Author: therawinformant

Short-sellers are upping their bearish bets against a number of ASX stocks as we head into the reporting season.

This may provide insights to the S&P/ASX 200 Index (Index:^AXJO) that may release disappointing news when their release their profit results.

Short-sellers tend to be more sophisticated than retail investors, so it can pay to keep an eye on what they are doing, particularly ahead of a market inflection point.

What is short-selling

For those who are unsure what short-selling is, it’s where a trader borrows a stock to sell on market with the hope of buying it back at a lower price later. This allows the trader, or short-seller, to profit from the difference.

ASIC puts out daily updates on the stocks that are being short-sold, but the data is always a week behind.

The part of ASIC’s report I find more interesting is not stocks that are most shorted at any given time, but the change in the short position (called short-interest). This tells me which are the new ASX targets being stalked by short-sellers.

Biggest increase in shorts before the reporting season

The stock that’s saw the biggest increase in short-interest since the start of July is the KIRKLAND/IDR UNRESTR (ASX: KLA) share price.

The Canadian-based gold miner didn’t have any of its stock short-sold up until two weeks ago. Now the percentage of its ASX shares that are in the hands of short-sellers stand at 10.29%.

How short-sellers are playing the BNPL sector

The second most targeted stock is the Zip Co Ltd (ASX: Z1P) share price. The BNPL star saw the proportion of its stock being shorted jump by 245 basis points (2.45 percentage points) to 7.67%.

That’s a big increase in shorts and comes as short-interest in its bigger rival, the Afterpay Ltd (ASX: APT) share price, fell 58 basis points to just 0.87%.

This may indicate that short-sellers are anticipating good results from Afterpay and are using Zip Co as a hedge. It’s a popular trading strategy to go long (meaning buy) on the strongest stock in a sector and short its weaker rivals.

Other favourite short-selling targets

The stock that saw the third biggest increase in shorts this month is the Electro Optic Systems Hldg Ltd (ASX: EOS) share price.

Short-interest in the weapon systems company jumped 221 basis points to 3.98% this month, although total short-interest in EOS is still relatively low.

Other notable stocks that are attracting short-sellers include the Pointsbet Holdings Ltd (ASX: PBH) share price and Webjet Limited (ASX: WEB) share price.

Some brokers believe the Pointsbet share price has overshot on the upside, while the rolling COVID-19 shutdown of parts of Australia will clip Webjet’s wings.

More reading

• Warning! ASX investors might be turning away from the share market
• ASX big banks stocks outperform even as APRA caps dividends
• WAAAX or FAANG? Which ASX tech shares to buy in 2020
• Xero and 1 other ASX growth share to watch in August
• ASX 200 flat: Big four banks higher, St Barbara and IGO sinks on Q4 updates

Brendon Lau owns shares of Webjet Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited, Pointsbet Holdings Ltd, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited and 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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Netflix Inc (NASDAQ: NFLX) has come a long way since its days of mailing you rented DVDs. (Though it still does offer this service).

Listed on the tech heavy Nasdaq Inc (NASDAQ: NDAQ), Netflix now has a market capitalisation of US$215.4 billion (AS$301.7 billion). And its streaming services are now available in 190 countries.

Netflix shares weren’t immune to the wider market sell off during the initial onset of COVID-19. The Netflix share price dropped 22.1% from 4 March to 16 March. Since that low, however, it’s up 65.5%. And year to date, it has gained 48.1%.

But Netflix likely has a lot more growth ahead.

Netflix shares offer a big moat

Even before the pandemic saw much of the world forced to stay at home for weeks on end, Netflix was growing rapidly. And with the world growing wealthier and ever more people gaining access to TVs, that trend looks likely to continue.

The company’s massive offerings and market dominance provide a large defensive moat any would-be competitors need to ford. As such, I believe it’s unlikely any start-ups will offer serious rivalry in the foreseeable future.

That leaves competitors like Foxtel and Stan, owned by Nine Entertainment Co Holdings Ltd (ASX: NEC) in Australia, and HBO in the United States to fight it out.

Today’s international share nomination goes to…Netflix

If you’ve spent any time scrolling through the Netflix content menu, you’ll know it has a heck of a lot of material to watch on demand. More than any of us will ever likely watch in our lifetimes.

But beyond the vast quantity of streaming videos, Netflix is also providing great quality. At least according to the judges at this year’s prestigious Emmy Awards.

Yesterday (Aussie time), Netflix beat HBO for the second time in three years, receiving 160 Emmy nominations compared to 107 for HBO.

With high quality and an ever growing quantity of shows available at affordable prices, Netflix is one international share you may want to consider adding to your portfolio.

A note on international shares

Not everyone is comfortable buying international shares like Netflix. While it’s become much simpler and cheaper in recent years, there are a few other aspects you need to consider. Currency fluctuations are chief among them.

If the US dollar falls against the Aussie, as it has been doing in recent weeks, it would see your Aussie dollar returns increase once you sell your shares. But if the greenback rises, it will diminish your gains or increase your losses.

More reading

• Why the Pointsbet share price is outperforming today
• Short sellers are betting US$20bn against the skyrocketing Tesla share price

Bernd Struben 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 Netflix. The Motley Fool Australia has recommended Netflix and Nine Entertainment Co. 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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Have you taken a look at the interest rates on your savings accounts recently? Right now, the majority of savings accounts offered by the big four banks come with base rates of just 0.05%.

That means that if you had $1 million sitting in one of these accounts, you would only earn interest of $5,000 a year.

Because of this, I continue to believe that it is better to put your money to work in the share market, rather than leave it to earn just paltry interest in an account.

If I had $5,000 in a savings account and no immediate use for it, I would consider investing it into one of these ASX shares:

Appen Ltd (ASX: APX)

The first ASX share to consider investing $5,000 into is Appen. It is the global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence. Its team of 1 million+ crowd-sourced workers allows the company to collect and label high volumes of data used to build and improve artificial intelligence models for some of the biggest technology companies in the world. This includes the likes of Facebook, Microsoft, and Apple.

Due to the growing importance of artificial intelligence and machine learning and Appen’s leadership position in its field, I believe it is well-placed to capture the increasing demand and deliver strong earnings growth long into the future.

Pushpay Holdings Ltd (ASX: PPH)

Another ASX share to invest $5,000 into is Pushpay. It is a donor management system provider with a focus on the faith sector. Pushpay’s innovative solutions simplify engagement, payments, and administration, allowing users to increase participation and build stronger relationships with their communities.

Pushpay has been growing at a very strong rate in recent years and FY 2020 was no exception. In FY 2020 the company delivered a 39% increase in total processing volume to US$5 billion and a 33% increase in operating revenue to US$127.5 million. Pleasingly, this strong growth is expected to continue in FY 2021, with management forecasting its operating earnings to double. After which, it is aiming to capture a 50% share of the medium and large church segments in the future. This represents a US$1 billion revenue opportunity.

More reading

• Are ASX tech shares the only way to protect your portfolio against the coronavirus?
• 3 of the best ASX tech shares to buy and hold until 2030
• 3 unstoppable ASX shares to buy right now
• WAAAX shares see mixed recovery from COVID-19
• Pushpay and 1 other 5-star ASX share to buy right now

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 PUSHPAY FPO NZX. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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It wasn’t that long ago that Afterpay Ltd (ASX: APT) was a small cap share flying under the radar of most investors.

Today the buy now pay later is one of the 20 largest companies on the Australian share market and has generated mouth-watering returns for investors.

I believe this demonstrates how rewarding it can be to invest at the small side of the market.

With that in mind, I have picked out three small cap tech shares which I think have the potential to provide strong returns for investors throughout the 2020s.

Here’s why I think they are worth watching very closely:

Bigtincan Holdings Ltd (ASX: BTH)

The first small cap share to watch is Bigtincan. It is a provider of enterprise mobility software which allows sales and service organisations to increase sales win rates, reduce expenditures, and improve customer satisfaction through improved mobile worker productivity. It has a large number of big names using its platform. This includes Red Bull, Sephora, and banking giant Australia and New Zealand Banking GrpLtd (ASX: ANZ).

ELMO Software Ltd (ASX: ELO)

ELMO is a cloud-based human resources and payroll software company. It provides a unified platform to streamline processes for employee administration, recruitment, on-boarding, learning, performance, remuneration, compliance training and payroll. Demand has been growing strongly in recent years and led to further strong recurring revenue growth in FY 2020. Pleasingly, due to the quality of its software and its sizeable market opportunity, I believe there’s plenty more growth to come from ELMO over the 2020s.

Whispir (ASX: WSP)

Whispir is a software-as-a-service communications workflow platform provider. It provides an industry-leading software platform that allows governments and organisations to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. Its platform has been experiencing incredible demand during the pandemic. This led to Whispir recently releasing a very strong fourth quarter update. That update revealed annualised recurring revenue growth of 35.7% to $42.2 million thanks to strong demand from new and existing customers.

More reading

• Bigtincan share price charges higher following rapid Q4 growth
• 3 ASX SaaS shares to buy this week
• 3 ASX tech shares to leverage the shift to remote working
• 3 unloved ASX growth shares that could make you rich
• 2 ASX tech shares to buy and hold beyond 2025

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 BIGTINCAN FPO, Elmo Software, and Whispir Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended BIGTINCAN FPO, Elmo Software, and Whispir 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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It’s another ho-hum sort of day on the S&P/ASX 200 Index (ASX: XJO).

At the time of writing, the ASX 200 is down around 0.22% to 6,007.1 points. Since 21 July, the Index has lost 2.4%, going off today’s numbers.

This might not seem important at face value. But a few other recent developments in the world of investing have turned my head.

Firstly, gold this week broke its all-time high of US$1,921 an ounce that was last set back in 2011. Since Monday, gold has reached new heights, trading as high as US$1,977 an ounce.

Fair enough, perhaps? With a global pandemic, unprecedented monetary easing, and fears of both deflation and inflation — the ground is certainly fertile for a ‘safe haven’ asset like gold.

Fellow precious metal silver is also experiencing a pricing boom – more than doubling since March.

But these aren’t the only trends that have caught my eye this week.

Bitcoin (remember that?) is also on the move. It has appreciated almost 20% in the last 2 weeks (against the US dollar) and is at its highest level in almost a year. A similar pattern can be seen in other cryptocurrencies like Ethereum and Litecoin over the same periods.

And according to reporting in the Australian Financial Review (AFR), the appetite for ‘safe’ government bonds is insatiable right now.

The AFR points out that the Australian Government’s auction for 30-year bonds on Monday attracted more than $20 billion in orders. That’s despite the almost-negligible rates of interest currently being offered on public bonds (the 10-year Australian government bond currently has a floating yield of 0.86% per annum).

So what’s going on?

Fear and loathing on the ASX

I think these trends point to an investor base that is getting extremely nervous. Remember, ASX 200 shares are down just 10% in 2020 so far — despite the worst pandemic the world has seen in a century. That statement in itself is enough to make this writer concerned.

So it’s clear investors are trying to diversify and hedge their bets across different asset classes, particularly those with an inverse correlation (either historically or conceptually) to the performance of equity markets (shares) or offer protection against inflation or monetary debasement.

And that includes government bonds, gold and (to a lesser extent) cryptocurrencies.

Foolish takeaway

In these risky times, I understand why some investors are attracted to gold, bond and other asset classes. But the fact remains that ASX shares have been the best performing asset class over the past 100 years and more.

So don’t feel the need to follow the investors that are driving up the prices of other assets. As long as you have a portfolio of quality ASX shares, I think you’ll do just fine over the long run.

More reading

• ASX big banks stocks outperform even as APRA caps dividends
• Xero and 1 other ASX growth share to watch in August
• ASX 200 flat: Big four banks higher, St Barbara and IGO sinks on Q4 updates
• Why the IGO share price is the worst performer on the ASX 200 today
• Is the AFIC share price a buy after a 41% drop in profit?

Motley Fool contributor Sebastian Bowen 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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It has been another busy day of quarterly and full year updates.

Today we have seen the likes of St Barbara Ltd (ASX: SBM) and IGO Ltd (ASX: IGO) release their quarterly updates (here and here) and will see Rio Tinto Limited (ASX: RIO) release its full year results after the market close.

Three other updates that you might have missed are listed below. Here’s how they are performing:

Champion Iron Ltd (ASX: CIA)

The Champion Iron share price is up 2.5% to $2.83 after the release of its first quarter update. The Canada-based iron ore miner revealed quarterly revenue of $244.6 million and EBITDA of $127.7 million. While these were down from the prior corresponding period, it was driven by lower production after being forced to ramp down during the pandemic. Nevertheless, this didn’t stop Champion Iron from posting record quarterly net income of $75.6 million.

Life360 Inc (ASX: 360)

The Life360 share price is down almost 2% to $3.25 following the release of its second quarter update. The family-focused app provider reported annualised monthly revenue (AMR) of US$77.9 million at the end of June, which was up 26% year-on-year. In addition to this, Life360 delivered positive quarterly operating cash flow of US$0.7 million, compared with a cash outflow of US$6.2 million in the March 2020 quarter. However, one disappointment was a 2.8 million reduction in its global monthly active user base to 25.2 million. Management advised that this reflects COVID-19 impacts.

Nuchev Ltd (ASX: NUC)

The Nuchev share price is in a trading halt today after launching a $15 million equity raising along with the release of its fourth quarter update. During the quarter the company reported strong sales of its Oli6 goat-milk infant formula and nutritional products. This led to Nuchev delivering a 98% increase in FY 2020 revenue to $17.8 million. While this was strong, it did fall ever so slightly short of its prospectus forecast. Another negative was that management has warned that third quarter pantry filling and panic buying is unwinding and is expected to continue into the first quarter of FY 2021. It also notes that lower international student numbers are restricting the traditional Daigou channel volume.

More reading

• This ASX tech share has my attention
• Why Alumina, BWX, Life360, & Perpetual shares are charging higher
• Why I’d buy and hold a2 Milk shares until 2025

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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‘Warren Buffett shares’ on the ASX could be the best way to invest right now.

There are certainly some great growth shares that could be worth investing for the long-term like Bubs Australia Ltd (ASX: BUB) and Altium Limited (ASX: ALU). However, for various reasons (including very low interest rates), businesses with lots of potential growth are being also being priced highly.

But there are some shares that still seem like they’re trading at reasonable valuations to me, outside of the tech sector. Warren Buffett’s share picks that made him big returns over the decades weren’t exactly pure tech plays.

But don’t forget, any decent business these days is using technology to make their business more efficient. From automated trucks for big miners like BHP Group Ltd (ASX: BHP) to the tech systems used by Transurban Group (ASX: TCL) to manage the tolls. Technology can still be involved in other industries.

If Warren Buffett invested in ASX shares, I think he’d be very interested in the below two businesses.

Warren Buffett shares: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Brickworks Limited (ASX: BKW)

Both of these businesses are closely linked to each other.

Soul Patts owns 44% of Brickworks and Brickworks owns 39.4% of Soul Patts. This partnership goes back decades to a time when corporate raiders were more common. If they both owned big chunks of each other then it would hopefully stop aggressive investors trying to come in and split them up into pieces.

Soul Patts is a diversified investment conglomerate and I’d describe Brickworks a diversified property business. I think they’re both ‘Warren Buffett shares’ because of their long-term focus, aligned management and the aim of being quality.

Brickworks

Brickworks is best known as a building product business. In Australia it has a number of key divisions including Austral Bricks, Bristle Roofing, Austral Masonry and Austral Precast. Each of these businesses are among the leading suppliers in their respective markets.

Brickworks also has a USA division. The company made three acquisitions over the past couple of years and now it’s the leading brickmaker in the north east of the US.

I’m very excited by Brickworks’ industrial property trust. COVID-19 has caused properties involved with logistics and ecommerce to be in even higher demand. There are currently two large distribution warehouses being built for Coles Group Limited (ASX: COL) and Amazon. Once complete, the rental income should rise and the gross assets of the trust is expected to go above $3 billion.

I think Brickworks is a Warren Buffett share not only due to everything I’ve already mentioned, but also because Clayton Homes is one of Berkshire Hathaway’s larger businesses – it shows he likes to be involved in property (with the right business).

Soul Patts

Soul Patts could be the best Warren Buffett-like share on the ASX. It operates in a similar way to Berkshire Hathaway. Soul Patts invests in both publically listed and private businesses. Aside from Brickworks, some of Soul Patts’ other major investments include TPG Telecom Ltd (ASX: TPG), Clover Corporation Limited (ASX: CLV), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI).

The investment house tries to invest with a contrarian strategy whilst being defensively positioned. Some of its investments include resources and agriculture, which largely have different returns profiles to the normal share market.

The ‘Warren Buffett share’ continues to diversify its portfolio. It will soon supposedly be investing in regional data centres.

I think they’re both pretty cheap

Brickworks looks the cheaper of the two after the COVID–19 decline. If you just take the pre-tax value of the Soul Patts shares and net asset value of the property trust, the rest of Brickworks is essentially free.

At the current Brickworks share price it comes with a grossed-up dividend yield of 5%.

There isn’t a clear net asset discount with Soul Patts like there is with Brickworks. But it does offer more diversification and it has a great dividend growth record – it has increased its dividend every year since 2000.

At the current Soul Patts share price it has a grossed-up dividend yield of 4.4%.

More reading

• 3 ASX 200 shares to buy for the long-term
• Extended jobkeeper: Which ASX shares to buy?
• Got $1,000? You should buy 1 of these 6 ASX shares
• 3 Warren Buffett dividend shares you can buy today
• 2 ASX shares for growth and dividends

Tristan Harrison owns shares of Altium and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, BUBS AUST FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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