Author: therawinformant

The S&P/ASX 200 Index (ASX: XJO) is on course to follow the lead of U.S. markets and record a sizeable decline on Friday. At the time of writing the benchmark index is down 0.9% to 6,038.3 points.

Four shares that are falling more than most today are listed below. Here’s why they are dropping lower:

The Afterpay Ltd (ASX: APT) share price is down 3.5% to $69.41. This appears to be down to general weakness in the tech sector after a pullback on the Nasdaq index overnight. In addition to this, news that ecommerce giant Shopify has signed an agreement with Affirm for its own buy now pay later offering could be weighing on its shares.

The Evolution Mining Ltd (ASX: EVN) share price has tumbled over 6% lower to $5.91. Investors have been selling the gold miner’s shares after they were downgraded by analysts at Credit Suisse. According to the note, the broker has downgraded Evolution’s shares to a neutral rating with a $6.00 price target on valuation grounds.

The Insurance Australia Group Ltd (ASX: IAG) share price is down 4.5% to $5.51. Investors have been selling the insurance giant’s shares after the release of a trading update this morning. Insurance Australia Group expects to post a pre-tax loss on shareholders’ funds income of $181 million. This is down sharply from a profit of $227 million in FY 2019 and has resulted in the company cancelling its final dividend.

The Vicinity Centres (ASX: VCX) share price has fallen 2.5% to $1.37. This follows the release of an update on its portfolio valuations. According to the release, the company’s portfolio has experienced a net valuation decline of 11.3%. This reflects the impact of COVID-19 and the evolving retail landscape. Among its valuation declines is its flagship portfolio, which includes Chadstone, Premium CBD locations, and DFO outlet centres. This portfolio has seen a net valuation loss of 8.8%.

More reading

• Should Afterpay shareholders be concerned about Shopify’s BNPL launch?
• Insurance Australia Group share price sinks 4% lower after cancelling final dividend
• Value stocks to rise on strong A$ and broker picks the cheapest ASX stocks to buy today
• 5 things to watch on the ASX 200 on Friday
• What to do if your ASX shares hit a record high

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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Long-term shareholders of emerging ASX healthcare company Opthea Ltd (ASX: OPT) have endured a volatile 12 months. A little under a year ago, the Opthea share price was trading at a 52-week low of just $0.735. Then, in the space of a month, shares skyrocketed 465% to an all-time high price of $4.15.

In March, amid a wave of selloffs prompted by the global spread of COVID-19, the Opthea share price plunged all the way back down to just $1.25. Opthea shares have rallied significantly since then – at one point in early June they even looked set to push back up beyond $3.50. But then came yet another pullback, and as at the time of writing they are trading at $2.67.

What’s been driving the Opthea share price?

Opthea specialises in developing novel treatments for chronic eye diseases such as age-related macular degeneration (AMD). The initial steep rise in the share price back in August 2019 was driven by positive clinical trial results from a phase 2b study involving 366 patients suffering from “wet” AMD. Wet AMD is a condition caused by blood vessels leaking fluid into the macular resulting in blurred vision or persistent blind spots. According to Opthea, wet AMD is the leading cause of blindness for those aged over 50 across the developed world.

In the trial, Opthea’s OPT-302 treatment was shown to deliver statistically significant benefits versus the control group when used in combination with an existing wet AMD treatment called Lucentis. Opthea has stated that currently approximately 50% of wet AMD patients who use Lucentis will not experience significant gains in vision. And yet, in 2018 alone, sales of Lucentis totalled US $3.7 billion.

That trial was followed by positive results from a further phase 2a trial released just last month. This time, OPT-302 was used in combination with another therapy called Eylea in patients suffering from diabetic macular edema (DME). DME is a similar condition to wet AMD and occurs in people suffering the long-term effects of diabetes.

On Thursday, the company announced that the results of the trial will be presented at the upcoming American Society of Retina Specialists 2020 Annual Meeting. This gives Opthea significant international exposure, as over 3,000 retinal specialists from 63 countries are expected to attend the virtual meeting.  

Should you invest?

Economic uncertainty caused by the COVID-19 global pandemic has made valuing growth stocks like Opthea incredibly difficult. Other emerging ASX healthcare companies like Medical Developments International Limited (ASX: MVP) and Polynovo Ltd (ASX: PNV) have also seen big swings in their share prices over the last 12 months as investors try to price in the longer-term impacts of the pandemic.

However, Opthea has continued to demonstrate that its treatments are not only effective but also address a debilitating condition affecting a significant portion of the population. Sales of Lucentis and Eylea show that this is a potentially lucrative market if Opthea can successfully commercialise its treatment.

The COVID-19 economy poses significant challenges to young companies. Supply-side logistical challenges may persist for months and funding will be harder to come by. However, for those willing to take on the risk, in my opinion an investment in Opthea has the potential to deliver significant long-term gains.

More reading

• Why the Polynovo share price could climb in August
• Why this underperforming ASX healthcare company could still light up the market in 2020 and beyond
• Why the Opthea share price surged more than 20% today
• 4 exciting ASX biotech shares surging higher today
• 5 of the worst performing ASX shares from last week

Rhys Brock owns shares of Medical Developments International Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited and POLYNOVO FPO. The Motley Fool Australia has recommended 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to finish the week in a disappointing fashion. At the time of writing the benchmark index is down 1% to 6,034.4 points.

Four shares that have not let that hold them back today are listed below. Here’s why they are pushing higher:

The Alcidion Group Ltd (ASX: ALC) share price has jumped almost 7% to 16 cents. This morning the healthcare technology company announced an enterprise agreement with NHS Lanarkshire for a five-year term. The agreement will see the health board deploy Alcidion’s Patientrack electronic bedside monitoring system across its entire regional health network. The total value of the new contract is ~$1.5 million over five years.

The Bubs Australia Ltd (ASX: BUB) share price is up 3.5% to $1.01 despite there being no news out of the infant formula and baby food company. However, Bubs is likely to release its fourth quarter update next week. Investors may be snapping up shares on Friday in anticipation of a stellar update. Infant formula demand has been very strong during the pandemic and could have underpinned solid sales growth in the fourth quarter.

The IGO Ltd (ASX: IGO) share price has stormed 4.5% higher to $5.41. This follows a jump in the spot nickel price overnight. According to CommSec, the nickel price climbed 4.2% to US$13,650.75 a tonne. It was the best-performing base metal during overnight commodities trading.

The Next Science Ltd (ASX: NXS) share price has risen 2.5% to $1.37. This follows the release of the medical technology company’s second quarter update on Thursday. Next Science’s performance was negatively impacted during the quarter due to the shutdown of elective surgeries. As a result, it reported cash receipts of $1.9 million. However, management expects a rebound in revenues as surgeries recommence and wound care clinics reopen.

More reading

• Where I’d invest $9,000 in ASX shares
• Got $1,000? You should buy 1 of these 6 ASX shares
• 3 of the best mid cap ASX shares you can buy right now
• The smartest ASX shares to buy if you have $2,000
• 4 ASX shares I’d buy with $4,000

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 Alcidion Group Ltd. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended Alcidion Group 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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Cannabis shares were considered a fad for a while. Now, they’ve proved they’re here to stay. As the Australian medicinal cannabis industry grows, ASX cannabis companies are refining their strategies. While some are focused on cultivation and production, others are involved in the manufacturing and distribution components of the value chain. 

ASX cannabis share prices have seen mixed comebacks from the March downturn. Some have struggled in the current environment, while others have adapted in the face of coronavirus challenges. We take a look at how ASX cannabis shares are facing the coronavirus challenge. 

Althea Group Holdings Ltd (ASX: AGH)

The Althea share price has regained 125% from its March low. The medicinal cannabis distributor responded to the coronavirus pandemic by launching online sales of medicinal cannabis. Patients can have products delivered direct to their door via Althea’s app, which has been registered as a medical device. 

Althea finished FY20 with a record month and quarter. Unaudited revenue for the quarter was $1.59 million, a new record and 5% up on the March quarter, notwithstanding COVID-19 disruptions. June sales rebounded strongly for a record revenue month following a COVID-19 affected April and May. Unaudited revenue for FY20 totalled $4.97 million, a 547% increase on FY19. 

At the end of June, Althea had 7,295 Australian patients and was achieving strong month-on-month growth in the UK. The number of healthcare professionals prescribing Althea products grew to 590 at the end of June, an increase of 16% on the prior quarter. Althea reported a healthy balance sheet with $10.4 million cash on hand at 30 June 2020.

Cann Group Ltd (ASX: CAN)

The Cann Group share price fell 18.4% yesterday. Cann Group announced a capital raising last week to fund working capital. Shares were issued under a $14.3 million institutional placement at 40 cents a share, which represented a 51.2% discount to the previous closing price. 

The company needed funds for working capital while it pursues near-term growth opportunities, including the expansion of its Mildura facility, which remains a key component of its growth strategy. COVID-19 has slowed progress of potential funding options and practical timing of construction involving offshore specialists. Cann Group’s existing facilities provide 1,200 kilos in capacity. 

The company has a manufacturing agreement with IDT Australia Ltd (ASX: IDT) to manufacture resins, oils, and finished products. Products are distributed to hospitals and pharmacies in Australia under a distribution agreement with Symbion. Cann Group also has existing supply agreements in place with Iuvo Therapeutics, Astral Health, Entoura, Zalm Therapeutics, and Aurora. These agreements cover Australia, New Zealand, South Africa, North and South America, Europe, and parts of Asia. The company says it has secured or is negotiating multiple supply agreements which are expected to generate ~$15 million revenue in FY21. 

Cann Group reports that Australian industry momentum continues to be positive. The company is well positioned to address growing demand due to its manufacturing of bio-pharmaceutical grade products. New international markets are also opening up, with initiatives including patient reimbursement in Germany and pilot programs on France and Poland. 

Auscann Group Holdings Ltd (ASX: AC8)

The Auscann share price is currently on par with its March low of 14 cents. Auscann is involved in the manufacture of medicinal cannabis products. With a focus on providing reliable and standardised cannabinoid-based pharmaceutical products, Auscann has developed a capsule formulation designed to enable accurate dosing. 

Auscann’s capsules are currently undergoing a phase 1 study to examine the pharmacokinetics of doses in volunteers. Dosing of the first subjects was completed in April. The study is designed to provide information that will inform dose selection and assist medical professionals in prescribing the hard shell capsules. The study is expected to be completed this calendar year. 

Auscann’s hard shell capsules were made commercially available for prescription in the March quarter. Patients can access the products through the TGA special access scheme and authorised prescriber scheme. The capsules are also available in a low-dose formulation, confirming Auscann’s ability to customise dosing in a standardised and scalable way. This is critical for personalised treatment. 

The company finished the March quarter with $24.7 million in cash and no debt. This was down from $26.1 million at 31 December 2019, however the strong capital position supports the continued progress of Auscann’s growth strategy. This strategy is centred on product development, clinical evaluation and market access. In its quarterly results announcement, Auscann CEO Ido Kanyon said, “product standardisation backed by clinical evidence and medical education will drive growth, medical acceptance, and consequent demand for our capsules.”

Ecofibre Ltd (ASX: EOF)

The Ecofibre share price has recovered strongly from its March low of $1.25 and is currently trading at $2.49. Nonetheless, it remains significantly down from its highs for the year of over $3.

Ecofibre manufactures hemp and CBD products which are sold in the US and Australia. The Ananda Hemp and Ananda Professional brands produce nutraceutical products for human and pet consumption as well as topical creams and salves. Ananda Food produces Australian grown hemp food products including hemp oil and protein powders. The Hemp Black business develops hemp-based textiles and composites.

Ecofibre recently announced that FY20 net profits are expected to be around $12.5 million, double that of FY19. Full year revenue is expected to be in  excess of $50 million. Ecofibre adjusted focus as a result of coronavirus, with the Hemp Black business tapping into demand for PPE. The brand launched a face mask and sold around 135,000 of these in May and June. This added $2.4 million to revenue in FY20. Manufacturing capacity will double this quarter from its current rate of 65,000 per month to 130,000 masks, and distribution to Australia has begun. 

The Ananda Food business also continues to experience steady growth. Its newly formulated protein powder will be used by The Alternative Meat Co in a new range of products. The range will be available in Coles from August. Woolworths will also begin stocking Ananda’s hemp seed oil under its Macro brand. The oil will be available from August alongside existing hemp seed and protein powder products.  

More reading

• Why Afterpay, BHP, Cann, & Mesoblast shares are tumbling lower
• Why Afterpay, Ecofibre, Mesoblast, & Zip Co shares are racing higher
• Stock of the day: Ecofibre share price jumps on profit guidance
• Why Cann, Flight Centre, Helloworld, & Zip shares are dropping lower
• Cann Group share price tanks on discounted capital raising

Motley Fool contributor Kate O’Brien 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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City Chic Collective Ltd (ASX: CCX) shares are in a trading halt with the apparel retailer announcing a capital raising and potential acquisition. City Chic is seeking to raise $90 million via a placement and share purchase plan. Funds will be used to fund the potential acquisition, strengthen the balance sheet, and provide financial flexibility to accelerate growth.

What does City Chic Collective do? 

City Chic is a multi-channel womenswear retailer focused on the plus size market. With over 200 locations globally, City Chic generated revenue of $104.8 million in 1H FY20, with digital sales accounting for 53% of total sales.

With the onset of COVID-19, City Chic temporarily closed stores, but saw online sales continue to climb, building on already high online penetration. Online sales grew 57% versus the same period the prior year, which meant City Chic was able to trade profitably through the store closure period.

Trade has continued to improve as stores have reopened, with City Chic recording FY20 sales revenue of $194.5 million (unaudited). 

Why is City Chic raising capital?

At the end of 1H FY20, City Chic had $17.5 million of debt and $14.9 million cash, giving a net debt position of $2.6 million. The company is now seeking to acquire the ecommerce assets of Catherines, a US plus-sized brand which has filed for bankruptcy. City Chic has bid US$16 million for the brand, subject to inventory adjustments. If successful, the transaction is expected to complete in the third or fourth quarter of 2020. 

To fund the acquisition, as well as strengthen the balance sheet and provide financial flexibility, City Chic is seeking to raise an additional $90 million in equity capital. A placement to sophisticated and institutional investors will raise $80 million with up to a further $10 million raised via a share purchase plan.   

What is the outlook for City Chic? 

The City Chic share price has recovered strongly from the March downturn, gaining 300% to trade at $3.20. The proposed acquisition is consistent with the company’s strategy of scaling its business across geographies and plus-size segments. It would be City Chic’s third strategic acquisition of digital assets in the $50 billion global plus-size apparel market.

In 2019, City Chic acquired Avenue and Hips & Curves, which are now fully integrated and trading profitably. City Chic has advised it intends to continue to assess opportunities to expand its customer base in key product streams and drive digital presence across geographies. 

More reading

• Where I’d invest $9,000 in ASX shares
• 4 trends to invest in before August earnings season
• Leading brokers pick the latest ASX 200 stocks to buy today
• Got $3,000? Here are 3 great ASX shares to buy
• 3 ASX shares to buy before earnings season

Motley Fool contributor Kate O’Brien 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 Afterpay Ltd (ASX: APT) share price is on course to end the week with a day in the red.

At the time of writing the payments company’s shares are down almost 3% to $70.00.

Why is the Afterpay share price dropping lower?

Investors have been selling Afterpay’s shares on Friday after a disappointing night of trade on Wall Street’s technology-focused Nasdaq index.

US-China tensions and worse than expected jobless claims data hit sentiment and weighed on U.S. tech shares overnight. This led to the famous index dropping 2.3% lower.

It isn’t just Afterpay that is dropping lower today. The likes of Altium Limited (ASX: ALU) and Nearmap Ltd (ASX: NEA) are also in the red. This has dragged the S&P/ASX 200 Information Technology index 1.6% lower.

What else is weighing on Afterpay’s shares?

There is also a spot of industry news that could be weighing on the Afterpay share price today.

Fellow buy now pay later company Affirm, which is run by PayPal co-founder Max Levchin, has just announced a partnership with Canadian e-commerce giant Shopify on a new interest-free, zero-fee payments program for online customers.

According to CNBC, the new “Shop Pay Installments” offering will give approved Shop Pay customers the option to split the total purchase cost into four equal, bi-weekly payments, which will be processed and handled by Affirm. This is identical to the Afterpay model.

While this is certainly going to increase competition in the industry, one broker that isn’t concerned is Goldman Sachs.

What did Goldman say?

Goldman commented: “Clearly alternatives are emerging to APT. SHOP has a merchant and consumer reach which could allow them to acquire a user base more rapidly than most of APT’s other US competitors (especially the likes of Quadpay, Sezzle and Klarna).”

“However, if APT has a large enough consumer base which is transacting frequently (which is what is occurring), merchants may be prepared to adopt both services. In addition, SHOP’s BNPL product will be limited to merchants who use SHOP.”

In light of this, the broker advised that it is leaving its “forecasts unchanged as we believe this announcement is unlikely to impede the company’s achievement of our forecasts.”

I agree with this view and continue to believe Afterpay would be a fantastic long term investment option.

More reading

• Value stocks to rise on strong A$ and broker picks the cheapest ASX stocks to buy today
• What to do if your ASX shares hit a record high
• Why the Zip share price is a better buy than Afterpay
• Are ASX tech shares in a bubble?
• Kanye West – ASX shares for his US presidential campaign

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd. 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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The Insurance Australia Group Ltd (ASX: IAG) share price is dropping lower on Friday after the release of an announcement.

At the time of writing the insurance giant’s shares are down 4% to $5.54.

What did IAG announce?

This morning IAG provided the market with an update on its expectations for FY 2020.

According to the release, the insurer expects to report gross written premium (GWP) growth of ~1.1%. This is consistent with its ‘low single digit’ guidance.

IAG also expects to report an insurance margin of approximately 10%, which has fallen short of its prior guidance of 12.5% to 14.5%. This is due largely to adverse natural perils, prior period reserving, and credit spread factors.

On an underlying basis, its insurance margin is expected to be 16%, compared to 16.6% in FY 2019. This was driven by a tough second half, which saw its margin fall to 15.1% because of higher reinsurance costs, lower investment returns, and a deterioration in the performance of some Australian commercial long tail portfolios.

This is ultimately expected to lead to a pre-tax loss on shareholders’ funds income of $181 million. While this is down sharply from a profit of $227 million in FY 2019, it is better than its previously indicated year-to-date loss of approximately $280 million at the end of April.

Dividend cancelled.

In light of its poor performance, there will be no final dividend in FY 2020.

The company explained: “While IAG recognises many shareholders will be disappointed with no final dividend, it believes it is important to adhere to its long-established dividend payout policy and to maintain a strong capital position in the current uncertain environment.”

IAG’s Managing Director and CEO Peter Harmer, commented: “We have experienced an immensely challenging second half to the 2020 financial year, characterised by severe natural peril activity, the disruption caused by the COVID-19 pandemic to our people, customers and suppliers, and the marked volatility in investment markets which has adversely impacted our results.”

“We have seen some softening in our underlying margin in the second half. This stems from the combination of lower investment returns from diminishing interest rates, an increased reinsurance expense as we bolstered our protection following heavy perils incidence early in the calendar year, and some deterioration in Australian commercial long tail loss ratio,” he added.

However, the chief executive appears cautiously optimistic on the year ahead.

He concluded: “We enter FY21 with a strong balance sheet and enhanced reinsurance protection, and are well equipped to negotiate the challenges and opportunities that a post-COVID environment will present.”

More reading

• Fund managers have been snapping up Sonic and these ASX 200 stocks

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 Bank of Queensland Limited (ASX: BOQ) share price has come under pressure on Friday morning and is dropping lower.

At the time of writing the regional bank’s shares are down by just over 2% to $6.29.

This latest decline means the Bank of Queensland share price is now down a disappointing 37% from its 52-week high of $9.98.

Why is the Bank of Queensland share price dropping lower?

This morning Bank of Queensland released a very revealing quarterly APRA Basel III Pillar 3 report for the period ending 31 May 2020.

This update shows that the bank has experienced a sharp increase in bad and doubtful debts because of the pandemic.

According to the release, Bank of Queensland’s +90 days past due loans has increased by $112 million during the quarter.

This $112 million includes $58 million of customer loans where banking relief package applications have been processed subsequent to 31 May 2020.

Management advised that the balance of the increase relates to customers who have not elected to enter into a relief package or who were ineligible.

Increased provisions.

In light of the above, Bank of Queensland has decided to increase its COVID-19 provisions.

It has taken a further collective provision of $61 million during the third quarter, bringing the total COVID‐19 related collective provision to $71 million.

This provision is at the top end of the range of $49 million to $71 million which was detailed in the half year results.

But whether it stops there, only time will tell. Management warned that there remains considerable economic uncertainty and it will continue to monitor the impacts of COVID‐19 on its portfolio and the collective provision prior to finalising its year end position.

No comments were made in respect to its dividend plans. A further update will be provided with its full year results later this year.

More reading

• These are the 10 most shorted shares on the ASX
• Here are the 10 most shorted shares on the ASX
• These are 10 most shorted shares on the ASX
• Here are the 10 most shorted shares on the ASX
• ASX beware: RBA warns on bank loan deferrals

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 Australian dollar is holding at a more than one-year high and it could be heading even higher. This will create winners and losers on the S&P/ASX 200 Index (Index:^AXJO).

The Aussie battler jumped over US71 cents and is holding around its highest level since April 2019.

This means our dollar has surged by around 24% since the COVID-19 low in March when it plunged to under US58 cents.

Is the Aussie heading to US73 cents?

The fightback may not be over. Macquarie Group Ltd (ASX: MQG) believes it can climb higher in the near-term.

“With Australian yields higher than the US, we think rising commodity prices will continue to support AUD,” said the broker.

“A model of commodity prices and AU/US interest rates suggests the Australian Dollar should already be closer to [US]73 cents.”

Losers from the stronger A$

If the Aussie continues to build on its recent gains, this will create a headwind for larger cap stocks as most of our largest companies are significantly exposed to the US dollar.

These includes our high-flying tech stocks like Afterpay Ltd (ASX: APT) and healthcare giants like CSL Limited (ASX: CSL).

However, there are exceptions among the ASX 200 stocks. Macquarie believes the weakening greenback will provide a tailwind to value stocks.

ASX value stocks are winners from US dollar weakness

Value stocks are those that trade at a discount to the market and to historical averages for their respective sectors. Despite spots of outperformance, this group is largely underperforming growth stocks, which trade on high price-earnings (P/E) multiples.

“The value rally in May/June corresponded with a period of US dollar weakness,” said Macquarie.

“As the weak USD partly reflects rising risk appetite, we prepared an updated list of Stocks to buy in the value rally.

“we target stocks where FY22 earnings have been cut since the pandemic, and the stock has also de-rated (we call them decliners).”

Best ASX picks for value

Three ASX sectors stick out. They are real estate, banks and industrials. The stocks in the property space the broker believes will outperform in the next value rally include the Stockland Corporation Ltd (ASX: SGP) share price, Lendlease Group (ASX: LLC) share price and GPT Group (ASX: GPT) share price.

In the industrials sector, Macquarie’s picks are the Worley Ltd (ASX: WOR) share price, Incitec Pivot Ltd (ASX: IPL) share price, Emeco Holdings Limited (ASX: EHL) share price and Genworth Mortgage Insurance Australia (ASX: GMA) share price.

The National Australia Bank Ltd. (ASX: NAB) share price is the only ASX bank to make the list.

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More reading

• Should Afterpay shareholders be concerned about Shopify’s BNPL launch?
• Why weakness in the CSL share price could be a buying opportunity
• Buy NAB and this ASX dividend share for income
• Up 38% in July! Is the Orocobre share price a buy?
• Why the Polynovo share price could climb in August

Brendon Lau owns shares of National Australia Bank Limited, Emeco Holdings Limited and WorleyParsons Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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