doesn’t have a huge impact on earnings unlike some other industries.

It could be a good idea to have some non-cyclical or even defensive sector exposure to weather a downturn.

Invest in ASX dividend shares

Growth shares tend to underperform late in the business cycle . That means ASX dividend shares that pay out income on a consistent basis could be the key.

What’s even better is ASX dividend shares that are also non-cyclical or defensive. For instance, Coles shares are currently yielding 3.4% which could be a good value in a recession.

Similarly, some top Aussie gold miners could be worth a look. The Northern Star Resources Ltd (ASX: NST) share price has rocketed 18.0% higher this year.

Despite strong capital gains, the ASX gold share is also yielding 1.3% right now. That could be a very handy portfolio addition if we see the economy deteriorate further in 2021.

Foolish takeaway

There are many ways to position a portfolio for a downturn. No one knows what a recession will look like and which ASX shares will outperform.

However, a disciplined, long-term approach to investing can help prepare your portfolio for the ups and downs of the share market.

More reading

• The Boral (ASX:BLD) share price back in the M&A spotlight as Stokes buys another 45m shares
• 3 simple ways to save more cash to buy ASX shares today!
• Is another stock market crash coming?
• ASX 200 Weekly Wrap: ASX 200 hits 4 straight weeks of losses
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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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