Author: therawinformant

At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a decent gain. The benchmark index is currently up 0.25% to 6,038.2 points.

Here’s what has been happening on the market today:

Lynas signs contract with U.S. Department of Defense.

The Lynas Corporation Ltd (ASX: LYC) share price is rocketing higher on Monday after it announced a contract with the U.S. Department of Defense. According to the announcement, the contract will see Lynas complete a detailed market and strategy study plus detailed planning and design work for the construction of a Heavy Rare Earth separation facility. There were doubts that Lynas would get the contract after some officials opposed the contract going to a foreign company.

Bank shares sink lower.

The big four banks have come under pressure and are acting as a drag on the ASX 200 index. All of the big four banks are dropping notably lower, but the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price is the worst performer with a 0.7% decline. Concerns over the spike in coronavirus cases appears to be weighing on investor sentiment.

Gold miners charge higher.

It has been a great day of trade for gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST). Investors have been buying gold mining shares after the gold price broke through the US$1,900 an ounce level and hit a record high. The catalyst for this was concerns over rising tensions between the United States and China. The S&P/ASX All Ordinaries Gold index is up 3.8% at lunch.

Best and worst ASX 200 performers.

The best performer on the ASX 200 at lunch is the Lynas share price by some distance. It is up 12% after announcing its U.S. contract. The worst performer has been the Insurance Australia Group Ltd (ASX: IAG) share price with a 4% decline. This morning analysts at Macquarie retained their neutral rating but cut the price target on the insurance giant’s shares to $5.50. This follows the release of its FY 2020 update and dividend cancellation last week.

More reading

• Why Lynas, Northern Star, REA Group, & Sezzle shares are storming higher
• Why Bubs, IAG, Star Entertainment, & Webjet shares are dropping lower
• HUB24 and 2 more ASX 200 shares to watch this week
• Why the gold price just stormed to a record high
• These shares were the ASX 200’s biggest losers last week

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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Thousands of Australian workers have shifted from the office to work from home during the COVID-19 pandemic. Many are enjoying the change and considering the possibility of making it permanent. According to research by OnePoll, 78% of Australian office workers believe remote working will become the new normal when the country emerges from the pandemic. 

This will have downstream impacts for other industries from property and retail to technology. Tools that enable remote working will be in ever higher demand as use of office space falters. Technology that allows for digital collaboration is likely to experience increased usage while city-centre retailers could see trade stall. Here, we take a look at three ASX tech shares that are leveraged to the shift to remote working. 

3 ASX tech shares leveraged to remote working

Whispir Ltd (ASX: WSP) 

Whisper provides a software-as-a-service (SaaS) communications workflow platform which automates interactions between businesses and people. The company has more than 500 enterprise clients, including Victoria’s Department of Health and Human Services (DHHS) which uses the platform to interact with Victorians about coronavirus. 

Demand for this ASX tech share’s products has been strong throughout the pandemic thanks to increasing requirements for communications software. A record 72 new customers were added during the June quarter. Many Whispir customers are utilising the platform to activate and coordinate their COVID-19 business continuity plans. 

Megaport Ltd (ASX: MP1)

Megaport operates in the network-as-a-service (NaaS) sector. The company provides bandwidth which allows users to connect to cloud services and data centres almost instantly. Businesses are able to create a network without complex configuration tasks, quickly building and deploying connections to the services they run on. 

Megaport has been growing its footprint into new markets and deepening its reach into existing markets. In 4Q FY20 the company established a presence in Denmark and Spain. This makes the Megaport platform available in 23 countries and 128 cities globally. In June, Megaport reported 1,842 customers including Amazon, Microsoft, eBay and Facebook. 

LiveTiles Ltd (ASX: LVT) 

LiveTiles supplies tools to create dashboards, employee portals, and corporate intranets. Its technologies can be used to extend underlying Microsoft platforms such as Office 365, SharePoint, and Azure. The ASX tech share creates value-adds and enhancements to the underlying platforms that address common business needs and priorities. 

LiveTiles’ annualised recurring revenue (ARR) reached $55.2 million at 31 March 2020, up from $52.7 million at 31 December 2019. ARR was up 60% over the year to March and 4.9x in two years. The company is well positioned in the current environment as a leader in internet software which is critical to remote working.  

More reading

• 3 unloved ASX growth shares that could make you rich
• 5 steps to start investing in ASX shares
• How are 2019’s tech IPOs performing?
• Megaport share price falls despite a strong quarterly update
• Why Marley Spoon and these ASX shares are hitting new highs

Kate O’Brien 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 MEGAPORT FPO and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of LIVETILES FPO. The Motley Fool Australia has recommended LIVETILES FPO, MEGAPORT FPO, 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) has fought back from an early decline and is pushing higher. At the time of writing the benchmark index is up 0.2% to 6,034.2 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

The Lynas Corporation Ltd (ASX: LYC) share price has jumped 12% to $2.43. Investors have been buying the rare earths producer’s shares after it announced a contract with the U.S. Department of Defense. According to the release, the contract will see Lynas complete a detailed market and strategy study plus detailed planning and design work for the construction of a Heavy Rare Earth separation facility.

The Northern Star Resources Ltd (ASX: NST) share price has climbed 3.5% to $16.04. Investors have been buying Northern Star’s shares after the gold price broke through the US$1,900 an ounce level and hit a record high. Traders were buying the precious metal amid concerns over rising tensions between the United States and China.

The REA Group Limited (ASX: REA) share price has risen over 3% to $110.90. This follows the release of a broker note out of Credit Suisse this morning. Although it has concerns over property volumes because of the pandemic, it expects price increases to support yield growth. And while the broker has retained its neutral rating, it has lifted its price target from $94.50 to $110.30.

The Sezzle Inc (ASX: SZL) share price is up 1.5% to $8.02. Investors have been buying the buy now pay later provider’s shares after the release of its second quarter update. During the second quarter, Sezzle delivered underlying merchant sales (UMS) of US$188 million. This was a 57.5% increase on the first quarter and a 348.6% lift on the prior corresponding period. This was driven by strong growth in customer and merchant numbers.

More reading

• Sezzle share price pushes higher after reporting stellar Q2 growth
• Why the gold price just stormed to a record high
• 5 things to watch on the ASX 200 on Monday
• New tailwind pushes gold price closer to record highs
• These BNPL shares have blown up since their IPOs

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended REA Group Limited and Sezzle Inc. 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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Can strong earnings push the CSL Limited (ASX: CSL) share price above $300 in August? That’s what I’m wondering ahead of the Aussie biotech’s full-year results announcement.

Can the CSL share price crack $300?

I’m reasonably bullish on the CSL share price and its prospects in August.

Shares in the Aussie biotech hit a new record high of $342.75 per share as recently as mid-February.

However, the coronavirus pandemic impacts various industries in different ways. I think we could see a decline in blood plasma revenue in August but that will be more than offset across the company’s other business lines.

One potential barrier is the strengthening Aussie dollar, which could lead to hedging losses for CSL. However, healthcare and biotechnology are in high demand right now, which could help boost CSL’s earnings.

That may be all that’s needed to push the CSL share price beyond $300 once again.

What are CSL’s key service areas?

The key areas of focus for CSL are broadly split into plasma collections, commercial, and research and development (R&D).

The company’s April trading update flagged a decrease in plasma collections due to the pandemic.

However, the economic downturn could boost collections in the medium-term due to the payments system in key markets like the USA.

Positively, CSL reported no ‘stock-outs’, which means supply chains have been uninterrupted in 2020. The Aussie biotech’s Wuhan facility recommenced operations in April and CSL’s activities have hummed back to life.

I think much of the CSL share price value depends on the success of the company’s research and development activities.

That R&D has pivoted slightly with the advent of COVID-19. For example, CSL is partnering with the University of Queensland in the hunt for a vaccine.

However, I think R&D activities have largely continued on their planned course.

What else is driving the CSL share price?

CSL has also pursued inorganic growth opportunities through various recent acquisitions.

That includes the takeover of biotech company Vitaeris in June and purchasing a new late-stage gene therapy candidate from uniQure.

Both of these acquisitions represent further strategic avenues for the Aussie biotech company to explore.

If CSL can post a strong earnings result in August and demonstrate strategic integration and execution, I think the CSL share price can climb beyond $300 in August.

More reading

• 3 unloved ASX growth shares that could make you rich
• 3 junior ASX healthcare shares with explosive growth potential
• ASX 200 Weekly Wrap: ASX has week of high volatility
• Should fixed-interest investments be part of your ASX share portfolio?
• Where to invest $100,000 into ASX shares

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to record a small gain. At the time of writing the benchmark index is up 0.3% to 6,040.7 points.

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

The Bubs Australia Ltd (ASX: BUB) share price is down 2.5% to 99.5 cents following the release of its fourth quarter update. During the fourth quarter of FY 2020, Bub reported gross revenue of $13 million. This was a 5% decline on the prior corresponding period. It also burned through $10 million of cash. One positive was that it has announced its entry into the children’s vitamins market. The company also revealed that it has appointed Jennifer Hawkins as its global ambassador.

The Insurance Australia Group Ltd (ASX: IAG) share price has fallen 4% to $5.11. This may have been driven by a broker note out of Macquarie this morning. According to the note, the broker has retained its neutral rating but cut the price target on the insurance giant’s shares to $5.50. This follows the release of its FY 2020 update and cancellation of its final dividend last week.

The Star Entertainment Group Ltd (ASX: SGR) share price is down 2.5% to $2.70. Investors may be concerned by news that New South Wales has reported another rise in coronavirus cases. There may be fears that the casino operator’s doors will be forced to close if the outbreak is not kept under control.

The Webjet Limited (ASX: WEB) share price has dropped 3% to $2.99. Investors continue to sell travel shares after coronavirus cases spike in Australia. There are concerns that the recent increase in cases could delay the recovery of the domestic travel market and lead to travel companies requiring additional funding. This could mean further dilution for shareholders in the future.

More reading

• Bubs share price sinks lower on Q4 update and new product launch announcement
• These are the 10 most shorted shares on the ASX
• ASX 200 Weekly Wrap: ASX has week of high volatility
• My 5-minute bull case for the Bubs share price
• Here are easy ways to diversify your ASX portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO and Webjet 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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A 10-bagger share is one that will return 10 times the initial investment. Over the past decade, there have been many growth shares on the ASX that have multiplied their initial share price 10 times or even 100 times. Unfortunately, while it is always easy to see the signs in hindsight, it is far harder to spot them beforehand.

Right now, investors are looking at payments companies, buy now, pay later (BNPL) companies and tech startups for tomorrow’s 10-bagger shares. This includes undeniably great companies like EML Payments Ltd (ASX: EML), Afterpay Ltd (ASX: APT), and Whispir Ltd (ASX: WSP).

However, I think some of tomorrow’s growth shares are in the innovation and science space. Australia has always been an innovative country. This is a different area of growth than fintech or technology, and doesn’t always come with the same headline-stealing rate of growth as we’ve seen in the BNPL space. For instance, CSL Limited (ASX: CSL) multiplied its original share price only 5 times in the first 11 years.

The 3 ASX growth shares I have listed below have a few characteristics in common. First, their innovation is very advanced. In fact, in 2 cases they are already generating revenue. Second, they have diversified their management away from the founders, instead handing over the corporate management to people with expertise in product commercialisation.

Growth shares for the environment

The market values Phoslock Environmental Technologies Ltd (ASX: PET) at $171.88 million at the time of writing. The company is commercialising a unique product also called Phoslock, which cleans polluted waterways. I am a very big fan of companies and technologies that improve our environment, particularly those that can survive without government subsidies and deliver practical and measurable results. Phoslock is one of these products.

CSIRO originally developed Phoslock in the early 2000s. It is a patented, one of a kind technology. Phoslock permanently binds to phosphate in waterways, therefore reducing or eliminating algal blooms. These produce toxins that affect either aquatic life, such as fish, or even human health. 

The company recently announced new project sites in Washington State and New Jersey, USA. In addition, it has extended a project in Brazil and has ongoing applications in both Italy and the Netherlands. Furthermore, the company has historic applications throughout Austria, Canada, the UK, Germany and Australia. 

I think this growth share could easily multiply its share price several times over the next 2–5 years, given its ongoing international applications. 

A world-changing technology

Recce Pharmaceuticals Ltd (ASX: RCE) is a medical research company that is developing a range of products in a revolutionary area of medical science. Once complete, I believe the company’s products will irreversibly change the treatment of superbugs and viral infections. 

The Recce (pronounced recky) share price caught fire recently on the back of news that 2 of the company’s products had been selected for a CSIRO trial for an antiviral to treat Covid-19. An antiviral is not a vaccine, rather it is a treatment for a viral infection. Shortly thereafter, it was also selected for a trial in the USA for the same purpose.

Recce is developing a new type of synthetic antibiotic, one that is bactericidal. Therefore, it doesn’t work to inhibit bacteria, but kills and eliminates it. In addition, repeated use will not reduce its impact.

The company’s initial target was to find a successful treatment for sepsis or blood poisoning. Sepsis is a life threatening reaction the body sometimes has to infection. 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. I find this to be a mind-boggling statistic.

To illustrate the level of momentum this growth share has outside of the Covid-19 trials, it has already secured fast track designation from the FDA in the US for one of its products, RECCE 327, in addition to 10 years of post-approval market exclusivity.

So, while the Covid-19 trials are welcome news, the company was already well advanced in building a first-of-its-kind treatment for several global health problems. 

The future is now

Artificial intelligence (AI) is a technology that learns from experience. Brainchip Holdings Ltd (ASX: BRN) is the world’s only listed pure-play AI company. It already has existing products which it has found a market for. So, like Phoslock, the company is earning revenue. However, like Recce, the company spends its earnings developing a first-of-a-kind technology.

BrainChip has successfully developed products that use its existing neural technology to generate revenue. For example, video security in casinos is one of the company’s core verticals. The technology automatically detects dealer errors by monitoring the video streams from standard surveillance cameras. It recognises the cards played, winning hands, the rules of the game and the payout.

In addition, airports have deployed the technology for facial recognition of known terrorists, along with several unnamed subway systems in Europe for recognition of wanted criminals.

The company is moving very quickly to create something called neuromorphic technology. This is several magnitudes of advancement from existing AI technology and mimics the human brain and nervous system. Consequently, the applications are truly next level concepts. One of the areas where advanced AI could be deployed is to move from unmanned drones to autonomous drones and field robots. 

Foolish takeaway

These cutting-edge ASX growth shares are all well under way in their innovative processes. They have either developed a revenue stream already, or they are very close to doing so. Most importantly, the technological genius behind each of these organisations has recently stepped aside, in the case of Phoslock, or has deliberately moved into the research and development area. Consequently, people who know how to make money and grow a business are running each company.

Personally, I will probably invest a small amount into Recce Pharmaceuticals shares in the near future. Nonetheless, I think each one is very likely to see strong growth over the next 2–3 years. 

More reading

• Will the CSL share price crack $300 in August?
• 3 junior ASX healthcare shares with explosive growth potential
• ASX 200 Weekly Wrap: ASX has week of high volatility
• Is now the time to sell your ASX shares?
• Should fixed-interest investments be part of your ASX share portfolio?

Daryl Mather 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 Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Emerchants Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended 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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The Australian tech sector is small and immature when compared to the much larger United States tech market. However, a broad range of exciting ASX tech shares is now emerging. Some have a fast growing international presence.

Here, we look at two ASX tech shares I believe would make worthy additions to your ASX share portfolio.

2 ASX tech shares to buy and hold

Nearmap Ltd (ASX: NEA)

Nearmap is an Australian aerial imagery and location data company. It provides geospatial map technology for businesses and government customers across Australia, New Zealand, the US, and Canada.

The Nearmap share price was hit harshly during late January and during the early phase of the coronavirus pandemic. It fell from $2.71`in mid January to 86 cents in late March. That’s a massive decline of 68%. The Nearmap share price has, however, risen fairly strongly since then, helped by two positive business updates during April and May. In late May, Nearmap revealed that its customer base has been growing strongly over the prior few months. Also, average subscription revenue continues to climb higher, which is lifting Nearmap’s operating margins.

I believe that this ASX tech share is well placed for strong growth over the next five years, driven in particular by its US operations.

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan operates in a fast-growing niche in the IT software market that is known as ‘sales enablement’. Organisations and their sales teams are provided with a platform to customise and collaborate on content and improve customer engagement. Bigtincan’s customers are located in over 50 countries. It operates in diverse industries and market segments. An aspect of its product that I find particularly appealing is that it leverages artificial intelligence through features such as the ability for users to personalise and recommend content.

Despite a temporary decline during the early phase of the coronavirus pandemic, the Bigtincan share price has risen very strongly from 27 cents in late March to now be trading at 92 cents. That’s an increase of over 240%.

Although Bigtincan is yet to achieve profitability, I believe it is well placed to achieve this goal over the next few years. Its customer base is growing quickly. Also, it operates under a software-as-a-service (SaaS) business model that is highly scaleable. Therefore, the addition of each new customer improves the company’s overall operating margin.

Foolish takeaway

Nearmap and Bigtincan are two small-cap ASX tech shares that are in my buy zone right now. I believe both have strong growth potential over the next five years, driven by expanding international markets.

More reading

• These are the 10 most shorted shares on the ASX
• 4 ASX tech shares to buy that aren’t BNPL shares
• 3 stellar ASX tech shares I would buy in August
• 3 exciting small cap ASX shares to watch in FY 2021
• Got $10,000 to invest? I would buy these ASX shares

Phil Harpur owns shares of Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO 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.

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With interest rates looking to stay at historic lows for some time to come, investing your money in a bank account or term deposit can actually negatively impact your long-term wealth. This is because, after you have factored in the impact of inflation, your investment can actually be going backwards. By comparison, ASX shares have returned on average around 9% to 10% per annum over the past few decades.

Here we look at two quality ASX shares to consider adding to your portfolio. Both are in my buy zone right now.

Two ASX shares I think are solid buys right now

JB Hi-Fi Limited (ASX: JBH)

Electronics retailer JB Hi-Fi has performed solidly in recent months, despite the challenges posed by the coronavirus crisis. The JB Hi-Fi share price saw a sharp decline during the early phase of the pandemic. It dropped from $44.71 in early February, to $23.50 in late March. The retailer however, subsequently recovered all of those share price losses and is currently trading at $44.91.

JB Hi-Fi reported strong revenue growth during 2H20 in the period up to early June. Demand has been particularly strong in recent months for technology products, such as laptops, used in remote working, learning and communication.  

Over the past decade, JB Hi-Fi has been one of Australia’s stronger performing ASX shares, with its share price up by over 137% during this time. JB Hi-Fi also pays a strong annual dividend yield of 3.6%, fully franked.

Wesfarmers Ltd (ASX: WES) 

The trend in the Wesfarmers share price during the coronavirus pandemic has followed a very similar path to that of JB Hi-Fi. The Group’s share price was significantly impacted initially during February to March, however since then it regained nearly all of those share price losses.

The recent rally in the Wesfarmers share price has been partly driven by  strong demand for its online retail offerings during the pandemic. Like JB Hi-Fi, demand for remote learning products has been strong in its Officeworks division. Bunnings also has experienced strong growth.

I am particularly attracted to Wesfarmers right now as it is a highly diversified business. This diversification provides a buffer to various parts of the economic cycle, especially during challenging economic times like we are currently facing.

In addition, Wesfarmers currently pays a strong annual dividend yield of 3.3%, fully franked.

Foolish takeaway

JB Hi-Fi and Wesfarmers are two quality ASX shares that I would be happy to own as part of my investment portfolio. Both have recently benefited from the changes in consumer behaviour resulting from coronavirus. But, equally as important, I believe both are well positioned for long-term growth. In addition both companies pay attractive fully franked dividends.

More reading

• 3 ASX dividend shares I like ahead of the August earnings season
• ASX 200 Weekly Wrap: ASX has week of high volatility
• Buy these blue chip ASX dividend shares for income
• 2 off the grid ASX retail shares for higher returns
• Which ASX 200 shares are the safest?

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

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Unlike a large proportion of shares on the ASX, the Treasury Wine Estates Ltd (ASX: TWE) share price has failed to bounce substantially from its post-pandemic lows. However, a recent deal negotiated by the federal government could turn the fortunes for Australian wine companies and the industry.

Why has the Treasury share price failed to bounce?

The Treasury Wine share price has only managed to bounce around 30% from its mid-March lows and is currently trading down more than 28% for 2020. This recovery dulls in comparison with the double and triple-digit recovery we have seen in other shares on the ASX.

Earlier this year, Treasury materially reduced market expectations citing an unexpected decline in profits from its US operations. The owner of famous brands like Wolf Blass, Lindemans and Penfolds was not spared during the COVID-19 pandemic, with Treasury acknowledging a decline in demand from China for its luxury wines.

In the company’s most recent trading update, Treasury informed investors that the COVID-19 pandemic and global lockdowns in major markets has reduced on-premise and cellar door sales. The company now expects earnings before interest, tax and accounting in FY20 to be between $530 million and $540 million. This compares to management’s guidance of $716–750 million at the interim result, which was then withdrawn on 25 February.

What deal has the federal government made?

According to a recent article in the Australian Financial Review, the federal government recently negotiated a deal that has lifted Canadian restrictions on Australian imports. Previous restrictions on Australian imports included a variety of taxes, markups and sales requirements. The new deal will lift these restrictions, allowing Australian wine producers and exporters like Treasury to take advantage of a market worth approximately $200 million per year.

Should you invest?

In my opinion, although the federal governments deal is a great win, I think that Treasury and the Australian wine sector in general faces multiple headwinds in the short term. Earlier this year, Treasury announced that it was considering a demerger of its flagship Penfolds business into a separate company listed on the ASX, which has further clouded the outlook for the company.

Despite the uncertainty, Treasury has reported positive signs of recovery in its major markets, which could see the company’s share price recover in the longer term. Instead of jumping the gun and buying shares in the company, I think a prudent strategy would be to wait until Treasury releases its full-year report in the August reporting season to get a better idea before investing.

In addition to Treasury, another listed wine company you might want to keep an eye on is Australian Vintage Limited (ASX: AVG).

More reading

• Why the Digital Wine Ventures share price is surging today
• How you can take advantage of the surging Australian dollar
• 2 ASX shares to buy during ‘Dry July’
• ASX 200 jumps 1.3%: Big four banks drop lower, Afterpay up after U.S. update
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates 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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As the economic outlook grows increasingly gloomy, many investors may be thinking of diversifying into defensive companies as a way of strengthening their portfolios. Generally, healthcare companies provide a good defence against a downturn as demand for health services tends to remain robust regardless of the prevailing economic conditions. However, many investors may want to look beyond the big name companies like Cochlear Limited (ASX: COH) or CSL Limited (ASX: CSL) to find pockets of higher growth in the sector. Here are three up-and-coming ASX healthcare companies that may offer explosive growth potential at bargain prices.

Polynovo Ltd (ASX: PNV)

Polynovo is a junior healthcare company that develops biodegradable medical devices for skin tissue repair. Its flagship medical technology is called NovoSorb, a synthetic polymer that clinicians can use to treat serious burn and skin trauma patients. It can be used in surgical procedures and will safely biodegrade and be excreted by the body.

The company recently announced it had secured US$15 million in funding from the Biomedical Advanced Research and Development Authority (BARDA), an office of the United States Department of Health and Human Services. The money will help finance a clinical trial to evaluate whether NovoSorb technology can apply to be an approved treatment for ‘full thickness burns’ in US hospitals. Full thickness burns are severe burns that destroy both the epidermis and dermis layers of skin.

The trial’s chances of success are relatively high, as NovoSorb is already used to treat these types of burns outside of America. This could cap off a surprisingly successful year for Polynovo. The company recently reiterated its FY20 guidance for sales to at least double FY19’s numbers.

Mesoblast Limited (ASX: MSB)

Mesoblast is an emerging pharmaceutical company that uses stem cell technology to develop treatments for a range of inflammatory diseases. The company’s shares have skyrocketed in recent months after one its treatments showed promising results in COVID-19 patients suffering from acute respiratory distress syndrome.

It was also recently announced that Mesoblast’s treatment for graft versus host disease – a potentially lethal condition affecting some cancer patients – had been accepted for priority review by the US Food and Drug Administration (FDA). If approved, the product has the potential to be made available in the US as early as September.

Revenues for the first nine months of FY20 were US$31.5 million, a 113% increase over the same period in FY19. A successful capital raise in May also means the company now has close to US$150 million in cash, which it is hoping to use to launch new treatments in the US, as well as scale up its manufacturing potential.

Medical Developments International Ltd (ASX: MVP)

Medical Developments International is a pharmaceutical and medical device company which specialises in pain management and the treatment of respiratory conditions like asthma. Its flagship product is a non-opioid analgesic named Penthrox.

Prior to the COVID-19 pandemic, the Medical Developments International share price had surged to an all-time high of $11.78. Excitement around the company was justifiably high: clinical trials of Penthrox were underway in China, and a US launch also seemed imminent.

However, the pandemic meant Chinese trials were put on hold, while talks with the US FDA don’t seem to have progressed markedly. Many impatient investors jumped ship, sending the share price tumbling – and even despite some recent gains, MVP is still trading at just $6.34.

However, for investors with a long-term outlook, I think this recent pullback in the share price offers the opportunity to pick up Medical Developments shares at bargain prices. Once the effects of the global pandemic subside, I believe the company still has a long growth runway ahead of it.

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Rhys Brock owns shares of Cochlear Ltd. and Medical Developments International Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., Medical Developments International Limited, and POLYNOVO FPO. The Motley Fool Australia has recommended Cochlear Ltd. and Medical Developments International 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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