Author: therawinformant

ASX 200 share investors have been betting big in recent months. That’s the message that’s coming out of new academic research according to an article in the Australian Financial Review (AFR).

The AFR has seen an unpublished research paper suggesting retail investors were “aggressive purchasers of high risk highly leveraged stocks”.

Investors also reportedly piled into “large market capitalisation stocks” and “stocks exhibiting large price declines prior to the lockdown”.

The new research findings come after ASIC reported an increase in retail trading between 24 February and 3 April. A lot of first-time investors have been buying and selling ASX 200 shares, but how have their investments performed?

Are you a risky ASX 200 share investor?

According to the AFR, the paper suggests that “retail investors have fundamentally altered their participation in the stock market during the COVID-19 lockdown period.”

So, what constitutes a “high risk highly leveraged stock”?

I think there are a few ASX 200 shares that spring to mind. They’re more likely to be concentrated in the hardest-hit industries amid the coronavirus pandemic. A few of those sectors include travel, hospitality and energy.

We’ve seen Virgin Australia hit troubled waters in 2020 and default on its debt. There’s also other big names like Sydney Airport Holdings Pty Ltd (ASX: SYD) and Santos Ltd (ASX: STO), which have significant debt balances.

To be clear, that’s not always a bad thing. In fact, the use of leverage can often be a good thing for ASX 200 share returns.

However, in times like these, cash is king. Less debt means fewer obligations to meet covenants and make lenders happy.

It’s OK to buy “high risk highly leveraged stocks” – as long as you’re aware of the risk. These ASX 200 shares have often dropped for a reason, as institutional investors sell down their positions.

Will retail investors outperform?

The answer so far appears to be yes. The S&P/ASX 200 Index (ASX: XJO) has rocketed 32% higher since 23 March.

That means many of these retail investors, including first-timers, have been on a hot streak.

However, it’s worth remembering that investing in ASX 200 shares is a long-term game. Short-term trading is fraught with danger, let alone the taxes and transaction fees that need to be paid on entry and exit.

That could be a warning sign that the smart (and big) money in town is betting against your average Joe in the market.

In fact, the AFR article reported that retail investors were net buyers of $3.5 billion in assets, while institutional investors were net sellers of $3.2 billion.

More reading

• Why the BlueScope share price is outperforming today
• One thing you should be doing ahead of the ASX reporting season
• 3 top Warren Buffett quotes for ASX investors this week
• 5 top performing ASX 200 shares from last week
• Why CSR, South32, Sydney Airport, & Webjet shares are tumbling lower

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

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The Redbubble Ltd (ASX: RBL) share price has continued its remarkable run on Monday.

The ecommerce company’s shares jumped a further 9.5% to reach a record high of $2.30.

When the Redbubble share price reached that level, it meant they were up an astonishing 475% from their March low.

Why is the Redbubble share price at a record high?

Investors have been fighting to get hold of Redbubble’s shares over the last few months after it followed the lead of Kogan.com Ltd (ASX: KGN) and Temple & Webster Group Ltd (ASX: TPW) by reporting exceptionally strong sales growth during the pandemic.

For example, last month the company released an update which revealed that fourth quarter to date, marketplace revenue was up 107% over the prior corresponding period.

This meant that year to date, marketplace revenue was up 42% on the prior corresponding period. This compares to growth of 26% for the first half and 25% for the third quarter.

Another positive was that its operating expenses had only lifted 7.7% during April and May, in comparison to the first two months of the third quarter.

As a result, its operating earnings before interest, tax, depreciation and amortisation (EBITDA) for the period 1 July 2019 to 31 May 2020 was $11.9 million. This compares to the operating EBITDA of $3.8 million it achieved in FY 2019.

What is driving this growth?

This strong growth has been driven by the acceleration in online activity throughout the fourth quarter of FY 2020 because of the pandemic.

Management notes that it has experienced an increase in demand at both of its marketplaces, Redbubble and TeePublic, as well as across core geographies and product categories.

Pleasingly, despite the rapid increase in sales, its supply chain has managed to cope and customer orders have been fulfilled within expectations.

Is it too late to invest?

While I have no doubts that Redbubble will continue to benefit from the shift to online shopping, I think its shares are fully valued now.

In light of this, I wouldn’t be in a rush to invest just yet and would suggest investors wait for a better entry point in the future.

More reading

• 2 ASX tech shares with stellar growth prospects
• Leading brokers name 3 ASX shares to buy right now
• The latest ASX shares to be upgraded by top brokers to “buy”
• Why AMP, IOOF, Redbubble, & Westpac shares are charging higher
• ASX retailers beware! Amazon.com is gearing up for its next major attack

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 Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd, REDBUBBLE FPO, and Temple & Webster 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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The Immuron Limited (ASX: IMC) share price is up by 6.86% on news that the U.S. Food and Drug administration (FDA) has provided guidance in relation to the clinical development pathway for its new oral therapeutics.

The oral therapeutics are being developed to treat campylobacteriosis and E. coli (ETEC) infections. The Immuron share price was trading over 11% higher following the release, before retreating to its current level of 24 cents per share.

What does Immuron do?

Immuron is an Australian biopharmaceutical company that focuses on developing and commercialising orally delivered antibodies, used in the treatment of inflammatory and infectious diseases.

Immuron has a novel and safe technology platform with one current drug generating revenue, Trevelan. Trevelan reduces the risk of traveller’s diarrhea and minor gastro-intestinal disorders, and is antimicrobial. It is licensed in Australia, Canada and sold as a dietary supplement in the US.

What caused the Immuron share price to jump?

The Immuron share price jumped after the company released news it had received written guidance for its new investigational drug. The FDA review provided a written response to the non-clinical questions posed in its briefing documentation submitted in early June. The FDA also provided additional guidance and comments to support the new drug submission.

There are set to be two human phase II clinical trials for the company’s oral therapeutics, to be conducted in 2021. One trial will focus on the ability of the hyperimmune product to protect volunteers against campylobacteriosis. The other trial will focus on ETEC infections.

Immuron CEO Dr. Jerry Kanellos commented: “This is an important milestone in the development of any new drug for therapeutic evaluation. The information obtained from this review will assist in the development of the IND application and provides a clear roadmap forward for conducting the two planned clinical studies next year.”

What now for Immuron?

The Immuron share price has seen a stark reversal in fortunes this year, jumping 275% on 9 June in response to news of the briefing documentation mentioned above being submitted to the FDA.

While this is good news, Immuron’s drug is still in its very early days and will need a lot of stones to fall into place for it to hit the market. In saying this, the FDA guidance is a huge step forward, hence today’s movement in the Immuron share price.

More reading

• Why the BlueScope share price is outperforming today
• Are you a ‘risky’ investor in ASX 200 shares?
• The Redbubble share price is up almost 500% from its low: Is it too late to invest?
• Is the Zip share price a buy after falling 20% last week?
• Buy and hold these mid cap ASX shares for strong potential returns

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 Zip Co Ltd (ASX: Z1P) share price slumped more than 20% last week despite a strong quarterly result and a recent game changing acquisition. This compares to the likes of other buy now, pay later (BNPL) operators Afterpay Ltd (ASX: APT), Openpay Group Ltd (ASX: OPY) and Splitit Ltd (ASX: SPT) that all suffered smaller pullbacks. Could this be an opportunity to buy the Zip share price? 

QuadPay acquisition 

The company’s recent acquisition of United States-based, QuadPay, will result in QuadPay shareholders receiving up to a maximum of 119 million fully paid ordinary Zip Co shares, equivalent to 23.3% of its issued shares. Furthermore, Zip Co has also received $100 million in convertible notes with an initial conversion price of $5.53 and $100 million in warrants with an initial exercise price of $5.16 from US private equity firm, Susquehanna International Group. 

Q4 FY20 update 

On 15 July, Zip Co provided a trading update for the quarter ending 30 June 2020. The update delivered sound improvements in all key metrics with quarterly revenue increasing 64% to $44.2 million, its merchant base increasing 51% to 24,500 and active customers increasing 60% to 2.1 million on the prior corresponding period. Pleasingly, the company beat the goals it had set in 2019 with a target of $2.2 billion in annualised transaction volume. Based on Q4 results, its total transaction volume (TTV) sits at $2.3 billion or $3.2 billion if QuadPay is included. 

The recent quarter also saw continued investment in product innovation to make it easier for global retailers to onboard Zip’s products and additional verticals for customers. This includes the launch of its food ordering app called Hey You, its first global payments partner, the Cotton On Group, and fast tracking its Shop Everywhere feature that allows customers to transact at any merchant online using a one-time virtual card. 

QuadPay delivered very strong numbers with a TTV of US$163 million for the quarter, up 9% QoQ and 800% YoY. Active customers continued to increase as a result of strong online spending in the US. More than 325,000 new customers were added bringing total customers to 1.8 million up 475% on the same period in FY19. 

Is the Zip share price a buy? 

BNPL shares have always been very volatile but for the right reasons. Zip Co’s Q4 update showed reasonable growth for its maturing Australian business and explosive figures in the US. I believe the acquisition of QuadPay is a game changer for Zip on all fronts. It bolsters the company’s financial performance and opportunity for cross-company collaboration as well as taps into a $5 trillion US retail market. Despite gaining back 2.5% to currently trade at $6.05, I believe the Zip share price represents fair value after the significant discount last week. 

More reading

• Why the BlueScope share price is outperforming today
• Zip and Openpay were among the most traded shares on the ASX last week
• 5 of the worst performing ASX shares from last week
• Respiri share price pops 17% after revealing merchant agreement with Zip
• Why these 9 ASX shares have doubled in value in the past year

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. 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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If you’re interested in investing in mid cap shares, then you’re in luck.

At present I believe there are a good number of mid cap shares that have the potential to grow strongly over the next 10 years.

Two mid cap ASX shares that I think are worth considering are listed below. Here’s why I like them:

BINGO Industries Ltd (ASX: BIN)

While waste management may not be the most exciting industry to invest in, I believe the potential returns on offer with BINGO shares over the next decade could be exciting. While the pandemic is likely to weigh on its near term performance, I believe its long term outlook remains very positive.

This is thanks largely to its expansion plans and the game-changing acquisition of rival Dial a Dump Industries. This acquisition has allowed BINGO to be fully vertically integrated from collections to landfill. It also makes it the largest player in building and demolition waste in Sydney and provides it with some much-needed diversification. 

Megaport Ltd (ASX: MP1)

Another mid cap ASX share that I would buy with a long term view is Megaport. It is an elasticity connectivity and network services company which has been growing at an astonishing rate. Its service allows users to increase and decrease their available bandwidth in response to their own demand requirements.

This is instead of being tied to fixed service levels on long-term and expensive contracts. Due to the popularity of its service, its growing footprint in data centres globally, its first-mover advantage, and the accelerating shift to the cloud, I’m confident that Megaport’s strong growth can continue for a long time to come. Overall, I feel this could make it one of the best buy and hold options on the ASX right now.

More reading

• 5 of the worst performing ASX shares from last week
• ASX 200 Weekly Wrap: Blue chip shares pull ASX 200 back over 6,000 points
• These were the worst performing ASX 200 shares last week
• Why these are the top performing ASX 200 shares over the past year
• Pointerra share price soars 77% on $2.5 million placement to tech entrepreneur

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 MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT 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 SEEK Limited (ASX: SEK) share price has been a very strong performer over the last few months.

The job listings company’s shares are up over 93% from their March low and are now trading within sight of their 52-week high.

Is it too late to buy SEEK shares?

While I still think SEEK shares would be a great long term option for investors, they certainly aren’t the bargain buy they were a few months ago.

One leading broker that thinks its shares have now peaked is Goldman Sachs. This morning the broker retained its neutral rating and lifted its price target on the company’s shares by 14% to $20.20.

This price target implies potential downside of 7% based on the current SEEK share price.

What did Goldman Sachs say?

Overall, the broker is actually very positive on SEEK’s outlook and is forecasting a swift rebound in earnings before interest, tax, depreciation, and amortisation (EBITDA) in FY 2021.

It expects the pandemic to lead to a 10% decline in EBITDA in FY 2020 to $409.9 million. However, in FY 2021 it is forecasting a 16% jump in EBITDA to $475.7 million.

After which, it expects its strong growth to continue in FY 2022, with EBITDA lifting another 23% to $585.2 million. This is despite a potential reduction in listing volumes in the ANZ market due to budget constraints.

Goldman commented: “Based on a number of discussions, we believe most recruiters will attempt to maintain, or only marginally increase total budgets (at least initially) despite the c.50%/c.25% price rises in FY21/22 from SEK. We estimate that should total recruitment budgets increase 10% each year, these contracts would result in a decline of total ANZ volumes of -12%/-5% in FY21/22, but result in yields improving +16%/+7% (all else equal).”

Another driver of earnings growth is expected to be the Asia Pacific & Americas (AP&A) business.

Goldman notes recent commentary which indicates that management has an increased focus on operational efficiencies for the AP&A business and is aiming to hold the total cost base flat into FY 2021.

“This is pleasing, given years of significant investment has limited EBITDA growth, despite the strong revenue performances,” it explained.

So why is Goldman Sachs not buy-rated?

SEEK’s valuation appears to be an issue for the broker and the reason it doesn’t have a buy rating on its shares right now. At 18.4x FY 2021’s EV/EBITDA, its valuation appears a bit too rich for this broker.

One broker that would disagree is Credit Suisse. Late last month its retained its outperform rating and $24.00 price target on SEEK’s shares.

At this point, I would have to side with Credit Suisse and be a buyer of its shares. I think its very positive long term outlook justifies the premium its shares trade at today.

More reading

• 5 things to watch on the ASX 200 on Monday
• How I’d build a $100,000 ASX portfolio of growth shares
• Why I would buy these blue chip ASX 200 shares this week
• Macquarie picks ASX stocks that can deliver positive earnings surprises next month
• 3 high quality blue chip ASX shares Warren Buffett might buy

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK 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 Ecofibre Ltd (ASX: EOF) share price is up 3.56% today after the company announced its FY20 profits are expected to double. FY20 net profit after tax is expected to be around $12.5 million, an increase of more than 100% on the FY19 result. 

What does Ecofibre do? 

Ecofibre is a provider of hemp products in Australia and the United States (US). In the US, Ecofibre’s Ananda Hemp and Ananda Professional brands produce nutraceutical products for human and pet consumption as well as topical creams and salves.

In Australia, the Ananda Food brand produces Australian grown and processed hemp food products including protein powders and hemp oil. Ecofibre’s Hemp Black business is focused on developing hemp-based textiles and composite materials in partnership with TexInnovate in the US. 

What did Ecofibre announce? 

Ecofibre released its quarterly report and provided an update on trading performance, including FY20 guidance. CEO Eric Wang said, “we expect our FY20 NPAT to be around $12.5 million, up more than 100% in our FY19 result. The result is underpinned by full year revenue in excess of $50 million and a business model that focuses on profitable growth in sales and EPS.” 

Ecofibre delivered a strong annual result, despite a challenging final quarter that included significant upheaval across the supply chain and customer base. The business has adjusted focus as required, with its Hemp Black business tapping into demand for PPE while the Ananda Food business continues to experience steady sales growth.

The Ananda Health business remains the number one supplier to retail pharmacies in the US by a wide margin, with the company reporting it has over 50% market share nationally. 

What’s next for Ecofibre? 

Ecofibre believes pharmacies are the preferred channel for long-term patients utilising CBD for health and beauty. It plans to gain access to more pharmacies and practitioners over time to expand market reach for the Ananda Health brand.

Hemp Black continues to invest in addressing market demand for PPE, launching a face mask late in FY20. Around 135,000 masks were sold in May and June resulting in $2.4 million in revenue. Manufacturing capacity will double this quarter to 130,000 masks per month with distribution of masks to Australia beginning this week. 

Ananda Food’s newly formulated protein powder is to be used by plant-based food producer The Alternative Meat Co in an upgraded range of products. The launch is planned for August with products to be available in Coles. Woolworths will begin stocking Ananda’s hemp seed oil in August under its Macro brand alongside its existing hemp seed and protein powder products. 

More reading

• Why the BlueScope share price is outperforming today
• Are you a ‘risky’ investor in ASX 200 shares?
• The Redbubble share price is up almost 500% from its low: Is it too late to invest?
• Immuron share price shoots 6% higher after receiving FDA guidance for new drug
• Is the Zip share price a buy after falling 20% last week?

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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Many ASX investors are feeling lost on what to do with the market walking into the reporting season on a tightrope.

There’s a lot at stake as we will find out if the big rebound in the S&P/ASX 200 Index (Index:^AXJO) from the COVID-19 sell-off in March is sustainable.

While no one can predict with any certainty how the August reporting season will play out, there’s one thing I’ve done to prepare.

Shoring up your cash

I’ve sold some of my ASX stocks recently to shore-up my cash position before companies hand in their profit report cards for review.

I was holding very little cash as I had been aggressively buying the market when it crashing earlier this year from the pandemic.

If you don’t have much in the cash tank currently, it won’t be a bad idea to take some profit with the market trading around a four-month high.

ASX buying opportunities

I say this not because I am a market bear. If anything, I think ASX shares are more likely to soldier on than capitulate.

But I suspect the August reporting season will present some interesting buying opportunities that you won’t be able to capitalise on unless you are packing a bit of firepower.

There are also some sectors that I think you could be using as a funding source too. The fact is, some of these ASX stocks have rebounded nicely as we emerged from the nationwide lockdown on faith of a V-shape recovery.

Funding sources

But the resurgence of COVID-19 cases in Victoria and New South Wales highlights the risk that some ASX shares could face downward pressure in the near-term.

It isn’t only the two Australian states that serve as a poignant reminder. Several countries, including Japan, are battling a second wave of infections, while the worst affected like the US and Brazil show little signs of getting on top of their rampant outbreaks.

This means stocks leveraged to global trade, such as the Brambles Limited (ASX: BXB) share price, could issue a sombre outlook with its results.

More write-down pressure

Another group that could disappoint are property stocks. A number of these landlords have recently written down the value of their assets due to the COVID-19 impact, but I think some are at risk to having to devalue assets again.

One possible disappointer is the Mirvac Group (ASX: MGR) share price. While management cut the carrying value of its retail properties by nearly 10% last month, it upgraded the value of its office properties.

The move runs contrary to growing signs of an office glut in our two biggest cities and reports of weaker demand in the COVID new normal.

It’s also worth noting that 9% of Mirvac’s office leases expire in FY21 with a further 8% in the following year.

Questionable ethics

Meanwhile, one stock that might be worth taking some profit on is the surging Kogan.com Ltd (ASX: KGN) share price.

The online retailer, which is a star performer during the coronavirus lockdown, was found guilty by the Federal Court of using dodgy sales tactics.

History has shown that if a company doesn’t care much for its customers, it will treat shareholders much the same.

Further, sales growth could be hurt if customers stop trusting Kogan to offer them a fair deal.

More reading

• 3 top Warren Buffett quotes for ASX investors this week
• 5 top performing ASX 200 shares from last week
• Why these 9 ASX shares have doubled in value in the past year
• ASX 200 down 0.5%: Sydney Airport and South32 updates, HUB24 delivers record Q4
• Why the South32 share price is falling today

Brendon Lau does not own any shares mentioned in the article. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com 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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