Author: therawinformant

I think that one of the most exciting areas to invest in at the moment is the tech sector.

In this part of the market there are a large number of companies with the potential to grow strongly over the next decade and generate outsized returns for shareholders.

Three ASX tech shares that I would buy in July are listed below. Here’s why I like them:

Afterpay Ltd (ASX: APT)

I think this payments company could be a great long term option. In FY 2020, Afterpay has continued to smash expectations thanks to the increasing popularity of its buy now pay later platform with both consumers and retailers. The uptake of its platform has been especially strong with younger demographics, which are turning away from credit cards and looking for better ways to budget. I expect this trend to continue for the foreseeable future and be boosted by further geographic expansion in the coming years. This could make Afterpay shares long term market beaters.

Nearmap Ltd (ASX: NEA)

Another tech share to consider buying is this aerial imagery technology and location data company. Thanks to the increasing demand for its services in both Australia and North America, Nearmap has been growing its sales at a very strong rate over the last few years. The good news is that I believe the company can continue this impressive growth for a long time to come thanks to its massive opportunity in a highly fragmented market, the launch of several exciting new products, and its potential expansion into new geographies.

Xero Limited (ASX: XRO)

A final tech share to consider buying is Xero. It is one of the world’s leading cloud-based business and accounting software providers. Xero recently reported its FY 2020 results and revealed further impressive growth in sales and operating earnings. This was driven by strong customer growth and its sky high retention rate. I believe the latter demonstrates both the quality and stickiness of its platform. Another positive is its modest market share in North America. At present it has just 241,000 subscribers in the key market. This compares to 914,000 subscribers in a materially smaller ANZ market.

More reading

• Top fund manager names favourite ASX growth shares
• Why the BlueScope share price is outperforming today
• Is the Zip share price a buy after falling 20% last week?
• Zip and Openpay were among the most traded shares on the ASX last week
• 5 of the worst performing ASX shares from last week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why I would buy Afterpay and these exciting ASX tech shares appeared first on Motley Fool Australia.

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Do you have some spare cash to invest in ASX shares right now?

I believe the shares below are 2 very solid options. Here’s why they are both on my buy list right now, and how I would split a $5,000 investment across the 2 ASX shares.

BetaShares NASDAQ 100 ETF (ASX: NDQ) – $3,000

My first recommendation is actually an exchange-traded fund (ETF), rather than an individually listed company. The BetaShares NASDAQ 100 ETF invests in a basket of shares that are listed the US NASDAQ exchange. This ‘tech heavy’ ETF includes many  of the tech giants that you probably familiar with, such as Apple, Amazon, Google, Facebook, Microsoft and Netflix.

What really appeals to me about this ETF is that you get exposure to a vast portfolio of US shares that you otherwise wouldn’t gain exposure to by investing on the ASX. Australia does have its own tech shares that are individually listed. However, I think it’s a great idea to also have some exposure to the massive tech market listed in the US. A number of US tech companies have become global leading brands and many also have dominant positions in their individual tech market niches.

The tech sector in the US is really booming right now. Despite strong recent gains, I believe the long annual return of this fund is likely to continue exceed the return of the S&P/ASX 200 Index (ASX: XJO) over the next 5 to 10 years. 

Telstra Corporation Ltd (ASX: TLS) – $2,000

Australia’s largest telecommunications provider Telstra has had many challenges to face over the last decade. In particular, it has had to transition to a whole new telecoms world, centred around the government-owned National Broadband Network (NBN). Prior to the NBN, Telstra enjoyed margins and profit levels well above those achievable by most of its competitors. However, Telstra is now on a level playing field with the rest of the local market.

Telstra’s response has been to transition to a leaner operation under its ‘T22 strategy’ and is now well underway to achieving this goal. In addition, it is emerging as a market leader in the race to launch full scale 5G mobile services.

Telstra also currently has an attractive price-to-earnings ratio of 19 and pays a forward fully franked dividend yield of around 2.9%

Foolish takeaway

BetaShares NASDAQ 100 ETF and Telstra are 2 very different types of investments. However, I believe that both are well positioned to deliver above average shareholder returns over the next 5 years.

If I was investing $5,000 between both shares, I would lean towards investing slightly more in BetaShares NASDAQ 100 ETF, due to its higher level of market diversification.

More reading

• Market close: ASX 200 falls 0.5%
• Why the BlueScope share price is outperforming today
• Are you a ‘risky’ investor in ASX 200 shares?
• One thing you should be doing ahead of the ASX reporting season
• 3 top Warren Buffett quotes for ASX investors this week

Phil Harpur owns shares of Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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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I think ASX shares are a great way to grow your wealth over the long-term. You just need to choose the right ideas which have long-term growth potential.

What about ASX blue chips?

If you’re thinking about investing in shares like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP) then I think you may as well go for an ultra-low-cost exchange-traded fund (ETF) like BetaShares Australia 200 ETF (ASX: A200) which has an annual management fee of just 0.07% per annum.

But I think these four ASX shares could beat the market over the shorter-term and longer-term:

Share 1: MFF Capital Investments Ltd (ASX: MFF)

MFF Capital is a leading listed investment company (LIC). MFF Capital aims to invest in overseas shares rather than ASX shares. 

There are few Australian investors with the investment track record of Chris Mackay. He manages MFF Capital and has achieved very strong returns over the past five years with top share picks like Visa and Mastercard. These two businesses still make up more than a third of the portfolio. There is a long-term shift away from cash payments and towards contactless payments and eCommerce. 

The LIC currently has a large pile of cash that it wants to deploy when the right investing opportunities come along. At the end of June 2020 it had 44% of its assets as net cash. I think that provides a solid base for downside protection this year as well as optionality to buy shares at beaten down prices.

At the current MFF Capital share price it’s trading at a 4% discount to the pre-tax net tangible assets (NTA) per share.

Share 2: Bubs Australia Ltd (ASX: BUB)

Bubs is an infant formula company. It specialises in goat milk products, but it also sells grass-fed organic cow milk infant formula too. It sells baby food too.

The company is on a very good course at the moment, it’s delivering strong growth. In the FY20 half-year result it reported revenue growth of 37% to $28.8 million. In the FY20 third quarter, infant formula revenue and China revenue both increased by more than 100%.

The ASX share’s gross margin continues to improve as well. I think Bubs can become a much larger business over the next few years, investors just need to be patient as it delivers on its growth potential.

At the current Bubs share price, I’d be happy to buy some shares for the long-term.

Share 3: Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is an agricultural real estate investment trust (REIT) which owns some of the largest citrus and berry properties in Australia which are leased to Costa Group Holdings Ltd (ASX: CGC).

In the FY20 interim result the REIT reported it had a net asset value (NAV) of $0.95 per unit. At the current Vitalharvest share price it’s trading at a 16% discount to that NAV, assuming the NAV hasn’t changed since December 2019.

I’m also excited for two other reasons. First, the ASX share has a new manager that will expand the REIT’s acquisition hunting ground to include other areas of the food supply chain with properties related to the processing, storage and logistics of food.

The other reason why I’m excited is due to a potential return to good results for Costa. Vitalharvest has a profit-share agreement with Costa. A return to normal profits for Costa could give Vitalharvest a boost.

At the current Vitalharvest it’s trading with a distribution yield of 5.9%.

Share 4: Brickworks Limited (ASX: BKW)

Brickworks is one of Australia’s largest building product businesses. It sells a variety of products like bricks, precast and roofing. COVID-19 could cause a material hit to the construction industry over the next 12 months. But that’s why the Brickworks share price is down by 18% over the past six months. A downturn is a good time to buy a cyclical business like a building product ASX share in my opinion.

However, I’m particularly excited by the recent Amazon news. Brickworks owns 50% of an industrial property trust along with Goodman Group (ASX: GMG). Brickworks recently announced that the property trust had succeeded in getting Amazon to commit to building a massive distribution warehouse at its Oakdale site in Sydney. That is in addition to the big distribution warehouse that Coles Group Limited (ASX: COL) is planning to build.

I think Brickworks could actually be a fairly defensive investment. At the current share price, Brickworks offers a grossed-up dividend yield of 5%.

Foolish takeaway

I think each of these ASX shares are good value and could deliver market-beating returns over the next 12 months and the long-term. I think Bubs and MFF Capital could deliver the strongest returns over the next few years due to the focus on growth, though Vitalharvest and Brickworks look good value to me.

More reading

• My ASX share of the week
• 4 ASX shares I’d buy to protect against a recession
• How to create a yearly income of $65,000 in dividends
• 2 easy ASX shares for beginners
• Top ASX dividend shares to buy in July 2020

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks, BUBS AUST FPO, and COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Tesserent Ltd (ASX: TNT) share price gained 28% today, while also smashing its 52-week high in the process. The Tesserent share price was sent flying on the news the company has achieved its financial objectives for the year and also secured a debt facility.

What does Tesserent do?

Tesserent provides internet security to a wide range of Australian and international customers, via services such as perimeter protection, internal monitoring and alerts, secure internet connectivity and co-location. Its customers include education providers, corporate enterprises, and government organisations.

The company’s flagship Cyber 360 strategy delivers a comprehensive security service including identification, protection and 24/7 monitoring against cyber security threats. According to Tesserent, it is Australia’s largest listed dedicated cyber security company.

Trading update

The Tesserent share price skyrocketed today following news the company had achieved its previously announced FY20 financial objectives and locked in an additional $10 million in funding. 

A key highlight for the company is the fact its $40 million revenue run rate was achieved. Furthermore, Tesserent announced that it is likely to become earnings before interest, tax, depreciation and amortisation (EBITDA) and cash flow positive in June. These metrics are subject to audit, with the company providing a comprehensive business update and quarterly update later this month.

Tesserent has also managed to secure an additional $10 million debt facility. The agreement was with Tesserent’s existing debt provider, Pure Asset Management. The funds will be drawn as required to support acquisitions by the company.

Chair of Tesserent Geoff Lord commented:

[W]e’re extremely pleased to be working with PURE Asset Management who continue to support the firm’s vision and strategy. This new facility provides the funding cornerstone to continue to drive the Company’s acquisition strategy with minimal dilutionary impact on our existing shareholders.

About the Tesserent share price

The Tesserent share price has surged higher so far this year, gaining upwards of 150%. Tesserent shares have been pushed higher following the successful acquisitions of Pure Security, Rivium and North in the past year.

Cyber security is a hot topic following the recent cyber attacks on the government, with the news that cyber security is getting a $1.35 billion spending boost no doubt adding to the Tesserent share price’s impressive run.

More reading

• Where to invest $5,000 into ASX shares right now
• 4 ASX shares I’d buy with $4,000
• Market close: ASX 200 falls 0.5%
• ASX investors were buying these 5 international shares last week
• Top fund manager names favourite ASX growth shares

Motley Fool contributor Daniel Ewing 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 S&P/ASX 200 Index (ASX: XJO) dropped around 0.5% today, falling back to 6,002 points.

Victoria reported another 275 new COVID-19 cases today and NSW clusters continue to grow in number.

Here are some of the highlights from the ASX today:

Eclipx Group Ltd (ASX: ECX) share price jumps

The Eclipx share price has jumped 8.5% today after announcing an asset sale. The company has sold Right2Drive for up to $26.5 million in fixed and contingent consideration.

The fixed consideration of $19.2 million includes $15 million payable at transaction completion and $4.2 million to be paid 18 months later. The contingent consideration of up to $7.3 million will be payable at six-month intervals following completion for a period of up to 24 months, based on pre-agreed collection rates on the current debtor book.

The book value of Right2Drive was $28 million at 31 March 2020. Therefore, the company will recognise a loss on the sale.

The transaction includes an ongoing commercial relationship with Right2Drive, including a right to supply new vehicle leases to Right2Drive for a period of three years.

All net proceeds will be used to reduce debt of the ex ASX 200 share.

Sydney Airport Holdings Pty Ltd (ASX: SYD) June 2020 traffic performance

Sydney Airport announced its June 2020 traffic numbers today.

The numbers were still down heavily. International passengers were down 97.6% to 32,000 and domestic passengers dropped 93.3% to 140,000.

While domestic passengers have materially increased in June compared to April and May, Sydney Airport expects to continue to see significant reductions in passenger traffic for as long as domestic and international travel restrictions persist.

As you’d expect, the ASX 200 share saw a large reduction in volume in all major nationality passenger groups. China, New Zealand, India, UK, USA and Japan passenger numbers were all down more than 90%.

The Sydney Airport share price fell 1.3% today.

Catapult Group International Ltd (ASX: CAT) share price surges 11.4%

Sports analytics business Catapult gave investors a preview into its FY20 numbers today.

The company said that it achieved free cashflow for FY20 of $9 million after taking a conservative approach with cost control measures. It also managed its working capital. Catapult achieved positive free cashflow a year earlier than expected. 

Total revenue for FY20 is expected to be between $100 million and $101 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be between $11.5 million and $12.5 million.

Around 75% of the company’s revenue is subscription based, which has helped the company through the COVID-19 shutdowns despite many professional sporting leagues pausing their competitions.

The company warned that a significant proportion of sales that would otherwise have been made in the fourth quarter of FY20 are now expected to be made in the first half of FY21.

Record June quarter and annual inflows in FY20 for Hub24 Ltd (ASX: HUB)

The fintech platform business announced that its funds under administration (FUA) was $17.2 billion at 30 June 2020, a 34% increase compared to last year.

Hub24 achieved record annual net inflows of $4.95 billion in FY20, up from 27% from FY19. The quarter net inflows for June 2020 was $1.1 billion, up 11% on the prior corresponding period.

Over the fourth quarter of FY20 FUA increased by $2.1 billion, including the positive market movement of $1 billion.

Hub24 said it maintained second place in both adviser satisfaction and adviser advocacy in the recent ‘investment trends’ report. Its Hub24 platform market share has increased to 1.94%.

The company said its new business pipeline continues to grow with 34 new licensee agreements signed during the quarter and 110 new advisers using the platform.

Hub24 managing director Andrew Alcock said: “We remain committed to delivering the highest levels of service to support advisers and their clients as they seek to meet their objectives. We would like to thank our customers and our staff for their continued support during this challenging environment.”

The Hub24 share price dropped 0.2% today. 

More reading

• Where to invest $5,000 into ASX shares right now
• Why the BlueScope share price is outperforming today
• Are you a ‘risky’ investor in ASX 200 shares?
• One thing you should be doing ahead of the ASX reporting season
• 3 top Warren Buffett quotes for ASX investors this week

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Catapult Group International Ltd and Hub24 Ltd. The Motley Fool Australia has recommended Catapult Group International Ltd and Hub24 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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I always find it interesting and useful to see where our fellow ASX investors are spending their capital, both domestically and with international shares. Luckily, Commonwealth Bank of Australia (ASX: CBA)’s CommSec brokering platform gives us a list of its most traded shares each week. As the largest broker in Australia, it’s a set of statistics that has some weight. So let’s look at some of the companies listed beyond our shores that were the most popular last week (13–17 July).

Which international shares are ASX investors buying?

1) Tesla Inc. (NASDAQ: TSLA)

Last week’s winner by a mile was Elon Musk’s electric vehicle and battery company Tesla. Tesla has been setting chins a-wagging in recent weeks as its share price has ballooned. One year ago, Tesla shares were going for around US$255. Today, those same shares will set you back around US$1,500, which includes a 50% jump in just the last month. Appreciation like this always attracts a lot of attention, so there’s no surprise Tesla takes out the top spot.

2) Nio Inc. (NYSE: NIO)

Number 2 this week is another electric car company in the form of Nio. Nio is often called the ‘Tesla of China’ despite it being nowhere near the scale of its rival Tesla just yet. Nio shares have become a speculative plaything in recent months. Back in May, Nio shares were going around US$3.30. But the last 2 weeks have seen Nio surge to over US$16 and then back down to the US$11 we see today. If you want to get your kicks on the Route 66 of investing, it seems you might have needed to take an electric car for the trip last week.

3) Microsoft Corporation (NASDAQ: MSFT)

Now we’re getting into some blue-chip territory. Microsoft is one of the largest companies in the world and dominates the world of personal computers with its Windows operating system and Microsoft Office suite of productivity apps. Its business has largely been unaffected by the coronavirus pandemic and possibly explains why ASX investors were clambering over the company’s shares last week.

4) Apple Inc. (NASDAQ: AAPL)

Apple really needs no introduction. Along with Microsoft, it’s one of the largest companies on the planet right now and is known for its ubiquitous iPhone product. In addition, every other product line that Apple offers is successful in its own right, whether that be the Mac, iPad, AirPods or its subscription services like Apple Music. Apple is unquestionably a fantastic company and would make a great investment (in my view) for any Aussie investor.

5) Amazon.com Inc. (NASDAQ: AMZN)

Last but certainly not least is Jeff Bezos’ Amazon. Along with Apple and Microsoft, Amazon is another member of the trillion-dollar company club in terms of market capitalisation. Despite its sheer size, Amazon shares have been on an absolute tear in recent weeks, climbing from around US$2,000 a share in early April to more than US$3,000 a share earlier this month. Everyone knows Amazon is one of the most disruptive and dominant companies in the world, and unrivalled in the world of e-commerce. As such, Aussie investors don’t seem to want to let the high price tag of Amazon today get in the way of them owning a piece of the action.

Foolish takeaway

Whilst we have many great companies on the ASX, it’s always interesting to see what Aussie investors are finding attractive beyond our shores as well. It’s never been easier to buy international shares, so if you aren’t already, it might be a lucrative exercise to check out some of these names and see how they could fit in your own portfolio.

More reading

• Why CBA and Macquarie shares could be in the buy zone
• ASX 200 Weekly Wrap: Blue chip shares pull ASX 200 back over 6,000 points
• 2 high yield ASX dividend shares I would buy
• Are our ASX bank shares expensive by global standards?
• Fund managers have been buying these ASX shares

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Microsoft, and Tesla and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon and Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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From time to time, we Fools like to look at some of the more successful fund managers on the ASX, and have a cheeky look at where they are finding good places to put their money. So today, we’re checking out Hyperion Asset Management – a growth-focused fund manager that has delivered top returns for its investors over the past few years.

In fact, according to reporting in the Australian Financial Review (AFR), Hyperion’s Global Growth Companies Fund topped the ASX’s managed funds in terms of 5-year performance, with an average annual return of 18.3% for the 5 years to 30 April. With numbers like those, I think this fund manager is well worth listening to.

So what exactly is Hyperion investing in right now?

A top ASX fundie’s share picks

According to the AFR, Hyperion has 2 managed funds: its global growth fund, and the Australian Growth Companies Fund.

For the global growth fund, the top holdings are as follows:

• Amazon.com Inc.
• Microsoft Corporation
• Tesla Inc.
• Alphabet Inc.
• PayPal Holdings

There are some of the most well-known global growth names right there, to be sure. It’s clear Hyperion is focusing on the big tech names for the lion’s share of its portfolio. And for good reason too! All 5 of these companies are pushing on record-high share prices right now. Tesla, in particular, has appreciated close to 200% in the past 6 months alone.

According to Hyperion fund managers Jason Orthman and Mark Arnold, the company isn’t worried about stretched valuations either:

We think they’re better value now than they were in January… They’re highly innovative. There’s a lot of optionality embedded in those businesses, and a lot of smart people are incentivised to create better features for existing products and expand product ranges. We are pretty comfortable that the value is there and the returns should be there over the next five to 10 years.

But let’s also look at Hyperion’s locally focused Australian growth fund as well. Here are this fund’s top holdings, according to the AFR:

• CSL Limited (ASX: CSL)
• Xero Limited (ASX: XRO)
• Domino’s Pizza Enterprises Ltd (ASX: DMP)
• Macquarie Group Ltd (ASX: MQG)
• Afterpay Ltd (ASX: APT)

That’s a far more balanced portfolio than the global growth fund. We have healthcare darling CSL, tech-savvy Xero, payments heavyweight Afterpay and fast food king Dominos. Even a bank (Macquarie) is in the list.

Mr Arnold also stated that he sees a growing divide about where he wants Hyperion’s funds to be, and where he doesn’t:

It really reinforces our view that we are permanently stuck in a no-growth or low-growth world. We think that’s going to be a big drag on earnings per share growth for the major indices around the world for the next 10 years… You’ve really got to back the winners. If you’re on the other side of the divide, you’re really going to struggle.

Foolish takeaway

I think Hyperion’s insights are very much worth taking on board, especially considering its enviable track record. I especially like the fact that the fund is taking a holistic view of the markets and where they see the future taking them. It’s an approach I think is worth implementing in our own growth portfolios as we navigate these uncertain times.

More reading

• Why the BlueScope share price is outperforming today
• Is the Zip share price a buy after falling 20% last week?
• Zip and Openpay were among the most traded shares on the ASX last week
• 5 of the worst performing ASX shares from last week
• Why these 9 ASX shares have doubled in value in the past year

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares) and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares) and Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BlueScope Steel Limited (ASX: BSL) is among the best performing stocks today even as the market quickly lost steam to close in the red.

Shares in the steel building products maker jumped 3% to $11.58 ahead of the market close to become the fourth best performer on the S&P/ASX 200 Index (Index:^AXJO).

The only stocks to beat BlueScope are the Resolute Mining Limited (ASX: RSG) share price, the Afterpay Ltd (ASX: APT) share price and the NRW Holdings Limited (ASX: NWH) share price. Even then, these ASX stocks aren’t ahead by much more.

In contrast, the top 200 stock benchmark fell 0.4% after briefly making gains in early trade on Monday.

Better than expected earnings

The surge in interest in BlueScope comes after brokers passed judgement on the stock following the company’s trading update on Friday.

The analysts at Macquarie Group Ltd (ASX: MQG) lifted its price target on the stock to $12.55 from $12.20 and reiterated its “outperform” recommendation on the stock.

The broker noted that the update was better than expected and believes Australian housing demand will remain resilient.

Upside risk from US steel spreads

Credit Suisse echoed a similar optimism when it repeated its “outperform” rating on the stock. The broker pointed out that BlueScope’s second half earnings before interest and tax (EBIT) of $260 million was 40% above consensus forecasts and a 27% beat on its estimates.

It also believes that US steel spreads are unsustainably low and any recovery on that front in FY21 presents upside risk to its $12.80 price target on the stock.

“We view BSL as a high quality cyclical exposure,” said Credit Suisse. “Its trading performance in what has been a very challenged period for markets in 2H20, particularly in the US, further endorses that quality view.”

It also helps that BlueScope holds net cash of $100 million on its balance sheet as that will help it see through the uncertain COVID-19 recovery.

Another target price upgrade

Meanwhile, UBS also upped its price target on BlueScope by 30 cents to $11.80 a share as its second half EBIT was $100 million above what it was expecting.

The beat is largely driven by BlueScope’s Building Products Asia & North America division, which benefitted from a better than expected recovery in China and improved margins in North America.

However, with the BlueScope share price trading close to the broker’s price target, UBS kept its “neutral” recommendation on the stock.

More reading

• Are you a ‘risky’ investor in ASX 200 shares?
• Is the Zip share price a buy after falling 20% last week?
• One thing you should be doing ahead of the ASX reporting season
• 3 top Warren Buffett quotes for ASX investors this week
• Zip and Openpay were among the most traded shares on the ASX last week

Motley Fool contributor Brendon Lau owns shares of BlueScope Steel Limited and Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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